OT, but big time news >Time Warner & AT&T Discuss Joint Telecom Venture
October 23, 1998
DULLES, VIRGINIA, U.S.A., Newsbytes via NewsEdge Corporation : In a move that could shift AT&T [NYSE:T] back around 20 years in terms of market dominance, the telecommunications giant has started discussions with Time Warner on the possibility of reciprocal access to each other's telecommunications network.
For AT&T, the prize is the ability to sell its services to Time Warner's cable customers, propelling the company into the "carrier's carrier" situation that its UK partner, British Telecom (BT), is slowly progressing towards.
For Time Warner, meanwhile, the deal solves the problem of the number of local deals for its 12 million cable customers across the US to have access to competitive rates on long distance and international calls. Such a deal, Newsbytes notes, would allow Time Warner to offer a standardized set of rates across the whole of the US.
In the longer term, however, such a linkup would give AT&T access to the potentially massive demand for high bandwidth access to the Internet services that cable users will almost certainly generate in the years ahead.
The deal is an interesting development, Newsbytes notes, as Time Warner is known to be in active discussions with America Online (AOL), regarding allowing AOL to sell wide bandwidth Internet service facilities to Time Warner cable subscribers. With AT&T entering the Time Warner arena, however, there is a real possibility of AOL being shown the company door.
The stakes are high, with AT&T having already committed itself to a merger with Tele-Communications, the cable giant, in a probable $48 billion deal. The deal is currently chugging its way through the government approvals mechanism. Adding AT&T as the third company in the deal makes sound financial sense, Newsbytes notes.
Time Warner, however, says it is continuing to invest in its Road Runner cable modem service, which is estimated to have more than 120,000 subscribers, each of which is paying $40 a month in access fees.
AOL may well be soiling a possible deal with Time Warner as it has separately requested the Federal Communications Commission (FCC) to mandate that all Internet service providers (ISPs) can have equal access to cable modem users, in much the same way that all carriers have equal access to the local PSTN (public switched telecommunications network) loop.
According to Jim Cicconi, AT&T's senior vice president for government affairs, AOL's request could cause serious problems for its planned merger with Tele- Communications.
Currently, with around 13 million subscribers, the bulk of whom access the service via modem, AOL is sitting pretty. In the future, however, with DSL (digital subscriber line) and cable modem connections set to take off, an AT &T/Time Warner deal could cause AOL's subscription base to diminish.
That could well throw doubt on AOL President Robert Pittman's commitment earlier this month to investing around $10 billion over the next five years to improve the AOL network infrastructure, Newsbytes notes.
Industry pundits are predicting that a deal between AT&T and Time Warner will almost certainly push AOL's possible deal out into the cold. Ultimately, however, the government's regulatory system could be the deciding factor in all of these matters.
Reported by Newsbytes News Network, newsbytes.com .
(19981022/WIRES TELECOM, BUSINESS/ATTTW/PHOTO)
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