Internet Changes Everything

AOL Signs Covad Deal to Market High-Speed Internet

AOL continues to wrestle with its business model, and continues to use self-fulfilling prophesies to rationalise their actions.

This quote below ".... and reflects a broader industry trend to unbundle programming and access". What are they talking about? The industry never bundled access and programming; thats what only AOL have been doing, and it obviously doesn't work, so they should just acknowledge that, and get on with it.

Yahoo! News - AOL Signs Covad Deal to Market High-Speed Internet

Thu Mar 11,12:38 AM ETAdd Technology - Reuters Internet Report to My Yahoo!

NEW YORK (Reuters) - America Online on Wednesday said it has signed an agreement with Covad Communications Group Inc. (OTC BB:COVD.OB - news) to sell high-speed Internet access and services that it hopes will be more profitable than earlier deals.

The world's largest online service, owned by Time Warner Inc.(NYSE:TWX - news), said the new agreement will allow it to offer Covad's high-speed access at the same time new customers sign up for AOL's own high-speed online programming.

AOL stopped offering high-speed access in January, saying earlier agreements with Covad and other high-speed access providers were not economically viable due to billing and customer service costs.

The latest partnership is part of AOL's goal to focus more on services that offer such features as streaming video and music, and reflects a broader industry trend to unbundle programming and access.

Yahoo Inc. (NasdaqNM:YHOO - news) in December began offering premium service, which includes news and entertainment videos as well as online videos and games, for $5.95 a month for consumers who already have their own Internet connections.

Since 2002, AOL has offered AOL for Broadband, a service that includes music, radio and video programming features for customers with high-speed Internet connections of their own.

The Covad partnership differs from older deals in which AOL purchased high-speed access from telephone and cable providers and resold it to new customers, as well as provided customer service. Customers were billed directly by AOL.

The cost of providing back-end services like billing and customer services made such agreements less economically attractive, it said.

"We took a look at that business model and we were realizing what we were trying to do here was a variety of activities ... where we had much less expertise than the broadband providers," said Lisa Hook, president of AOL for Broadband.

The new agreement splits up the duties. Covad will bill the customer directly for access. AOL will bill subscribers for the programming portion of the offering.

Hook said the profit margins for the new agreements will surpass older deals, but declined to go into details. AOL said it planned to strike similar partnerships with more high-speed Internet providers.

AOL, which saw 2.2 million dial-up modem subscribers leave its service in 2003, has attempted to heavily market the new broadband offering. The company has about 25 million subscribers in total.

It will begin selling the new bundle with Covad's access for $34.95 a month with a 12-month contract.

AOL added 1.2 million new members to its AOL for Broadband service last year and now serves about 3 million in all.

March 11, 2004 at 11:07 AM in @ My Views @, Portals | Permalink | TrackBack (50) | Top of page | Blog Home