New to this thread, but I guess most of us are.
I've scanned a few messages here, and am glad to finally see a group of people who seem to really understand the true nature of what's happening with AOL. Frankly, I'm getting tired of the positive spins I keep seeing on AOL news. Yesterday, for example, they said the email outage was due to upgrades they were making to the system to "increase capacity". I'm sure this led many to think that a solution was around the corner, when, in reality, it's way down the road, and with them only planning to add 150k modems, shedding millions of users is a required part of the solution.
This may've been mentioned before, but I've got to throw this out:
I believe that when/if trial proceedings against AOL actually begin, the most important part of AOL's problems will become apparent, once expert testimony is heard. That issue is that had AOL done *any* DD before rolling out unlimited usage, they would've known that they only had 1/3rd the number of lines required to adequately service that many unlimited-time subscribers. They *had* to know that they were looking at a 31:1 user/modem ratio, when the industry standard is 10:1, with 15:1 being the upper limit. It's a self-correcting system, that is well-documented in the industry. If the ratio gets too high, either the line count must come up, or the userbase must go down.
It was obvious before they rolled it out, that they could only support 3 to 4 million users, so I expect a case to be made for them *intentionally* promising service they knew they couldn't deliver.
I expect the worst (and most likely) downside to AOL's woes to be:
1. Forced to issue cash refunds to 8 million users for at least $19.95, along with possible punitives. I don't expect rebates to be acceptable, as many of the victims won't be on AOL anymore.
2. Earnings (not taking refunds into account) down 50% this year because of ratio-induced subscriber bailouts.
3. Huge hits on credit card chargebacks. Because many folks use credit cards to pay monthly, there will be an enormous number of chargebacks due to subscribers disputing charges. I don't know what the chargeback fee is for AOL, but for me it's $15 a shot. And too many of them, and I'd lose my merchant status. Not saying this might happen to AOL, but if it did, it would be *the end*.
4. AOL's market share will plummet, as many other providers (CompuServe, Worldnet, FNET) will snatch up fleeing AOLers.
Let me add here, that AOL's announced addition of 150k modems by June is too little, too late. Even if they could install them all today, the ratio would be 21:1, which is still much too high.
Hope I'm not rehashing things said earlier in this thread. Glad to get it off my chest, in any event. <smile>
BTW, my first investment in Puts happened Friday, when I bought April20s on AOL. How's *that* for bearish. *LOL*
IMHO, the *only* thing that could possibly save AOL now is to immediately acquire a very large provider(s), with about 300k modems, and get the required infrastructure changes in place very quickly. |
