AOL's Wide World of Broadband?
- 11 January, 2000 12:01
The proposed $166 billion merger of America Online and Time Warner has sent a hurricane through the media and Internet worlds.
Nowhere is the wind blowing harder than through the offices of ExciteAtHome and AT&T.
For the past year, the two companies have battled AOL in boardrooms, courtrooms and the press over guiding Internet users' access onto high-speed cable lines - all without AOL having a significant broadband presence.
As of today, that has changed. Time Warner is part-owner of the Roadrunner high-speed access service. Indeed, some on Wall Street saw bad news for ExciteAtHome in the AOL-Time Warner deal. Deutsche Banc's Alex Brown downgraded the company's stock on Monday, from "buy" to "market perform." But toward the end of Monday's trading session, ExciteAtHome shares had gone up about 3 percent to $41.13 a share.
While AOL and AT&T, which has voting control of ExciteAtHome, did try to come to an agreement last year which would have carved out space for AOL on AtHome's cable modem service, obviously AOL president and COO Bob Pittman meant what he said when he told The Standard in June that AOL would dominate the Net at any speed, AT&T or no AT&T. "If (broadband) is going to happen, then we have to make it happen," Pittman said at the time.
In the past, Pittman has pooh-poohed broadband as simply a delivery mechanism for content; in a statement Monday, he specially mentioned the broadband opportunity that AOL has in Time Warner's Roadrunner service. "We will accelerate the development of Time Warner's cable broadband assets by bringing AOL's hallmark ease-of-use to this platform," Pittman said. "We expect America Online to help drive the growth of cable broadband audiences."
Clearly, the AOL-Time Warner deal is an aggressive deal to make broadband happen. The question for ExciteAtHome president George Bell is how it affects his company's plan to roll out its service to the public.
According to Bell, it doesn't. Well, sort of. Bell does say that the deal could drive Time Warner's media mogul rivals right into his arms. "The deal signals that big, traditional media companies need to find allies in broadband, and there's only one place to go in North America for a partner ... us," Bell told The Standard in an interview Monday.
Bell also says the deal proves that AOL's lobbying efforts to force AT&T's local cable franchises to provide access at reasonable rates was simply a ploy to delay the growth of ExciteAtHome's service. "There's no question [AOL's regulatory action] was designed to stymie us," says Bell. "There were two downsides to our stock over the past year. One was the regulatory fight in the courts over open access, and the other was the notion that something would happen to us without our control. What happened today should remove any fear that AOL will swoop in and do a deal with AT&T without our knowledge."
Still, having a competitor announce the biggest deal in Net history is no way for a company that had a rough 1999 to start 2000. All through the year, AT&T and AtHome were subjected to speculation that AtHome's merger with Excite wasn't going as well as hoped.
It was widely reported that ExciteAtHome CEO Tom Jermoluk repeatedly clashed with board member and former TCI Cable executive Leo Hindrey over whether the company should open its service to other content companies. Hindrey has since left ExciteAtHome.