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

To: zalesky who wrote (15500)	5/7/1999 5:34:00 AM
From: puborectalis	Read Replies (1) \| Respond to of 41369

AOL is too smart not to have contingency plans.....READ ON>>>>>Some analysts believe that for now, America Online must content itself with gaining access to customers via a competing set of partners -- the regional Bell phone companies, which are slowly rolling out high-speed Internet links over phone lines. Still, most analysts believe economics will eventually force cable network operators, including AT&T, which will now reach more than 50 percent of U.S. households, to strike deals with independent Internet service providers like AOL. ''AOL is working on ways of striking a deal in the area,'' said Abishek Gami, a securities analyst with Chicago brokerage William Blair & Co. ''Deals will be cut here because it makes economic sense,'' agreed a Washington D.C. communications lawyer and regulatory expert who asked not to be named, referring to AT&T. ''The hard part is what the right structure of such a deal would be,'' Gami said. ''Clearly, they have to convince the cable guys that going it alone is not the right way to go.'' AT&T finalized the nearly $60 billion acquisition Thursday. A related side agreement with Microsoft Corp., AOL's nemesis, calls for Microsoft to invest $5 billion in return for a stake in the communications giant and a deal to use Microsoft software to deliver interactive services over cable links. The MediaOne deal gives AT&T cable access to half of U.S. households when joined with the cable networks of its other major acquisition, Tele-Communications Inc., and its joint venture with Time Warner Inc. In response, AT&T stock roared up $5.06 to close at $61.87 in heavy New York Stock Exchange trading, $2 shy of its 1999 high. Currently, America Online uses standard phone lines to deliver Internet access to roughly 17 million U.S. subscribers via its AOL and CompuServe services. It obtains these connections at wholesale rates principally from MCI WorldCom Inc. -- AT&T's arch-rival -- and a range of other communications companies, such as the regional Bell companies that dominate the U.S. local phone business. For over a year, AOL executives have reiterated their optimism that high-speed, constant Web connections will come from all directions -- not just cable, but high-speed phone lines, satellite transmission and wireless devices. They combine such public pronouncements with traditional back-room political arm-twisting in Washington D.C. to press cable operators to open networks to Internet services like AOL. Paradoxically, AT&T's growing power over the cable industry -- and the potential this could trigger a regulatory outcry or even a legislative response -- could indirectly boost chances AOL and AT&T will strike a deal. Its impasse with AT&T may push America Online to forge closer ties with U.S. Baby Bell companies that can provide it with high-speed Internet connections over standard phone lines using a rival technology to cable modems known as DSL. Already, America Online has agreed to such deals with Bell Atlantic Corp. and SBC Communications Inc., the nation's two largest suppliers of local phone service. But AOL has stressed that this is part of a strategy to embrace all methods of high-speed Internet delivery. AT&T Chairman C. Michael Armstrong left open the possibility of doing a cable network access deal with AOL at a news conference Thursday detailing AT&T's acquisition of MediaOne. ''If AOL would like to sit down at the table and negotiate a commercial arrangement, we would welcome that. If others wish to ride (on our systems), we are open to that,'' he said in a conference call with analysts and reporters. But his comments did not respond directly to concerns that AT&T will require AOL customers to pay for both AT&T's programming via AtHome Corp. and for AOL programming, in effect making AOL's service twice the cost of AT&T's own.