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Technology Stocks : America On-Line: will it survive ...?
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To: Tim Kenney who wrote (9233)4/2/1998 8:16:00 AM
From: yard_man  Read Replies (2) of 13594
 
>>If the smartest move
ATT can think of is to raise prices, they ought to just close shop on the ISP business. If
they want the business, they ought to make short-term monetary sacrifices to attract
business. Once users are used to their service, then ATT can stick them with higher
prices. I can only see price increases in this atmosphere as a way of marginalizing ATT
as a player.<<

I would agree that for ATT, this is not a good move. There's two points that you need to remember. First, who has the deep pockets and can subsidize the ISP business. AOL can't charge below cost for very long, unless the advertising revenues balloon beyond everybody's wildest expectations. Second, ATT's willingness to raise prices (bad move on the face of things for attracting subscribers) underscores that it is very costly indeed to provide this service. It is really funny to me that the coverage yesterday on the upgrade had a vestige of Case's own comments about the increase in price not adding to the bottom line.

AOL has to:
1) grow advertising revenues very quickly,
2) not lose customers to lower cost providers or to the simple process of them wising up, and
3) continue to provide for the increasing cost of providing a sub-standard service.

Looks like one heck of a balancing act to this guy -- now consider the price of the stock which discounts them executing this almost perfectly for the next 3 years at least.
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