Together, AOL And AT&T Will Dominate Broadband
January 26, 2000The AOL Time Warner deal will cause AT&T to pursue a wholesale broadband strategy and partner with AOL. By focusing on their core competencies -- content and carriage -- AOL and AT&T will wield more power within broadband circles and force others to either partner or perish.
by Bruce Kasrel with Mark Zohar, Tim Grimsditch
The AOL Time Warner deal gives AOL access to Time Warner pipes as well as the platform it needs to transition its service to a high-speed experience. As a result of the deal, AOL will:
* Provide a consistent and complete experience. AOL will now be able to offer its users a simple and easy interactive experience across multiple devices from the PC to the TV. AOL can now expand the reach of its service by giving all of its cable TV subscribers access to the AOL interface for customer service and online bill payment.
* Push access to all technologies. With delivery via cable, DSL, and satellite firmly in place, AOL will take steps to separate the broadband experience from the specific delivery platforms. AOL will implement plans to allow cable subscribers who move to another system access to its DSL offering for the same price.
* Deliver a set of unbeatable and integrated brands. AOL will provide a much-needed jolt of Internet smarts to Time Warner brands like Time, CNN, and HBO. AOL will take it a step beyond just improving the Pathfinder stable and establish a clear policy of integrating content across channels. If Parenting magazine doesn't fit into the broadband picture, it should be sold off to Hachette Fillipachi. This works both ways: AOL Digital Cities must translate over to the TV and magazine world -- or it will be jettisoned.
AT&T GOES WHOLESALE, LEAVING RETAIL TO OTHERSAOL access to broadband pipes now gives the online giant access to the broadband podium. Forrester expects AOL to steal the broadband spotlight away from AT&T, forcing AT&T to change its strategy by:
* Folding all interactive efforts under a single umbrella. With WorldNet floundering on the dial-up side and Excite@Home being dwarfed by AOL's shadow, AT&T needs to consolidate its Internet initiative into a unified brand. AT&T must move WorldNet under Excite@Home or saddle up with Yahoo! or Disney. Either way, the brand must be able to encompass everything from interactive TV on AT&T cable systems to mobile eCommerce on AT&T Wireless Services.
* Moving WorldNet over to Excite@Home. Battling AOL in dial-up will take AT&T's focus away from the bigger broadband opportunity. AT&T should move all of its subscribers over to @Home and let it manage the transition from dial-up to broadband.
* Wholesaling infrastructure while retailing services. The AOL deal, by increasing the value of the broadband pipe, validates AT&T's massive investment in cable assets. To get the biggest bang for the buck, AT&T should wholesale bandwidth to AOL, Excite, and others. As it moves its focus toward leveraging its infrastructure, AT&T should look to enhance its phone service offering with Time Warner by providing deep long-distance discounts to AOL subscribers. AOL would get a better deal for its members, and AT&T would become the official telecommunications provider for AOL services, even when AOL is being delivered via an RBOC's DSL lines.
* Taking the lead in open access. Following its open-access plan with MindSpring, AT&T is in a position to define and lead the open-access charge. AT&T should move first by offering AOL wholesale access on its fixed wireless systems and by planning on opening up its cable systems to AOL and other content providers once its exclusive deal with Excite@Home terminates in 2002.
Others Will Have To Face The Harsh Reality Of Playing Second FiddleAs AOL takes the broadband spotlight and AT&T leads the high-speed delivery game, other players will need to respond -- or find their roles significantly reduced. We see:
* RBOCs getting comfy in the passenger seat. Lacking access to cable will position RBOCs as an also-ran in the early going. It won't be all bad news, though, since Bell Atlantic and SBC marketing alliances with AOL will pay off even bigger as AOL touts broadband across technologies. The overall gain from new AOL broadband promotions and DSL sales will soften the blow from any cable-based competition within the RBOCs' territory.
* Dial-up ISP consolidation. The price tag to battle AOL in the ISP arena has risen exponentially, and other ISPs must join forces or be left in AOL's wake. We see Earthlink gobbling up Prodigy, while other ISPs like NetZero will be folded into either cable or DSL providers.
This document is relevant to the following lenses:
Corporate Technology
Internet Commerce
Computing, Networks, & Communications
Consumer Technology
Future Of Public Networks
Future Of TV & Entertainment
For more information about any of Forrester's lenses, contact us.
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