What percent of this AOL business can we expect Ascend to win? This will also stimulate equipment sales and upgrades. Another Ascend customer?
Of course, talk is that AOL may be bidding for Compuserve. What would that do to Ascend, or for that matter if CSRV is sold to another?
Regards,
Mark
AOL Continues Modem Expansion
By Steven Vonder Haar
1:30 PM EDT
America Online Inc. last week said it will continue its pace of network expansion "for the foreseeable future," setting the stage for accelerated growth in the fourth quarter of the year.
AOL Chairman Steve Case, in a letter to subscribers, said that the online service will continue its program of adding 25,000 modems monthly to the company's dial-in network.
The company last week concluded a six-month $350 million network expansion, adding 25,000 modems monthly in an effort to relieve pressure on a data network deluged with calls and busy signals following AOL's move to unlimited usage pricing in December.
While the company could not predict how long it will continue its network expansion, it appears to be taking an open-ended approach to its build-out program. If the program extends through AOL's fiscal year, which ends June 30, 1998, it would represent an investment exceeding a half-billion dollars.
"We're going to continue doing this for the foreseeable future," said AOL spokeswoman Wendy Goldberg. "We're going to keep building as long as people keep coming online, but we're not making any projections."
Wall Street analysts take AOL's decision to maintain its fast-paced network expansion as a signal that the company is preparing to accelerate subscriber growth significantly during the final three months of the year.
"They're going to blow out as many modems as they can," said Brian Oakes, an analyst with the Lehman Bros. investment banking firm. "They should use the next six months to prepare for the next big wave at Christmas."
If AOL does maintain its expansion pace through year's end, it would add another 150,000 modems to its system, which now has 350,000 communications ports nationwide. The company also leases network facilities from Sprint Communications Co. and other communications companies, which add at least another 50,000 modems to its available pool.
Unlike small regional access providers that usually have one modem installed for every 10 subscribers, AOL's Case has claimed the company can provide acceptable service offering a modem for every 20 users because of the number of light users in its customer base.
Using that ratio, AOL would add enough modem space to serve an additional three million subscribers by year's end. Such expansion would allow it to grow to as many as 11 million subscribers, exceeding its projections to reach 10 million subscribers by the end of the year.
"The decision to continue expanding the network is a good sign," said Lise Buyer, vice president at the T. Rowe Price investment banking firm. "It suggests that they are comfortable with subscriber growth and usage patterns under the unlimited pricing model." |
