AOL And DirecTV Link Up To Challenge Cable In Developing High-Speed Internet Service
As reported June 22 in Todayís News, AOL will be joining other Web portals that have already weighed in with an aggressive strategy for promoting and distributing streaming media content. One of the uncertain factors facing all the major portals is the extent to which their servers can deal with the expected demand when millions of subscribers to their traditional dial-up service convert to high-speed and then start tapping into streaming media content and enhanced electronic commerce. The new AOL Plus is a broadband-oriented package slated to be launched later this year when AOL begins selling subscriptions to its service bundled with High-Speed Digital Subscriber Line (DSL) access from local telephone companies. To date, AOL has announced partnership agreements to resell DSL service from Bell Atlantic and SBC Communications. The company also is aggressively pursuing the right to be carried on the high-speed data lines of cable television operators. Cable companies are presently leading the development of high-speed Internet access services followed by local telephone DSL services. A new deal struck between America Online and Hughesí DirecTV division will widen the choices available in the potentially huge consumer market for high-speed Internet service and interactive television. AOL on Monday, June 21 announced that it would make a record $1.5-billion investment in Hughes Electronics and jointly introduce new consumer offerings with Hughesí DirecTV satellite service. The agreement will allow the joint marketing of new services to AOLís existing 16 million customers and DirecTVís 7 million TV subscribers. Such services will include AOL Plus, which will provide high-speed connections over satellite, and AOL TV for such television-based functions as interactive shopping, Web surfing, e-mail and electronic chat. ""With this agreement w are accelerating the pace of Hughesí transformation into a media and entertainment and information service growth company,"" said Michael Smith, Chairman and Chief Executive of Hughes Electronics. While this development is promising it will be costly to DirecTV subscribers who will need to purchase new equipment to receive AOL TV and AOL Plus. But then for regions of the country that receive no other high-speed or broadband service, satellite delivery will be the only delivery means. In urban areas the phone companies and cable companies will dominate due to price competition. Presently, unlimited high-speed access costs cable and DSL customers about $40 per month for unlimited use. According to Mondayís announcement, $500 million of AOLís $1.5-billion investment will be used to market APL Plus via DirecPC, a DirecTV high-speed Internet satellite service which requires users to buy a special dish for $199 with monthly service charges of $35. Another $500 million will be used to market new set-top boxes to support AOL TV that will be available next year. With the set-top box customers will be able to surf the Internet, chat electronically, e-mail and engage in real-time e-commerce.