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Strategies & Market Trends : ahhaha's ahs -- Ignore unavailable to you. Want to Upgrade?

To: Solid who wrote (626)	12/18/2000 12:17:59 AM
From: Ahda	Read Replies (1) \| Respond to of 24758

Forbes.com It's The Access, Stupid By John C. Dvorak The popular belief that the AOL-Time Warner merger is AOL's final chance to get brick-and-mortar old media status is missing an important point. AOL has 26 million subscribers addicted to its service and still growing like mad. Why burden itself with a huge boat like Time Warner AOL's underlying strategy: to achieve a monopoly position regarding Internet access. Period. AOL is after the Time-Warner (NYSE: TWX - news) cable system. If there are companies that could be adversely affected by this merger, on the surface it looks like the Walt Disney (NYSE: DIS - news) and Microsoft (Nasdaq: MSFT - news). Everyone seemed to roll their collective eyes when Disney protested the merger plan, but Disney knew the deal would be threat. If Time Warner was clueless about the emerging online world, Disney was hopeless. One venture after another fumbled by the company topped off by the lame ``GO'' network. But Disney is not AOL's real target. Instead, it's Microsoft. For background, Microsoft had a series of missed opportunities and incredible botches in its competition with AOL, including a frontal attack on AOL's core business. Just as the Web was emerging in the early to mid-1990s as a powerful force, Microsoft rolled out its own online system: MSN. It was going to put MSN exclusively on the Windows 95 desktop, a move that offended everyone especially AOL. Many thought Microsoft's MSN was going to kill AOL. During this time AOL squawked and protested. Microsoft relented giving AOL some desk space figuring it would do them no good. Microsoft also fiddled with the I/O (input/output) ports in such a way that AOL was unable to work. The company fixed that at the behest of AOL too. It saved AOL from ruin and was the biggest mistake Microsoft ever made. Meanwhile Microsoft was distracted by the sudden emergence of the Web as ``the next big thing.'' During the battle between Netscape and Microsoft over the Web browser, Microsoft lost impetus to push MSN in a world that was becoming Internet crazy. In the process it gave up its interest in UUNet, a large Internet service provider, which had wed MSN users to have worldwide net access. This was a huge mistake because the loss of UUNet made MSN less desirable. At that time, Microsoft didn't understand how important access was to growth. AOL had figured it out. During the battles AOL bought out its own true competitor, the Compuserve online service. This acquisition added many more access points to the already astonishing network AOL had pieced together. This slowly became an unspoken battle of access. Apparently Microsoft was flat-footed as AOL took over the world. The Time-Warner deal adds more access. That's what this merger is really about. Access is key. Can you get on the Internet? Is there a local phone number? If the number is busy are there other numbers? AOL has thousands. When I travel I use AOL. I used to use MSN when it was affiliated with UUnet. Now I don't. The reason is simple. I can get an AOL connection and go on the Internet with a local call from almost anywhere in the world. I've done it in Beijing by making a local call. I have argued in the past that the AOL-Time-Warner merger was about Time-Warner's need to get a clue and its need to have AOL in its stable. I still think this is mostly true--from the Time-Warner perspective. But I did not emphasize enough the rationale of AOL to get into this deal. It's about incremental access. AOL gets control of the Time-Warner cable modem network. And you can forget about any promises to make it easy for others to usurp AOL's hegemony on this network. It's just window dressing. If AOL loses a few subscribers to Earthlink (Nasdaq: ELNK - news), then so be it. It's still ahead and it has enough marketing talent to wrest back those who stray. When you own the network, you're not about to make life easier for the competition. Meanwhile over the past few years someone at Microsoft must have realized that access is important. The company has made three major commitments to alternative access after losing the dial-up wars, by its own blundering, to AOL. And Microsoft is now going for broadband. The company bought a minority position in the unique Gilat (Nasdaq: GILTF - news) direct satellite service that allows two-way Internet access. Right now this service is seriously under-promoted, but available through Radio Shack on a limited basis. This is a godsend for anyone in rural areas not served by the MSN or AOL dial-up network. And since it is a high-speed service delivering over a megabit-per-second, it will appeal to those who cannot get direct subscriber line or cable modems. Microsoft also bought a minority stake in Teligent (Nasdaq: TGNT - news), a company that provides broadband Internet access using a technology called fixed wireless. Again this requires a dish, but access speeds can be as high as 45Mbps using such a system. Finally Microsoft invested heavily in AT&T (NYSE: T - news), which owns the other cable modem infrastructure. When the Microsoft investment in AT&T was first announced it was assumed that it was done to guarantee that AT&T would use a Microsoft operating system in future set-top boxes. This may have been a red herring as Microsoft eyes the cable modem network of AT&T. The Microsoft style is to keep plodding towards a perceived enemy if it sees any threat to its core business: the PC operating system. While AOL has never overtly threatened Microsoft, AOL must be concerned about how easy it would be for Microsoft to make changes in a future operating system that could simply derail the functionality of AOL. Of course, there have always been rumors that versions of AOL can run without Microsoft Windows and speculation over why AOL really bought Netscape, a software company. Netscape was always thought to have had operating system schemes. There have always been rumors that versions of AOL exist that can run without Microsoft Windows underneath. And there had to be some underlying and practical reason AOL bought Netscape. Netscape was always thought to have had operating system schemes-- now they are owned by AOL. In some ways Microsoft and AOL are like the trite scene common to many action movies where two guys both have a gun aimed directly at the other guys head at the same time. Neither wants to pull the trigger. So we wait. As we wait, make no mistake that this merger is more about just plain access and Microsoft than anyone wants to admit.