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

To: Gaffa who wrote (6925)	1/21/1998 12:09:00 PM
From: Alec Epting	Respond to of 13594

Gaffa, my understanding is that your phone is tied into a central office which is typically less than 2 miles away. The phone company will install ADSL equipment at each and every central office, at least in the major metro areas. You will buy an ADSL Lite modem, plug it into the phone jack. Once the ADSL signal gets to the central office, it is combined with other digital data and routed on a high speed line, like optical fiber, to the internet backbone. Phone companies already have subscribers and a billing structure in place. I doubt they will offer much in the way of content, though, opting instead to partner with Yahoo or Excite. What will hurt AOL is the fact that phone and internet service are bundled for a fixed monthly fee. Since you get internet access anyway, why pay extra for AOL? I think phone companies are beginning to realize that long distance service is going to be a low margin business. Internet is where they can make some real money. True, phone companies are notoriously slow about making changes to their system. They are very much concerned with Quality of Service. But the advent of cable modems is putting considerable pressure on them. If they lose out to cable modems, they may lose the phone business as well (assuming cable becomes two-way). They are very worried this will happen. Microsoft, Intel, and Compaq are concerned that PC sales are starting to taper off because there is currently no killer application that demands higher processor speeds. That's why sub-$1000 PC's have taken off. The margins are just two low on these PC's to keep these companies' profit margins up (except perhaps for Microsoft). Hence, they want both the phone and cable companies to get the ball rolling and soon. I think you will see phone companies move into the internet this year in a big way. BellSouth is already starting to advertise on TV.