AOL: Back in the Broadband Game?

Joseph Laszlo | January 27, 2006, 03:45 PM

AOL's on-again, off-again, on-again flirtation with providing broadband access (as opposed to just broadband content and services, bring your own access [BYOA] style) is on again. In a major way.

AOL today announced deals with BellSouth and AT&T, in addition to its existing Verizon deal and of course Time Warner Cable, giving it a nearly nationwide footprint in which it can market broadband to its existing (if diminishing) base of dial subscribers.

The kicker, and the reason I think this is fundamentally different than earlier efforts by AOL to do something like this, is price point. In most areas, AOL HighSpeed will be available for around $26, generally just a buck more than AOL dial. Assuming AOL's not doing something foolish like losing money on every broadband sub, hoping to make it up "in volume," this is great. AOL subscribers, assuming they live in range of DSL or in a TW territory, have no excuse NOT to get broadband, and might as well get it from AOL.

Is AOL late to the game? Absolutely. But are they too late? I think not. My first report this year is looking at who's getting broadband today; it's a very different kind of consumer than 3 years ago...AOL could've taken broadband mainstream much sooner, but now that broadband finally IS mainstream, AOL is positioned interestingly to take advantage of it.

Will AOL be number one? I doubt it. As of the third quarter, Comcast had over 8m broadband subs, SBC (AT&T, that is) had over 6m, TW and Verizon were both around 4.5m. But AOL can be a contender, if even a fraction of its remaining dial base, which is still around 15m, converts.

Will these deals last? Hmm, I don't know. This isn't AOL's first attempt to do deals with the telcos to provide broadband. Of course the last time it happened the price point was around $55. If the ILECs (and TW) see strong growth in their subscriber bases attributable to AOL, that'll make them happy in the market share game. If AOL gives them something besides just price to differentiate, that too will be a good thing. And assuming AOL can make money off its share of the monthly fee, both sides benefit.