AOL looking at broadband access deals
By Bloomberg News
Special to CNET News.com
May 5, 1999, 4:20 p.m. PT
America Online wants to offer high-speed Internet access over cable TV lines to its subscribers as long it makes economic sense for the company, AOL president Robert Pittman told investors.
America Online, the No. 1 online service, decided earlier this week not to pair up with Comcast to bid jointly for rival cable TV operator MediaOne Group. AT&T, the largest U.S. phone company, will buy MediaOne after agreeing to sell cable TV systems to Comcast.
Dulles, Virginia-based AOL expects that eventually it will strike a partnership with one of the cable operators to offer the service to some of its more than 17 million subscribers, according to at least one investor who listened to Pittman's conference call hosted today by Merrill Lynch.
AOL currently offers Internet access over phone lines and will start a high-speed service using phone lines later this year.
Pittman "admitted that cable is going to be one of the preferred broadband access methods," said Ryan Jacob, manager of the Internet Fund. "And clearly, they'd like to offer their service. For them, it has to be a deal that's economical."
America Online officials and Merrill Lynch analyst Henry Blodget, who hosted the conference call, couldn't be reached immediately to comment. Reporters weren't allowed to listen to the call.
Internet service over cable lines is expected to boom over the next several years, according to a study from Forrester Research, a Cambridge, Massachusetts-based technology consulting company. Cable-based Internet providers are expected to have 13.6 million subscribers by 2002, up from 700,000 subscribers in 1998.
Fast Internet service over phone lines is expected to be a fraction of that, increasing to 2.2 million subscribers in 2002 from less than 200,000 last year, according to Forrester.
High-speed Internet access over both cable and phone lines will account for 26 percent of the online market in 2002, up from 2 percent last year, Forrester said.
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