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Technology Stocks : America On-Line: will it survive ...? -- Ignore unavailable to you. Want to Upgrade?

To: yard_man who wrote (6888)	1/20/1998 12:49:00 PM
From: White Shoes	Respond to of 13594

These things take time. EOM

To: yard_man who wrote (6888)	1/20/1998 2:10:00 PM
From: Alec Epting	Read Replies (2) \| Respond to of 13594

First of all, the phone companies are already moving into the ISP business. BellSouth has just started an advertising campaign touting their ISP service (they don't say how much it costs, though). The reason they haven't done it sooner is they've been focusing their energies on long distance prospects, deregulation issues, and competing ADSL technologies. Well, the time has come. Apparently, the clincher with ADSL has been the lack of a standard (DMT v. CAP) and the need for a technician to come to your house to balance the splitter (internet/phone) connection. Looks like the standard will be DMT. Also, Aware and Lucent have recently announced splitterless ADSL technology that does not require on site installation. Now Compaq, Intel, and Microsoft are forming a consortium to push the phone companies to adopt the technology. All but one of the Bell companies have signed on. Products and service should be ready by the Christmas season. This consortium really needs a killer app this year to keep computer sales up. Hence, the big push. Now, here's where AOL's subscriber growth begins to taper off. The phone companies can use the same ADSL modem to bundle both your phone and ISP service. They'll simply include a flyer in with your regular phone bill advertising their new ISP service which is 30 times faster than AOL. They'll even give you a browser if you don't have one. Since there would be no extra cost in advertising this way and the phone companies already own the lines, their profit margins would be phenomenal (at least greater than what they have now). The only cost would be to upgrade the central office. The user buys his own modem and pays $30 for the monthly service. The user can justify paying more because phone service is bundled with Internet service. So there is really no extra cost (in fact, it's cheaper than $19.95 for AOL and $15 a month for phone service). Plus the ISP connection is always up and it's 30x faster. My question is, why hasn't Wall Street realized this yet? They saw Netscape as possibly bringing about the downfall of Microsoft a couple of years ago (of course they were wrong -- anybody can write a browser). Why don't they see the consortium as a major threat? AOL's only response would be to upgrade to ADSL but why should the user pay for AOL in addition to an ADSL phone line. And even if AOL did this, it would cost them a bundle to upgrade. They haven't even written off the 56k modem upgrade yet. Maybe the best investment right now would be AWRE before they get bought out, or perhaps TXN which is in the process of buying AMTX. AMTX owns the patents on ADSL DMT.