The deal between America Online Inc. and Time Warner Inc. will change the face of the Internet, bringing more compelling content to subscribers at a quicker speed.
AOL will have access to Time Warner’s extensive list of brands from CNN and Time to the Cartoon Network and Sports Illustrated, as well as its cable network system with 13 million subscribers.
“AOL will be able to leverage some of the brands that Time Warner has and will start to distribute that content over the Web,” said Dan MacKeigan, senior Internet analyst at Friedman, Billings, Ramsey & Co. Inc. “AOL has always been looking to get into broadband, but producing broadband content is very expensive.”
The deal will also allow AOL to directly sell World Wide Web access over cable lines, adding another competitor to the Internet-cable-access arena. AOL will compete directly with RoadRunner and Excite at Home Corp., the two largest Internet-cable providers.
“We’ll see two major broadband ISPs contending for subscribers now Excite at Home and AOL,” said Zia Daniell Wigder, senior analyst at Jupiter Communications Inc., a New York Internet research company.
Reston, Va.-based Roadrunner, which is a joint venture among affiliates of Time Warner Inc., MediaOne Group, Microsoft Corp., Compaq Corp., and Advance/ Newhouse, doesn’t have enough clout to remain in the top two, she said.
AOL’s access to cable lines puts a new twist on the ongoing battle for open access, which would give consumers the option to choose the Internet service provider they want transmitted through cable coming into their homes.
Consumers do not have that option now. Internet-service providers, like AOL, are generally not allowed to use existing cable lines, which would make Web access almost 100 times faster than the traditional dial-up telephone connection. Nine million U.S. households are expected to use Internet-cable in 2003, according to International Data Corp.
Only a handful of municipalities, including Fairfax City, Va., are using agreements with cable companies as leverage to demand open access to Internet-service providers.
Both AOL and Time Warner officials said they would not block ISPs from using their cable lines.
The OpenNet Coalition, a group fighting for open access, said yesterday it will seek binding commitments for open access in the merger review of both AOL and Time Warner and AT&T and MediaOne Group, which is also faced with the open-access issue.
“We will seek negotiations with both AOL-Time Warner and AT&T, as well as the rest of the cable industry, to define how and when open access will be implemented, and we will continue to urge the federal government to make open access the rule for the entire cable industry,” said Greg Simon, co-director of OpenNet in a statement.
The deal between AOL and Time Warner also will give the Internet company an opportunity to capitalize on an international market that thus far has been challenging for AOL to capture.
“AOL doesn’t have the power or the brand recognition internationally” that companies like Time Warner has, Mr. MacKeigan said. “This is a sign of the times. I think we’ll see more Internet companies merging with traditional media companies.”