Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : America On-Line (AOL) -- Ignore unavailable to you. Want to Upgrade?

To: David E. Taylor who wrote (25459)	7/11/1999 10:48:00 PM
From: Ed Forrest	Read Replies (1) \| Respond to of 41369

To: David E. Taylor who wrote (25459)	7/11/1999 11:23:00 PM
From: E. Davies	Read Replies (2) \| Respond to of 41369

The arguments I keep reading such as "AOL wants a free ride on AT&T's cable system", "AOL wants the rewards without the risks" etc. seem to me to miss the main point of this "open access" issue. First I must make clear that I agree that "AOL wants a free ride" is incorrect. They are willing to pay. What it boils down to is whether or not they are willing to pay enough to reward AT&T (or whoever) for the risk it took in spending billions to upgrade the networks and the customers lost to AOL (or not taken from AOL). AOL is a content provider But they are also a reseller of ISP services. It is a very tricky thing to resell a product purchased from one of your competitors (AOL selling broadband internet from AT&T). You have to provide some pretty impressive value added. Obviously the main thing that AOL has to offer is its content, but that content has a predefined value of no more than $9.95/month. The sticking point comes when you realize that the profit lost by AT&T to AOL from advertising, e-commerce, and subscription fees could easily add up to more than $9.95/month/customer! If so, there is no amount AOL could pay that would be better than the current solution. It might not be that way. Depends on many variables, including how many new customers that would not be on cable without AOL could be brought to the AT&T pipes. But don't forget that each new customer will cost AT&T even more in infrastructure costs which AOL is not willing to help with up front. All AOL wants to do is to use that distribution network for its content, paying a reasonable price to AT&T for that use Thats exactly the point. What is reasonable return for billions of high risk $ invested? Probably not what AOL considers "reasonable". Hence the impass. There's nothing free for AOL in that kind of arrangement, and AT&T's "risk" (if there is any) is rewarded by the revenue it can generate from its cable assets Most of us are so enamored with the concept of the internet that we do not realize how uncertain it is that it will actually grow to the proportions expected. Even greater is the risk that cable technology will not be able to keep up with its competition (especially if the cable co's are forced to give up control of the technology to politicians). There is real and massive risk to AT&T. But if AOL only pays $x/month/customer they take on zero risk. Bottom line is that if AT&T feels that the net lost revenue by allowing AOL access is more than $9.95/month no deal can ever be made successfully without a partnership arraigement. Eric