AOL-Deal Talk By Rivals Adds To Verizon's Woes

The news that a venture of Google and Comcast is trying to acquire a minority stake in America Online could aggravate a headache for Verizon Communications that has been building all year. Even before word of the possible deal leaked out, investors were concerned over competitive threats posed to Verizon by the Internet. Cable companies have been successful at wooing hundreds of thousands of telephone customers with their relatively inexpensive Internet-based phone services. An AOL deal with Google and Comcast adds to Verizon's woes because it poses a new threat to one of its few growth businesses: the sale of high-speed Internet connections. Comcast is one of Verizon's biggest competitors in this business, and owning a piece of AOL would give it new advantages. Initially, Comcast would benefit by getting access to AOL's 20 million dial-up Internet subscribers, the most likely consumers to switch to broadband. But even more powerful would be Comcast's ability to augment its broadband service with AOL's brand name and content, such as concerts, movies and even new reality shows that AOL is producing. In the early days of broadband competition, this type of content wasn't as important to consumers as price and speed in deciding what service to use. But as the number of broadband users increased -- about one-third of U.S. households have high-speed Internet connections -- the amount of movie trailers, sports highlights, home movies and other content has proliferated. Moreover, Internet companies like Time Warner's AOL and Yahoo have done good jobs of developing a sense of community among subscribers. While AOL has made much of its content available to nonsubscribers, Comcast would get a powerful marketing lift by being aligned with one of the most well-known of these online communities and being able to offer AOL's content on its portal.
[SOURCE: Wall Street Journal, AUTHOR: Dionne Searcey dionne.searcey@wsj.com]
http://online.wsj.com/article/SB112925703127368505.html?mod=todays_us_mo...
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* Portal strategy is key to interest in AOL
http://www.mercurynews.com/mld/mercurynews/business/technology/12895742.htm