[GM's Internet Strategy (cont.)]
"AOL Fills A Gap With Hughes Satellite Deal"
By Nicole Volpe -- Monday June 21 4:44 PM ET
NEW YORK (Reuters) - America Online Inc. (NYSE:AOL -
news), the leading online service provider, Monday said
it would make a $1.5 billion investment in Hughes Electronics Corp.,
the owner of DirecTV, giving AOL a means to offer high-speed Internet
services via satellite nationwide.
The investment in Hughes, a satellite communications company that
offers digital TV and Internet access, represents the largest cash
investment ever made by AOL, officials said.
AOL Chief Executive Steve Case said the partnership would allow AOL to
offer high-speed Internet access to the one-third of U.S. households,
mostly in rural areas, that will not be wired for high-speed cable or
phone lines by the year 2003.
''What this alliance does is give us a national footprint for
high-speed Internet access,'' Case said in a telephone interview.
''Even if we had deals with all of the cable providers and telephone
companies -- and we don't -- we would not have this national reach,''
he said.
AOL and other Internet companies have complained to regulators that
cable companies are locking them out of their market by bundling
online access and other services into a single price.
AOL, along with other Internet companies, has complained to regulators
that cable companies are locking them out of their market to broadband
cable customers by bundling access and services provided by companies
into a single price.
Many analysts forecast that most U.S. consumers will use cable
television links to receive fast Internet connections versus
high-speed phone lines and to a lesser degree, satellites.
AT&T Corp. (NYSE:T - news), the emerging powerhouse of the U.S. cable
industry, requires customers who want high-speed Internet access to
purchase the services of AtHome Corp., a cable-owned provider
controlled by AT&T, for a single price.
''It is clear that by going to satellites, AOL is trying to cover its
distribution bases,'' said Gary Arlen, president of Arlen
Communications. ''It certainly makes it a race between satellites,
phone wire and cable access.''
Arlen said he estimated some 2 million to 5 million AOL subscribers
could be satellite customers by 2003. AOL counts 17 million
subscribers to its flagship AOL service and another 2 million to
CompuServe, and millions more to Web-based services.
Hughes Electronics Chief Executive Mike Smith said in a conference
call with reporters that the so-called ''AOL-Plus'' high-speed service
would be offered as part of Hughes' DirecPC service, which currently
counts 100,000 customers.
''We have not promoted DirecPC due to financial constraints,'' said
Smith, adding that the AOL brand name and investment will help
immensely.
''This is a way for DirecTV to catch up with cable,'' said Armand
Musey, a satellite communications analyst at Banc of America
Securities in New York.
''It's a race for the middle ground, as satellite TV is trying to
upgrade and cable trying to roll out as fast as possible,'' he said.
The AOL-Hughes alliance builds on an earlier deal, announced in May,
under which the companies will develop a ''combination'' set-top
receiver to make DirecTV/AOL TV available to consumers next year.
''We're interested in this idea of 'AOL Everywhere,' extending
services across all broadband technologies,'' Case said.
Case described ''a highly connected society'' in which AOL services
could be accessed through television and other household appliances,
as well as handheld devices and computers.
''If you are watching the Super Bowl, you can then access a sports
site, or pull up your buddy list to start a chat about the game or
access your e-mail during a commercial,'' he said.
Separately, Hughes struck a deal with Intel Corp. (Nasdaq:INTC -
news), the leading maker of computer chips, for Intel to supply chip
technology for use in Hughes set-top boxes used to convert satellite
signals. The first of these products will be the AOL TV satellite
receiver. Terms were not disclosed.
AOL's stock, the New York Stock Exchange's most active issue, was up
$1.88 to $115.31 late Monday afternoon. Hughes, a separately traded
unit of General Motors Corp. (NYSE:GM - news), was up $2.31 at $55.75.
GM added $1.06 to trade at $63.94. On the Nasdaq, Intel was $1.875
higher at $56.81. |
