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Technology Stocks : America On-Line (AOL)
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To: Dustin who wrote (5626)2/23/1999 9:34:00 PM
From: RTev  Read Replies (2) of 41369
 
AOL has plenty of options beyond paying the very high investment costs of becoming a broadband service provider. But first... some of the suggestions.

TWX partnership. This looks possible and looks like it could be a good deal for TWX since it _might_ be a way that they could get more people to hook up to their RoadRunner service. A partnership would probably force AOL to pay some of the billions that have already been dropped into developing the infrastructure for the service.

Why it would be bad for AOL: There is a significant overlap of BellAtlantic and TimeWarner service areas. A deal with TWX wouldn't expand AOL's service area all that much and might offend the one company with whom they've already signed a partnership and which has wires into more homes and businesses than does TWX. (Remember that business connections a vital for Netcenter to reach its goals.)

@home partnership. Since AT&T will soon own a controlling interest and already owns a big chunk, this seems most unlikely. AT&T has a strong brand name itself and clearly is looking to synergy of all its properties offering long-distance, local, cable, wireless, and internet to consumers and in a different package to businesses. AOL as a partner would just confuse the offerings.

Partnership with other @home partners: AOL might be able to sign individual deals with some of the other @home partners including COX and CMCSK/CMCSA (Comcast). Maybe they'd be willing to pull out of @home completely and build a new system along with AOL. Maybe. Not likely. Why wait when they've already spent the money and already offer the service through @home? Sticking with AT&T's @home benefits from the considerable techno-talents of AT&T. Building a new system would cost billions. If they did decide to separate, surely they'd expect AOL to take on a big chunk of that change. (And remember, Microsoft is a major owner of Comcast. They don't have a controlling interest, but enough to influence them against this kind of deal.)

And remember: cable companies don't really compete with one another. They have service areas that rarely overlap. Competition right now comes from on-air or satellite providers. (One of which -- Primestar -- is owned by the cable companies.)

Why it doesn't matter to AOL: AOL has built enough of an internet presence that it doesn't need the wires into the home at all to take advantage of broadband. Just make the services appealing to broadband users. But AOL does like to have an internet-plus-more service. They could provide that as a value-added service on broadband. This lets others pay the billions for the wires and switches, but gets the users "eyeballs" once they're online.
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