`A good deal for consumers'

But the implications may be as uncertain as they are far-reaching

January 11, 2000|By Michael Stroh | Michael Stroh,SUN STAFF

If you thought AOL was everywhere, just wait.

America Online's acquisition of Time Warner could certainly have far-reaching implications for customers of both companies and for the continued reach of the Internet into mainstream America, analysts said yesterday.

But whether the influence might be good or bad was an open question.

"There are a lot of unanswered questions," said Brett Azuma, director of worldwide Internet research for the Gartner Group. "But, overall, this is a good deal for consumers."

Consumer groups, however, argued that the deal could result in fewer choices in the long run, especially for high-speed Internet access.

For both couch and mouse potatoes, it will initially be a marriage made in heaven.

Time Warner's rich catalog of movies, music and magazines -- everything from CNN to Time to the Cartoon Network -- now becomes fair game to AOL's more than 20 million members.

At the same time, the merger will give subscribers to Time Warner's Road Runner high-speed cable Internet service access to popular AOL features such as Instant Messenger, AOL Search and AOL MovieFone.

On the downside, analysts warned, the deal may unleash a new avalanche of AOL advertising, as AOL uses its new inroads into the mainstream media to sign up subscribers. How about an AOL compact disc in your Time magazine, or at the bottom of your box of popcorn when you see a Warner Brothers film? "It may not be pretty," said Azuma.

What the deal probably won't bring is cheaper service, analysts said.

But the most far-reaching implications of the deal for consumers concerns high-speed Internet access.

For the past year, AOL and other national Internet service providers such as GTE have been pushing cable companies to open their networks to the home -- a move that would bring greater competition for high-speed Internet access. But AT&T, the country's largest cable provider, Time Warner and others have so far resisted.

Yesterday, AOL Chairman Steve Case said the new company will be committed to providing competing Internet service providers with access to its cable infrastructure.

But consumer advocates yesterday worried that AOL, which has been the online industry's most vocal and influential champion of open access to cable company networks, might change its tune now that it has its own cable network.

"We think consumers don't want to be beholden to a giant media-Internet dictatorship, even if it promises to be a benevolent one," said David Butler, spokesman for Consumers Union in Washington. The deal, he added, "will likely leave consumers with fewer choices, limited competition and higher prices."

Several consumers groups said they were drafting a letter to the Federal Communications Commission to block the deal.

Even if they succeed in stopping the acquisition, AOL is working on several other avenues to bring its high speed service into the home.

Last year, the company announced that it would offer high-speed, digital subscriber line Internet service through Bell Atlantic. AOL is now conducting trials of the service in Baltimore, Philadelphia, Pittsburgh and southern New Jersey.

"AOL's customers have choices for high-speed access. They've got Time Warner. They've got DSL. It's a great mix," said Bell Atlantic spokesman Ells Edwards.

And this month the online giant also unveiled plans for something called AOL TV, a new interactive television service offered through satellite broadcaster DirecTV.

"You're going to see more of these kinds of deals down the road," said Edwards.

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