Senate testimony

February 29, 2000: 8:09 p.m. ET

AOL's Steve Case

STEVE CASE, CHAIRMAN & CEO, AMERICA ONLINE: Good afternoon. Chairman Hatch and all the members of the committee, thank you for the opportunity to appear before you today to talk about why this merger will continue to be in the interests of the consumers, and why, Senator Leahy, this will be the best of times.
     As you know, on January 10, AOL and Time Warner announced our plan to join our two companies together, creating the world's first truly global media and communications company for, what we think will be known, as the Internet century. I want to start by saying that we see this as more than a merger of two companies.
     We really see it as a merger of ideas. A shared commitment to empower consumers, community, families and citizens, expanding their choices, bringing more value into their lives, and building a global medium that benefits society. I believe that the excitement generated by our announcement is due to the growing evidence that we really are on the verge of a second Internet revolution, a transformation of the way we live our lives. This transformation has already begun in ways large and small. The Internet has changed the way we communicate with friends and family, the way we learn more about the world around us, even the way we connect to our political leaders. It has impacted the way companies ship and consumers shop. It is changing the way we strengthen our communities at home, and also how we build a world community. And the terrain is changing before our eyes, from increasingly affordable Internet services to better, faster connections that make possible a far wider array of content on-line, to wireless and hand-held devices to make the Internet available anywhere, at any time.
     This is also a time of incredible innovation and of intense competition. We welcome that, and believe that our new company will be stronger because of it. The Internet never could have become a driving force of the new economy, and neither AOL nor Time Warner could have gotten where we are today without competition. And going forward, we are committed to ensuring that our merger creates new choices for consumers, and promotes a diversity of voices in our culture. We know that change is dramatic, and rapid creates new opportunities, but we also believe that it creates new responsibilities. So while we work hard at AOL-Time Warner, to make the most of this changing world, there are a few things that won't change.
     First, our commitment to provide consumers with an empowering range of choices. Second, our commitment to earn their trust and their confidence. Third, our commitment to foster the openness, competition and innovation that are the Internet's driving force. And finally, our commitment to leave no one behind in the Internet century, fostering the diversity of voices that is the Internet's greatest strength.
     Let me start with our first and most important commitment at AOL-Time Warner, which is to serve consumers. In our business, consumers are the ultimate venture capitalists. They guide our business models and drive our ideas. This will only increase in the years ahead. Let's step back for just a moment. Five years ago, the World Wide Web barely existed; but as people began to see the Internet as a tool to improve their lives, not some obscure realm for high-tech enthusiasts, they started using it. It happened slowly at first, starting with e-mail and chat groups, but then rapidly expanded to a range of experiences that are increasingly indispensable to millions of people's everyday lives. To give you just a few compelling examples. AOL provides 200 million stock quotes every day to help people invest their money. We handle nearly 900 million messages a day, 50 percent more than the 600 million pieces of mail handled daily by the United States Postal Service, and that's just AOL. It certainly doesn't stop there. The e-commerce phenomenon continues to develop as more and more people go on-line to buy an increasingly large number of products and services. Last year, the numbers spoke for themselves. Around $100 billion in global e-commerce revenues, a figure that is expected to break a trillion dollars by 2003.
     What about education and the world of ideas? Today, a student in Alaska or Alabama can visit the Library of Congress on-line, and so can a young person in Ankara. Anyone with access to a computer and a modem can visit any one of our 800 million Web sites in just about every language, covering every topic you could imagine. As consumers have embraced the interactive medium, they have begun to demand that it meet their needs in new ways. Technological advances, from cable broadband to satellite and DSL connections, to a new generation of wireless and hand-held devices, are already increasing the range of on-line content people can enjoy and use in their everyday lives. And both new ideas and new competitors are surfacing every day, further driving the medium in a vital process of continuous improvement.
    Consumers drove this quantum leap into the Internet revolution, and they will most certainly drive it into this Internet century. Consumers have been empowered and they are exercising their power every day, seeking out the Internet service that meets their needs and the content that matches their interests, whether it be books, movies, stock quotes, even polling data. I believe that AOL-Time Warner will only accelerate this trend.
     History tells us that the most profound life-changing ideas come to life when people find valuable new ways to join emerging technology with existing content. Consider this. Nearly 25 years ago, Gerry Levin had an idea that the combination of satellite and cable technology with movies and other media could change the way people are entertained. That idea became HBO, and HBO not only accelerated the development of the new cable medium, it really did change the way we think about entertainment. Twenty years ago, Ted Turner wondered what would happen if he combined the new capacity of cable television to reach households with a 24- hour news network. That idea became CNN. And it has transformed the way we think about news and raised the bar for every news station around the world. In the same way, VCRs transformed the movie industry, and CD technology transformed the music industry. These are the kind of remarkable combinations and experiences we think AOL-Time Warner will be able to provide consumers, across industries, across platforms, across media. From music to movies, to publishing, to communications, to financial services. We certainly hope to lead a whole new era of innovation in our industry, but we won't be the only company out there, especially not in the new converged environment that is joining the forces of many historically distinct industries in creating so many new and compelling consumer products and services.
     We've come a long way from the time when all you could get was three broadcast networks, PBS, scratchy vinyl records, maybe a department store down the block. Again, consumers have been empowered, and they will shape the market. One thing the last few years have made crystal clear is that in the rapidly changing Internet supercharged economy, companies must constantly innovate and continuously remake themselves if they expect to attract customers. And let me be clear: we do not intend to limit content diversity on any of our systems. If we limit content, if we do not promote a diversity of voices, if we do not maintain scrupulous journalistic standards, then consumers will waste no time migrating to other Internet and media services. The second commitment is that AOL-Time Warner will build on the consumer trust and confidence that have made our brands among the most trusted in the world. As I just mentioned, the media and communications landscape is changing rapidly as all the new media come together in powerful new combinations that are increasingly central to people's lives. If the Internet really is going to empower people in this new environment, and it is more important than ever for them to be able to trust that the information they share online is private and secure. At AOL, we have worked hard to educate consumers about the special nature of on-line transactions because we know it's the best way to build trust and to build our business. We've also put in-place strict privacy and security standards and we are working with our industry to make those standards universal. The same is true for Time Warner, a company that is committed to journalistic integrity and consumer trust, both on and off-line. And AOL-Time Warner will continue to build consumer confidence and trust by maintaining our efforts to ensure that families and teachers have the tools they need to guide our children's experiences in cyberspace.
     The Internet can open a door into another world for our kids, a world of imagination and learning. But it's up to us to determine which doors they open and to keep them safe. As separate companies, we have made a commitment to consumers and we have kept it. As one company, we will continue to make that commitment and we will continue to keep it. We will take building consumer confidence and trust to the next level, working within our industry and with all of you to craft responsive and responsible policies that address these concerns. This is something consumers care about and something we have to work together to ensure. One thing is certain. We share the same goal: protecting consumers and their families in establishing a new standard of privacy and security for the digital age, while permitting the Internet to flourish in these changing times. Third, AOL-Time Warner will build on our commitment to open-access. We have made real progress on this issue over the past year and a half, and I'm proud of the role AOL has played in getting us to where we are today. AT&T and Time Warner, the two largest cable companies in the country, have committed to the principle of providing consumer choice on their systems. And with other cable companies considering following our lead, I believe implementation of open-access nationwide is no longer a question of whether, but of when. We believe that consumer choice is not only the smartest business practice for both the cable industry and for the growth of the Internet, it is the right policy grounded in the right values for consumers and for the growth of the Internet.
     This committee recognized this early on, and I want to thank you all for your support of our efforts to push this industry to act. Today, we took another step forward, jointly releasing a memorandum of understanding that will form the framework for delivering AOL and other ISPs over at Time Warner cable, and to give consumers greater choice. We look forward to putting that open-access framework into practice as soon as possible. Meeting the challenge of consumer choice won't happen overnight, but it is part of our ongoing commitment to consumers. In fact, we believe that the merger of AOL and Time Warner puts us in a position to initiate real dialogue about the best way to offer multiple Internet services over multiple broadband platforms, from cable and DSL lines to satellite connections, turning our commitment into real choices for consumer in the marketplace. And we believe that working together with our industry and with all of you, we will ensure that open-access is a common practice, and that consumers are the real beneficiaries.
     Finally, AOL-Time Warner will be committed to using our combined resources, assets and experience to build a medium we can be proud of. Building a medium we can be proud of has always been core to the vision at AOL, and it will continue to drive us at AOL-Time Warner. That means empowering people by giving them a voice and greater choice. It means connecting people in meaningful ways to their government, and helping them to give back to their communities. It means enhancing educational opportunities for children. And building a medium we can be proud of means expanding its reach and its benefits to every corner of the world, leaving no community and no country behind. We all have a responsibility to meet these challenges. At AOL-Time Warner, we will take this responsibility very seriously, not only as a company, but also as individuals with a shared personal conviction that we must use our leadership to build a better world. Nowhere is this leadership more important than driving the crusade to close the digital divide.
    You have all heard the statistics. Our public schools are overcrowded, understaffed, and unprepared to teach the skills of the future. Seventy-five percent of households with incomes over $75,000 own computers; 10 percent of our poorest families do. Yet, more than 60 percent of all new jobs will require high-tech skills by 2002. Both AOL and Time Warner have already taken significant steps to meet this challenge. I am especially proud of the role we are playing at AOL to help launch Power Up, a unique public-private partnership to create a network of community technology centers that teach young people the skills they need and give them the guidance they need to make the most of their potential. One of the things I am looking forward to doing at AOL-Time Warner is joining our resources and sharing our ideas to close this digital divide. Just as important, we intend to devote our personal energy to finding new ways to help the benefits and opportunities of this Internet century to reach developing countries; and all countries in the world. We have to make sure that the World Wide Web is not worldwide in name only. All of these measures will bring us closer than ever to fulfilling AOL-Time Warner shared mission of building a truly global medium, essential to people's lives as the telephone or the television, and even more valuable.
    Let me close with a comparison. One hundred and twenty years ago, almost to the day, Thomas Alva Edison patented the light bulb. But it took nearly 60 years for the power of electricity to reach every corner of America, bringing light to the farmhouses, connecting people and remote communities to the radio and one another, and transforming life as we knew it. By comparison, the Internet was invented around 30 years ago, and it has taken us most of the last 15 years to reach just 40 percent of American households. Imagine what we will achieve when we reach every country, every community, every business, every family. Because in truth, we really are just scratching the surface of a broad and powerful vision that will forever alter our lives. And it's no surprise really, that both the electric light and the Internet were born in America. Our spirit of innovation and creativity, our tradition of competition and cooperation, and our ideal of inclusion and equal opportunity, are the driving force of the Internet, and they'll be the guiding principles of AOL-Time Warner. I appreciate the time and effort the committee is taking to hear about this important merger, and I thank you all for your leadership on many important Internet policy issues. I look forward to working with you in the months and years ahead. Thank you.