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To: E. Davies who wrote (9259)	5/7/1999 11:25:00 PM
From: ahhaha	Read Replies (2) \| Respond to of 29970

The market is home BB Internet and what that supports. Don't get distracted by the business market. That's not what all this is about. Certainly in the future that will be significant, but what is learned about an extensive heavily loaded cable network serving the home market can then be applied to the business market. AOL doesn't need cash. Their stock is terrific collateral. They've got a locked in, growing cash river. It's what banks drool over or they did when banks actually were in the loan business instead of in the financial business whatever that is (some Glass-Steagall violation). When it comes to upgrading or building a cable network, it is only a matter of investment. If the wires were there, in six months there would be a cheap and easy way to roll your own. This is all being addressed now, but it can't go anywhere without the last mile infrastructure. That's why they have a thread by that name. It may be the most important factor in modern communications. Maybe half the installations need an installer. So, you cut a deal with the US government to supply manpower via the military, the national guard. Those guys in general are plenty smart and don't need much training. You learn by doing anyway. Internet communications are a matter of national security so use of GI is justified. As far as fine-tuning agreements I'm sure there are plenty of pencil pushers available to get that all straight. No places haven't been cabled because it was deemed that the return wasn't there. Armstrong paid a load for a dog which proves it's there just about anywhere. The RBOCs are in the same position AOL is. They must upgrade their MSO plants or eventually disappear like the dinosaur. They don't have MSO's? They better start getting them. I've been predicting for a year that they would. It is understandable that they have a lot of copper business to tend to, but they're running out of understanding time. Once the cable network was substantially built, it wouldn't matter who did what for free. Why doesn't MSFT have a problem about providing free IE? If AOL cuts an agreement to fund infrastructure, surely they should never need to pay more than for its maintenance. An agreement can take other forms too, including amortization clauses, extensions, alternative statuses; it is up to the negotiators. Right now no such are happening nor planned. The extra charge plan would constrain or reduce AOL's existing or future market. You are asking them to tie one hand behind their backs for you when you should be willing to tie two of your fingers together for them. Instead, you offer them a way to expand their market faster than they would already and you ask them what more you could do to help them go forward. This doesn't compromise ATHM. At the very least it identifies where both have common interests. When the system is built, then they can try to outdo each other by giving us better and better stuff. I strongly believe it will end up like the tv broadcasters, the that arena needed the tv distribution system in place first to grow to its maturity. I don't agree that AOL is invoking government for such a crass purpose. It's easy to appear to find the evil of others, but "honi soit qui mal y pense". What they are doing is trying to ensure that they won't be cut-off by exclusion from preferred access. It isn't necessary or wise to appeal to government. They need to go make a deal with T or with some RBOC who gets the lead out and buys some cable MSO. There is also the possibility of stringing your own wire. This is the best course, but that strategy would take a motivated MSFT. MSOs would have to relinquish their ROWs to anyone seeking to original string. Riparian Rights, my boy, Riparian Rights.

To: E. Davies who wrote (9259)	5/8/1999 12:47:00 PM
From: Frank A. Coluccio	Respond to of 29970

Eric, just a curious kind of observation on my part, concerning your: "...assumption that limited resources infrastructure buildout is the primary limitation in reaching new customers. I'm not so sure that is true. AT&T has already proven it has far more access to cash than AOL ever could imagine...." For eons, the dominant carriers have used reverse tension in their buildout strategies, artificially squeezing supply in order to maximize element-level pricing. Like I said, a curious observation on my part, which seems to work against present demand dictates facing T at this time. Or, in reality, have things really not changed all that much in this respect? For one thing, I view the proliferation of additional HFC builds as opposed to stating a more optically-rich alternative for the future, as standing pat on this principle. I could be disproved on this in the near future, but I tend to think not. T knows better than anyone, and they have to be obsessed with this, that subdivisions in the supply of their products (i.e., bandwidth, switching, routing, even rebilling) can easily lead to leaks and appropriations of those resources by users and purveyors alike, in ways that can, and often do, detract from their core offerings and financial interests.

To: E. Davies who wrote (9259)	5/8/1999 7:01:00 PM
From: Ted Schnur	Read Replies (3) \| Respond to of 29970

Eric, I once pitched (as you did) that AOL can became a sort of HBO of the cable Internet channel. Well, after reading some of today's posts, and giving that idea some additional thought, I've changed my mind. AOL's argument has been one around the bundling issue. I think their argument is that it is not fair for consumers has to purchase ATHM's content and services, which they do not intend to use, before purchasing the content and services from another ISP. This implies (IMO) that what AOL was offered was a "premium channel" agreement. In the "premium channel" approach (ex. HBO), the primary revenue source is from subscriber fees, not advertising. If subscribers had access to ATHM, AOL, and the open Internet (not using either home page), there would be no way to count those "eye balls" without some sort of user monitoring (which wouldn't go over too well with the privacy folks). How would AOL justify their advertising fees? If control of the first page is so important, I doubt that AOL will accept anything less then an either/or marketing agreement. Technically, this should be possible by reconfiguring the DNS servers for multiple domains so by default, the AOL user would not get the ATHM startup page. However, there would be a host of other operational issues that would have to be resolved, such as installation cost, customer support agreements, current and future infrastructure cost, billing, and a host of others. It would take time to workout, and I am not convinced that now is the time given the current start of the art, and the current backlog of customer installation requests. Then again, I work at the operational end, and I'm sure that's the message being passed up the management line. The gap between the strategic and the tactical thinking will have to narrow before the long-term destination appears through the fog. Ted