Just hours after I had written about SBC's (NYSE:SBC) new low-rate DSL offering yesterday -- and theorized on the impacts not only on other broadband providers but also on dial-up access providers -- I saw a television advertisement for AOL High Speed. Say what?
As it turns out, Time Warner's (NYSE:TWX) AOL is testing high-speed DSL Internet access in Washington, D.C., and Chicago, with a view of expanding the service across the nation. It's tapping Covad to provide the high-speed capability. When it comes to staunching subscriber bleed, offering broadband Internet connectivity is just what the doctor ordered for AOL.
Of course, yesterday SBC lowered the bar by offering its customers broadband DSL for a mere $14.95 per month. That's a lot less than many providers charge for dial-up access. It's also a deep discount to the fees that major players like Verizon (NYSE:VZ) and Comcast (NASDAQ:CMCSA) charge for high-speed Internet connections. (Several readers have written to me skeptical of SBC's 12-month contract for the low rate, believing that after a year, the service will increase in price, although a Wall Street Journal article quoted company executives as saying this is not a "temporary promotion.")
Price will be a concern for AOL given that its $29.95 monthly fee for AOL High Speed is no longer competitive now that SBC has slashed its prices. We also don't yet know what the fallout will be as other providers react to SBC's announcement. However, when you take into consideration the fact that AOL has been bolstering its premium content and adding on benefits like anti-spam and anti-virus capabilities, it certainly seems that it's finally getting all its ducks in a row.
If AOL can manage to add high-speed connectivity to its overall offering, the outlook looks less dire when it comes to subscribers being wooed elsewhere. (Meanwhile, of course, there are always other reasons why some subscribers may stay -- things as simple as habit or keeping their old email addresses, both of which may be why subscriber defections haven't been any worse.)
As recently as February, we were getting hints that AOL was "getting it" -- for example, its long-awaited effort to team up with Road Runner, another member of the Time Warner family, which offers high-speed Internet connections to a small segment of AOL customers in the areas where Road Runner was offered. Even then, there were indications that AOL was in talks with other providers to offer more of its subscribers high-speed access.
Longtime Fool Rick Munarriz has been tracking AOL's progress in recovering its past glory for quite some time. In the long run, offering high-speed connectivity may be the most important move the company could make. As digital-content downloading becomes more and more sophisticated -- and more ubiquitous -- speed will be essential. Given the increasing popularity of digital photography, music downloading, and soon, digital video feeds, it seems the days of dial-up are numbered.
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Alyce Lomax has no financial interest in any of the companies mentioned.
