If AOL sells its French & German ISPs

IanFogg | April 15, 2006, 12:47 PM

The Telegraph reports that AOL is considering selling its broadband ISPs in France and Germany to focus on a content-led portal strategy.

The reason for the decision point now is simple: broadband access revenues are declining (our forecast will be published very soon), the ISP markets are competitive, and the major ISPs are investing capital in DSL LLU, fibre-to-the-curb, VoIP and IPTV initiatives. If AOL wishes to remain in the ISP business, it must be confident in the business case for those investments.

If AOL sells its access businesses AOL's challenge will be how to maintain a channel to market, both to acquire new users of its paid services and to drive visitors to its advertising supported properties. Europeans already use numerous ISP-provided features. The relative weakness of AOL Instant Messenger, compared with the US, will make it harder for AOL to leverage AIM to build an independent portal in the face of other ISP's initiatives.

If AOL hopes to build ISP relationships with major French and German ISPs, then it will be facing competition from Yahoo! and MSN, which will worsen the terms of any deal for AOL. The incumbents in France and Germany, Wanadoo and T-Online, have their own rich content offerings and so may prove uninterested in any such relationship.

Additionally, AOL's ISP peers in both France and Germany have been rather more successful in competing with the incumbents than AOL. Perhaps AOL should be re-positioning its ISPs in France and Germany, rather than looking to cash in now?

Non-clients note: the Jupiter reports I linked to above include French and German data splits.