AOL Still Wants DSL to TV, Even in Time Warner Markets


If it wasn't already clear that the impact of broadband
Internet technology was pushing the cable industry into a new era of competition within
its ranks, last week's announcement of the merger between America Online Inc. and Time
Warner Inc. should eliminate any doubts.

AOL's commitment to serving customers with broadband
content to the TV, as well as the PC, using all means available in the local
network-access market, will not change, officials said.

In fact, while access to Time Warner Cable customers adds
another means of reaching the mass market with AOL broadband services, those services will
be available to people with digital-subscriber-line links, as well as cable, in any market
where AOL has both DSL- and cable-transport arrangements. That includes Time Warner Cable
markets, they said.

AOL will "have the capability to offer broadband
Internet to every user in the country via cable, DSL, wireless and satellite," said
Robert Pittman, president and chief operating officer of AOL and a designated co-COO of
AOL Time Warner Inc., along with Time Warner's current president, Richard Parsons.
"There's no question this merger will transform the landscape of both [the online and
media] industries overnight."

AOL has already begun to market its DSL-based service
commercially in certain Bell Atlantic Corp. and SBC Communications Inc. markets, AOL
spokeswoman Wendy Goldberg noted. These are low-key rollouts in preparation for more
aggressive efforts later in the year, she added.

"We're working closely with our partners to make the
upgrade to DSL service as easy and convenient as possible for our customers,"
Goldberg said. "We're still in the learning and ramp-up phase."

This includes determining whether customers prefer the
"splitterless" approach, which uses the same in-home wiring for DSL and regular
phone service, or the traditional approach, which requires a technician to install a
second wire in the home, Goldberg said. "We're not taking anything for granted,"
she noted.

As for "AOL TV," the company demonstrated its new
service at the recent Consumer Electronics Show in Las Vegas, and it is planning to begin
introducing the service commercially in the spring, Goldberg said, declining to say where
it would debut initially.

AOL has deals with Philips Consumer Electronics Co. to
supply set-tops for the DSL environment in support of AOL and with Liberate Technologies
to provide navigating software.

AOL has also worked out deals with DirecTV Inc. to supply
AOL TV via direct-broadcast satellite and with TiVo Inc. to incorporate personalized
digital TV-recording technology into the set-top.

Adding to the its momentum in the broadband-services arena,
AOL announced last week that it had signed a licensing agreement with Veon Inc. aimed at
facilitating integration of various content formats and advertising and
electronic-commerce links into the broadband programming stream.

Veon's client plug-in software will be included in AOL's
5.0 software operating system, enabling customers of AOL's broadband services to access
any content developed with the Veon tool kit without having to download the player, said
Gaurav Suri, COO and chief financial officer at San Francisco-based Veon.

Veon's authoring tools -- which include the major
compression and streaming formats provided by vendors such as RealNetworks Inc., Microsoft
Corp. and Apple Computer Corp. -- allow developers to incorporate the measurement and
management components, as well as the disparate media and advertising-content pieces, in a
simple point-and-click navigation mode in the developing process.

The firm is also working with Excite@Home Corp. and many
other broadband content suppliers to enable easy development of end-to-end
revenue-generating services, he noted.

While AOL has been low-key about its broadband
content-development efforts, the firm has progressed to where it will be able to launch a
wide range of multimedia material across 15 "channel" categories, Suri said.
"We're working with several of the suppliers in these channels," he added,
noting that AOL wants to be sure that its content can scale to a mass market when it
becomes available.

With AOL poised to move into broadband to the PC and TV
across all platforms, Time Warner is in effect putting itself in position to exploit
high-speed connectivity for its content inside and outside of its cable markets.

This is similar to Excite@Home making the Excite broadband
portal available to all users who have high-speed connections. Excite@Home officials said
last fall that the new portal would exploit the high-speed national distribution
capabilities of @Home and include much of the broadband content that has been developed
for @Home.

Time Warner Cable spokesman Michael Luftman said the threat
of high-speed-data competition from Excite@Home in markets served by Time Warner's current
Internet-service provider, Road Runner, was not a significant force behind the merger.

"Excite hasn't announced any DSL deals that I'm aware
of," he said, in reference to residential versus business markets. The affiliated
@Work service has long had a deployment agreement with DSL competitive local-exchange
carrier NorthPoint Communications Inc.

But no such deals are necessary for anyone with a broadband
connection to enter the Excite portal.

Moreover, AT&T Corp. has already made it clear that it
will use fixed wireless in its noncable markets to provide high-speed-data and voice
services. AT&T vice president for advanced technology Jim Wood suggested last week
that the company would make use of phone lines to expand its reach, as well.

In fact, AT&T already has contracted for use of DSL
lines in conjunction with its efforts to deliver high-speed-data services to the business
community nationwide.

The emergence of competition between cable's
high-speed-data suppliers -- via DSL, open access over cable or both -- became more or
less inevitable when @Home and Road Runner backers failed to agree on a merger more than
two years ago, said one senior cable-industry executive, speaking on background.

"The industry decided then that there would be
competition, whether everyone fully recognized the fact or not," the official said.

As to where the AOL-Time Warner deal leaves Road Runner,
that remains to be worked out, officials said. But the firms have already moved toward
exploiting the Road Runner connection by agreeing to add some of AOL's features to the
cable service, including AOL's popular instant-messaging service, "Digital
City," "AOL Search" and "AOL MovieFone."