Good post, be sure to check out the article below.
My take was and continues to be that people should just chill. Case and AOL are in the drivers seat. It isn't necessary to get a cable deal for the sake of saying I have a cable deal. This is linear thinking and Case didn't get AOL to where it is by being linear and grabbing the closest thing in sight. To make agreements on terms favorable to the cable industry is not prudent. Cable will come to Case in time, for Case in a strategic cat bird seat - quite frankly, T/cable has little choice. T is about to be squeezed on many sides, they must do something to increase future revenues or they are dead in the water. AOL on the other hand, with or without T will be available on all platforms. The article below only strengthens my conviction that this will be the case.
AT&T and AOL: Separated at Birth?
The phone company's got the cable. The Web company's got the content. It could be a beautiful relationship.
Inside America Online's sprawling headquarters in rural Virginia, there is a widely held belief that there will be no mass market for broadband Internet services until AOL (AOL) says so.
To hear that idea, go straight to the fifth-floor executive suite of President and COO Bob Pittman. Wearing the AOL team colors of denim on denim, Pittman tells The Standard that while there's currently no market for high-speed access, AOL wants broadband to take off. But, he adds, "if it's going to happen, we have to make it happen."
To some that sounds like familiar AOL arrogance, but there's a growing sense that AT&T, whose cable acquisitions have suddenly made it a major player in the broadband sweepstakes, will have to partner with AOL in order to sell broadband to a mass audience. Such a partnership would put AOL in the catbird seat. AT&T may have the pipes, but AOL has the brand.
"AOL has reached the masses because it has figured out what to deliver to Middle America – entertainment," says a venture capitalist who asked not to be named. "AT&T, AtHome and Excite (XCIT) have not figured this out yet. Even if they did figure it out, I suspect that they would not be able to duplicate AOL's success." AtHome, which recently merged with Excite, is partly owned by AT&T and has exclusive rights to provide Internet services on many major cable systems.
At an analysts conference in mid-May, Barry Schuler, AOL's president of interactive services, said his company was in talks with AT&T about a possible broadband content alliance. When Pittman is asked about such a deal, he declines to comment. What AOL executives are saying to Wall Street sounds different from what they have been saying on Capitol Hill, where they've been demanding that the government require AT&T to make its cable pipes available to any and all Internet service providers.
The economics of a possible deal boil down to one question: How much of the $40 AtHome access fee might AOL get in exchange for letting customers access AOL via AT&T cables? Currently, AtHome collects 35 percent, or $14, of its subscribers' monthly bills, with the cable companies recouping the rest to cover infrastructure costs.
In the meantime, AOL is planning to launch AOL Plus, its own broadband offering, over telephone lines equipped with digital subscriber line technology. AOL is expected to get a $10 cut of the $40 AOL Plus access fee – leaving the rest to the telcos – and it may be looking for a similar deal for cable.
Despite their common interests, any deal between AOL and AT&T would be hard to pull off. The egos and reputations at stake range from the partners at Kleiner Perkins Caufield & Byers, who have a big stake in AtHome, to AtHome CEO Tom Jermoluk. And don't forget former TCI executive and AtHome board member Leo Hindrey, now AT&T's president of broadband and Internet services.
Some sources close to the Kleiner Perkins camp describe Hindrey as hard to deal with, and there is apparently no love lost between Hindrey and AtHome's Jermoluk. Hindrey stated flatly at a conference last month that AT&T doesn't want to be in the content business and doesn't want customers to be locked into AtHome content offerings – a position that doesn't marry well with AtHome's acquisition of Excite. Hindrey's stance has upset Jermoluk. So while an AOL-AT&T deal may make financial sense, it may not make as much personal sense. Says one source: "There are some big egos involved here, and it would not be surprising if the players did something illogical."
AOL plans to roll out AOL Plus this summer with help from telcos SBC (SBC) and Bell Atlantic (BEL). But because he believes demand is so low right now, Pittman won't give AOL Plus the typical AOL marketing blitz.
AOL can probably afford to bide its time. Every six weeks it signs up an other million customers – more than AtHome and Road Runner (another cable company broadband service) have signed up between them. By playing down broadband's importance today, AOL puts itself in a better bargaining position should cable operators get desperate to cut a content deal.
AOL has also been quietly setting up the framework for AOL TV, a set-top box service developed in conjunction with DirecTV that may hit the airwaves next year. It's not clear whether AOL will solicit cable partners for the service.
But AOL shouldn't wait too long. AT&T's Hindrey is a big fan of Yahoo (YHOO) and has been pushing for a deal with the portal company, according to sources. While Yahoo won't confirm having spoken with AT&T about such a deal, Ellen Siminoff, VP of business development and strategic planning for Yahoo, says that the important issue is how difficult AtHome makes it for consumers to get to Yahoo and other sites. "From all indications, they don't plan to lock off access," Siminoff says. "The question is, 'How many barriers will they put in the way of the consumer?'"
According to Siminoff, AT&T has a decision to make. "Does it want to provide what customers want, and go with a leader, or go with something it owns?" Pittman seems to share this perspective, except that he thinks consumers will want AOL and nothing else.
Pittman remains convinced that it will be the AOL brand, not the AtHome or Road Runner brands, that consumers will choose for their broadband needs. Which would leave AT&T pretty much still in the phone business.
"What [AtHome and Road Runner] are at the end of the day is … the cable industry trying to figure out what to do with its transport system," he says. "I believe they will eventually be the transport system that enables ISPs to use cable systems as a data network."
----------------------------------------------------------------------
Mentioned in this article
PEOPLE
Bob Pittman President and COO, America Online
Barry Schuler President, AOL Interactive Services, America Online
COMPANIES
AOL (AOL) Dulles, VA
AT&T Englewood, CO
Excite (XCIT) Redwood City, CA
Kleiner Perkins Caufield & Byers Menlo Park, CA
SBC (SBC) San Antonio, TX
Bell Atlantic (BEL) New York, NY
Yahoo (YHOO) Santa Clara, CA
thestandard.com
Regards, |
