Panelists: MSOs Should Cut Deals with AOL

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One of the best ways for cable operators to drive cable-modem penetration would be to cut affiliation deals with America Online, Western Show panelists said last Thursday.

Many cable subscribers already subscribe to AOL. With satellite operators lacking a strong broadband Internet-access play, cable has an opportunity to convert AOL's 30-million plus subscribers to broadband cable services, Sanford C. Bernstein analyst Tom Wolzien said.

One of AOL's keys to success has been its simplicity. And its popularity with younger users may make it difficult to convert them to non-AOL services, Liberty Digital president Lee Masters noted.

"Teenagers and kids are going to be almost impossible to displace," Masters added.

Panelists discussed a wide range of topics, including the challenge of offering interactive-TV services on thin-client set-tops. Cable operators can reduce capital expenditures by deploying less expensive thin-client boxes, but the lower-end boxes will limit what MSOs will be able to do in the interactive television space, Bernstein said.

Adelphia Communications Corp. executive vice president Timothy Rigas said the MSO expects to generate 50 percent of its revenue from such non-video services as high-speed data and telephony within the next four or five years.

There isn't enough ad revenue to sustain existing basic-cable networks and new programming services, so networks will be forced to charge operators stiffer license fees, Wolzien noted.

He said that's going to be a problem going forward. "Something has got to give," he said.

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