>> AOL is moving away from pure ISP service...WCOM and UUNET will
>> be handling the bulk of operations...AOL will have a fixed fee
>> for x number of years. This is all part of the WCOM deal.
>> WCOM and UUNET will be adapting new technologies as they
>> become widely available. It will be up to them to keep up
>> with new technologies and occur operating costs.
>>
>> Regardless - cable, satellite, radio, ISDN, ADSL, etc. etc.
>> are all ways to connect to the internet. Simply put, you
>> could connect to AOL at a faster rate, making AOL more
>> enjoyable for all.
Here are the problems for AOL moving away from an ISP. Current AOL subscribers receive both ISP and content services for $19.95. If they sign up for cable modem with another ISP, it will cost $40 more per month. That's tripple their current cost! They will likely unsubscribe AOL because its content can be obtained from the Internet for free or a small fee. The only way AOL will retain a subscriber in that case is if the subscriber wants more than $19.95 worth of content. Meaning, if the subscriber wants WSJ and other on-line for-fee magazines totalling $30 when AOL offers all of them in one package for $19.95. Overall though, most people will unsubscribe AOL because AOL cannot compete with the entire Internet for content.
AOL had a niche in packaging content and ISP service in one. Some people use AOL as an ISP, some people value it for content. Now it's moving away from that niche, something (or someone) has to give. If an user wants faster speed thru cable modem, the user leaves AOL for TCI. If the user doesn't want all the content offered by AOL, then the user leaves AOL for a more dependable ISP (without busy signal and email delays). AOL's value is eroding fast.
I admit I don't know what the proper valuation for AOL is, but certainly not at the current level. I recall $90 as the target set by some brokage firm when AOL broke $40. So it's about time they take another look at AOL again, especially in November when AOL report earnings or the lack of. And remember my previous prediction, when mutual funds lock-in profit for the year, AOL will have a sell-off.
Yikes |
