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Time Warner: Making An Offer They Can't Refuse?

Morgan The Wicked Look at the numbers, folks (127 comments)


If you look at the numbers, AOL currently pays about 60% of revenues to pay MCI/Worldcom for 56K dial-up access. This is a "sweetheart" rate, which is low because of size (AOL is a decent sized ISP ;-), because they negotiated a significant discount during the deal for Compuserve, and because Steve Case is on the board for Worldcom. Keeping all this in mind, is 75% so outrageous if it costs the largest and most profitable ISP 50% for 56K access? In Canada, their version of the FCC has already ruled that 75% is a reasonable rate for "carrage charges", or fees for ISP's to piggyback on cable lines.

ISP's working with AOL are getting broadband access for their customers and can begin to phase out their dial-up access and reduce maintenance and technical support costs, better for them in the long run. For instance, AOL has a $9.95/plan TCP/IP only access plan that is MORE profitable than a $21.95/month dial-up plan.

Now, I do admit that some of the plan is very onerous (veto power over external content, advertising space on the ISP's home page, etc.). That is just dumb, dumb, dumb, dumb, dumb, dumb, dumb, dumb. There are legitimate business reasons for flexing your muscle, but this is certainly not one of them.

Look at the numbers before you fire off your mouth about the evil AOL. When you make a business case (and believe it or not, AOL intends to make money, not build the ultimate weapon and destroy Alderan) this is not so outrageous.

Let the flames begin!


************ DISCLAIMER *****************

I am a former AOL employee and current AOL stockholder.

************ DISCLAIMER *****************

about 14 years ago


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