August 16, 1999 12:00am
AOL In Talks With AT&T, MCI
By Steven Vonder Haar and Louis Trager Inter@ctive Week
America Online, seeking new ways to access broadband networks and sell long-distance services online, is negotiating with both AT&T and MCI WorldCom over a range of possible business combinations, according to industry executives familiar with the discussions.
AOL's talks with the long-distance giants set the stage for the company to forge a far-ranging alliance that would make AOL accessible via the broadband connections it covets while providing its partners a platform for marketing traditional long-distance services to AOL subscribers.
While industry analysts have said that any partnership likely is months away from completion, AT&T acknowledged last week in a statement it has engaged in recent talks with AOL on issues related to access on high-speed data services delivered via AT&T's cable television systems. But AT&T added that "no formal proposal" is currently under discussion with AOL. AOL and MCI WorldCom officials declined comment.
One hostage of the ongoing AOL talks appears to be the Excite@Home service, which now holds exclusive rights to deliver packaged high-speed access services via AT&T's cable systems through 2002. AOL has been spearheading aggressive lobbying efforts to win rules that would open AT&T's network to other content providers.
AT&T said that it will stand by its exclusivity arrangements with Excite@Home but is open to negotiating partnerships with outside companies that would take effect once the Excite@Home deal expires.
Judging AT&T's intent based on its statement last week, though, is a matter of interpretation. By publicly stating intentions to open its network, AT&T could be turning up the heat on Excite@Home so that it can broker its deal with AOL.
"AT&T would be in trouble if they tried to shake out the minority [Excite@Home] shareholders for their own benefit," one source familiar with AOL's talks said. "So they are saying: 'Play, or we will kill you in two years.' "
Others, such as Lehman Bros. Internet analyst Brian Oakes, see the pronouncements as stonewalling by AT&T designed to deflect political pressure mounting on AT&T to open its cable network to outsiders, creating more time for Excite@Home to build its franchise in the broadband space.
Ultimately, though, a partnership with AOL would make sense for AT&T as it seeks to build traffic volume.
"[AT&T Chairman C. Michael] Armstrong doesn't want to be a content guy," Oakes said. "He wants to be a pipe guy."
Dealing with MCI WorldCom could be a risky proposition for an AOL seeking access to AT&T's cable systems.
While MCI WorldCom is growing its base of wireless broadband offerings, it offers a fraction of the broadband distribution held by AT&T following the latter's acquisition of cable giant Tele-Communications Inc. earlier this year.
If AOL partners with MCI WorldCom, "AT&T for sure would cut them [AOL] out of a future deal" involving AT&T's crucial cable network, the industry executive familiar with the talks said.
Ron Dior |
