Down to the wire

Internet service provider AOL Europe could be feeling a bit like an unwanted child right now. The private company was set up as a joint venture in 1995 between two giant media parents – AOL (now AOL Time Warner) and Bertelsmann. It was conceived to sell AOL’s online service in Europe. However, as yet it has not turned in any profit.

Last year, its parents agreed to part company. The complex deal to unwind the joint venture was struck by the couple at the height of the internet boom, so AOL was happy to agree to full custody of AOL Europe. Since then, AOL Europe’s value has plummeted from an estimated high of $16.5bn (£11.38bn) last year, to estimates ranging between $2bn (£1.38bn) and $5bn (£3.45bn) this year.

AOL will probably have to pay Bertelsmann around $5.3bn (£3.65bn) to take AOL Europe next January. And the size of this alimony payment has already caused AOL’s shares to drop.

Unsurprisingly, the company’s senior vice-president of public policy and regulatory affairs Clare Gilbert does not want to talk about the business. This is in some ways fair, as Gilbert does not have a corporate role, focusing as she does on telecoms and internet regulation and public policy. “Quite simply, I don’t do deals,” she says. But this was not always the case.

In 1998 Gilbert joined AOL Europe as company secretary from Masons, where she was an IT lawyer. She worked on both the corporate and regulatory sides of the business until she took on what was a new position for the company this summer.

“Focusing on the regulatory side of the business, such as the e-commerce directive coming into force at the beginning of January next year, is our strategy in going forward,” she says. “I needed a role that allowed me to focus on future legislation in order to maximise opportunities for the business.”

“BT is delaying in order to keep its prices unofficially high and ensure there’s no competition”
Clare Gilbert, AOL Europe

Gilbert’s is very much a lobbying role, which has benefited the business no end in terms of market share. She led a group that lobbied the telecoms regulator Oftel to force BT to allow flat-rate internet access call origination (Friaco), which is a technology now used by all the internet service providers (ISPs) that allows internet users to pay a monthly charge for unlimited internet access. Because Gilbert spearheaded the lobbying group, AOL Europe in September 2000 became the first company to offer a Friaco service. It took Gilbert nearly two years to win this battle.

She says that obtaining Friaco was not easy. The main problem was BT, which owns all the local loop telephone networks which internet calls utilise. Household internet charges used to appear on telephone bills. BT also provides internet access, and was stubborn about letting customers of other ISPs roam all over its network for a standard monthly rate. But in May 2000, telecoms regulator Oftel sharply ordered BT to do just that. Now AOL Europe has more than five million users, thanks largely to Friaco.

But Gilbert did not stop fighting BT after Friaco was made available. She is currently lobbying Oftel to force the company to ‘unbundle’ the local loop – the wire that connects your home to the local telephone exchange. As BT has historically owned the local loop, other companies operating across it, such as ISPs, have had to gain permission from BT for any services they offer, and pay accordingly. Oftel has ruled that this is anti-competitive behaviour. ISPs, among other operators, want bits of the local loop ‘unbundled’, or given to them. This is mainly so that they can offer asymmetric digital subscriber lines, which give faster internet connections. BT originally told the regulator that unbundling would be resolved by July 2001, but this has still not happened.

“We desperately need local loop unbundling, but so far BT has only unbundled a few hundred metres of the local loop,” says Gilbert. “BT is delaying unbundling in order to keep its prices unofficially high and ensure there’s no competition.”

Gilbert is one of a number of leading lights in the telecoms regulatory industry that meet for round table discussions with the regulators to discuss such issues. But this is by no means the entirety of her legal and regulatory work.

Through its French office, AOL Europe is currently involved in a landmark defamation case, along with many of the ISPs operating in France. A Jewish organisation is hauling the ISPs through the courts because anti-Semitic material, which it does not host, can be accessed through their sites. “The material is actually hosted by a US ISP, although the plaintiff has not yet, to my knowledge, sued them,” says Gilbert. “But at least this case has given the ISPs in France a chance to discuss solutions to this type of problem.”

As well as an internet service, AOL Europe also provides a realtime, web-based, celebrity chat channel entitled AOL Live. Here, subscribers can interview the stars live over the web by email. This throws up some complex legal issues.

“The main issue with AOL Live is the realtime communication and controlling the appropriateness of the content,” says Gilbert. “It’s meant to be a family service, but people can say anything. Users are bound to a strict contract, however, and we have a team of staff monitoring people’s questions. We have a number of procedures against members who break the rules, but so far we’ve not had to take any action.”

AOL Europe is a private company, but its parent company AOL merged with media giant Time Warner in February and listed on the New York Stock Exchange. Gilbert is now establishing links with the individual European companies that form part of the US-listed AOL Time Warner conglomerate, such as IPC Media.

Gilbert says: “Since the merger there’ve been some dynamic tensions between the legal departments of the individual companies now owned by AOL Time Warner, which are being resolved.”

She would not say whether this means she wants to synergise the legal advisers used by all AOL Time Warner’s European companies. Gilbert herself mainly uses sole e-commerce and media law practitioner Liam McNeive of McNeive & Co as well as Nicholson Graham & Jones. She also uses Simmons & Simmons for competition work and has instructed Shaw Pittman for “some techie deals”.

The relationship with McNeive is an interesting one. In fact, AOL was a major contributing factor to McNeive’s decision to set up on his own in 1998. McNeive and Gilbert worked together previously at Nabarro Nathanson and at Masons. The pair won AOL as a client in 1996 and took the company with them when they moved from Nabarros to Masons. Gilbert joined AOL Europe on 16 March 1998, the day that McNeive set up his own law firm. McNeive admits: “I would say the AOL relationship was what provided the final push for me to set up my own firm.”

So it seems that Gilbert has been exceptionally good to her old boss. But considering that McNeive originally won AOL as a client from Clifford Chance, he must be worth his salt. And with AOL Europe’s current status, Gilbert may feel that she needs something familiar to hold on to.
Clare Gilbert
Head of legal
AOL Europe

Statistics
Organisation AOL Europe
Sector E-Commerce
Employees Undisclosed
Legal capability 12 lawyers in London, one in Brussels, 11 in Germany and four in France
Head of legal Clare Gilbert
Reporting to Michael Lynton, acting chief executive officer of AOL Europe
Main location for lawyers Pan-European
Main Law Firms McNeive & Co, Nicholson Graham & Jones, Shaw Pittman and Simmons & Simmons