Barry,
Let me take this a piece at a time.
"Subscribers to AOL are already subscribers to LD service. Just
because a LD company acquires AOL why does that necessarily mean
that they would acquire some portion of those customers' LD business."
True, they do already subscribe to some LD service. However, look
at the AT&T pricing model for on-line service. If you want to use
AT&T for your ISP, it will cost you $19.95 if you also have AT&T
as your LD provider. If you don't have AT&T as your LD provider and
you want them for your ISP, it will cost you an additional $5.00
per month. As far as I know, T is the only major company that is
providing both LD and ISP services - so that's why I use them as
an example. Let's say that T also gets into the local phone service
(which we all know is their intent), They could then offer you
discounted service, given you use T for all three of the services.
The customer then only has one company to deal with for any
interconnection/ISP related problem and/or upgrade of service.
"What can AOL do if RBOC's or LD companies subsidize their own IS
to put AOL and others out of business?"
What would it take to duplicate the environment that AOL currently
has? That question is the basis of my answer. It would take
money to buy the hardware, build the facilities, get the staff,
and in general - build the ISP environment. If an LD/RBOC company
were to build it themselves - how long would it take? What would
they offer the customer to get them to leave their current ISP?
Buying AOL gets them everything up front. Sure, there would be
problems to work out and financial stuff to work through. But,
the acquiring company would get the ISP environment basically
overnight. That speed is worth money.
al |
