AOL Time Warner Merger In January 2001, the FTC approved the merger between AOL and Time Warner. America Online is the most prosperous Internet company due to their online skills, massive market share, and distribution. Currently, AOL owns 13 Internet Service Providers. Time Warner, the second largest cable company in the U.S., offers activities that range from television, music, magazines, and movies. Time Warner currently owns six magazines and eight television properties. This merger has created a media monster worth $350 billion that will transform the Internet and media industries worldwide. ―AOL Time Warner is organized around its core growth drivers—subscription services, advertising and commerce, and content—to maximize the value of the company's unique combination of brands and other assets, and to drive the next wave of growth that will transform the landscape of media and communications‖ (aoltimewarner, 2001). AOL Time Warner will be introducing their new cable and broadband Internet service to the Athens area. We, as consultants, have been asked by the Athens City Council to assess the possible benefits and negatives of the service provided. The Athens City Council is concerned about issues relating to the pricing and packaging of services offered by AOL Time Warner. Company Overview America Online “Our mission is to build a global medium as central to people’s lives as the telephone or television…and even more valuable” (AOL, 2001). America Online was founded on May 24, 1985 and was registered in Delaware under the name Quantum Computer Services. In October of 1989, AOL service was open for Macintosh and Apple. It only offered limited online services for people that used their personal computers. ―AOL is the world’s leader in interactive services, Web brands, Internet technologies, and e-commerce services‖ (AOL, 2001). Due to its convenient and easy-to-use services, AOL serves more than 27 billion customers. AOL owns two of the largest instant messenger services, which are AOL Instant Messenger and ICQ. These are both free to AOL non-subscribers. AOL International serves 16 countries in eight different languages. AOL has many partners including: E-bay, Gap, Proctor and Gamble, Wal-mart, and Petsmart. Barry Schuler, AOL’s chairman and chief executive officer, is now beginning to market interactive television services that connect video programming features with web-based and other interactive features. These are viewed and then used by customers through their televisions. Customers can see their e-mail, instant messages, stock portfolios, and other features on their television set by using AOLTV service. Along with AOL’s 27 million members, it also serves 150 million people who use emails daily, 245 million use stock quotes daily, 7.3 million web URLS served daily, and 656 million people per day are on Instant Messenger (AOL, 2001). Time Warner ―We know what it takes to lead a business to revolution” (Time Warner, 2001). Time Warner is currently the second largest best-clustered cable television operator in the nation, with 12.7 million customers, serving 100,000 subscribers or more, and has
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cable systems in 20 million homes. Time Warner is a pioneer in the cable industry because it introduced the digital age into our houses. They use Road Runner, which is a fast broadband service. Time Warner has strong technological leadership and outstanding digital upgrades of its systems. Time Warner Cable had 946,000 Internet customers in 2000, which increased 187% from 1999 (Time Warner, 2001). Joseph J. Collins is the chairman and chief executive officer of Time Warner Cable. Time Warner own magazines, music recording labels, video programming networks, multiple sport franchises, a broadcast TV network, and companies that distribute TV programming and films. Some companies that Time Warner owns are: CNN News Group, Home Box Office, New Line Cinema, Time Inc., Time Warner Cable, Time Warner Publishing, Turner Entertainment Group, The WB, Warner Brothers, and Warner Music Group. Due to the AT&T and MediaOne merger, AT&T owns 25% of Time Warner Entertainment, while Time Warner owns 75%. Time Warner Cable continues to grow. By the end of 2000, they netted 1.7 million digital video subscribers; this was a 305% growth from 1999 (Time Warner, 2001). Overview of AOL Time Warner Merger The FTC approved the merger between AOL and Time Warner in January 2001. America Online is the most prosperous Internet company in the world, and Time Warner is the second largest cable company in the U.S. This merger has created a conglomerate worth $350 billion that will transform the Internet and media industries worldwide. The combined strengths of each of these companies will build the world’s preeminent, fully integrated media and communications company. ―The merger of AOL Time Warner will provide stronger operating and financial outcomes than either company could have accomplished on their own‖ (Olavsrud, 2000). Together, AOL and Time Warner now have the potential to cross-exploit and cross-promote their assets. Both companies have gateways into separate industries, such as AOL’s online entry-point and Time Warner’s cable network. This merger will also create new business opportunities for the company, which will expand to their potential customers and services. Government Regulations FTC Regulations The Federal Trade Commission, in a unanimous 5-0 decision, approved the merger between AOL and Time Warner, but they declared restrictions on the merger. The merger would have lessened competition in the broadband access market, undermined AOL’s incentive to promote DSL service as an emerging alternative to cable broadband, and restrained competition in the market for interactive television without restrictions. Robert Pitofsky (2001), the chairman of the FTC said, ―In a broad sense, our main concern was that the merger of these two powerful companies would deny to competitors access to this amazing new broadband technology. This order is intended to ensure that this new medium, characterized by openness, diversity, and freedom, will not be closed down as a result of this merger.‖ The regulations and conditions of the AOL Time Warner merger set by the FTC are listed below. AOL Time Warner must let at least one non-affiliated cable broadband ISP provider be available to subscribers using Time Warner’s cable lines before AOL
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can be offered itself. Then they must add two more non-affiliated ISP’s within 90 days. They currently have a contract with Earthlink. AOL cannot begin to advertise or promote their services until Earthlink’s services are available or they begin to advertise. In Time Warner’s smaller cable divisions, such as Athens, they are required to enter into at least three agreements with other ISP providers within 90 days. If Time Warner fails to enter into these contracts, the FTC will assign a trustee to enter into a contract with a company for Time Warner. Time Warner must include a ―most favored nation‖ clause, which requires that, if AOL Time Warner executes a cable broadband ISP service agreement with another company, AOL Time Warner must provide a copy to the Monitor Trustee. They must also give notice of the execution of the cable company agreement to each non-affiliated ISPs, and give the non-affiliated ISP an opportunity to the same rates and terms secured by AOL in the cable company agreement. AOL Time Warner must negotiate in good faith with future ISP providers that would like to use their lines. However, they can deny other ISPs based on the capacity of the cable broadband line. AOL Time Warner cannot interfere with content passed along the cable lines by non-affiliated ISPs. ―They must market and offer AOL’s DSL services to subscribers in Time Warner cable areas where cable broadband is offered at the same price as they do in the areas that are not offered cable broadband‖ (FTC, 2001). AOL Time Warner must notify the FTC of any complaints from Internet and digital cable competitors that are unable to access Time Warner’s services. These conditions, listed above, are set for a period of five years (FTC, 2001).
FCC Conditions The Federal Communications Commission examined Internet services, Instant Messaging, and the relationship between AOL and AT&T in regards to the AOL Time Warner merger. Listed below are the imposed conditions to the terms of the AOL Time Warner merger set by the FCC. Conditions relating to Internet Services: Choice of ISPs: AOL Time Warner must open its cable systems to ISP competitors. They must allow customers to select a participating ISP by a method that does not discriminate in the favor of AOL Time Warner associates. First Screen: AOL Time Warner must allow all unaffiliated ISPs to control the content of their customers’ first screen. AOL Time Warner cannot require an unaffiliated ISP’s customer to go through an associated ISP to reach the unaffiliated ISP. Billing: If they desire, participating ISPs must be allowed to directly bill the subscribers to whom they have sold their high-speed Internet access services. Technical Performance: AOL Time Warner must offer the technical performance standards to unaffiliated ISPs in a non-discriminatory manner.
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Disclosure Agreement AOL Time Warner may not enter into a contract with any ISP for connection with AOL Time Warner’s cable systems that violates FCC confidentiality procedures. Enforcement Procedures Any disputes regarding the FCC conditions are to be settled within 60 days of a filed complaint. Conditions Relating to Instant Messenger: Instant Messaging They must file a progress report with the FCC every 180 days describing the actions that it is taking to achieve interoperability of its IM and other offerings. Conditions Relating to a Contractual Agreement with AT&T: Relationship with AT&T AOL Time Warner may not enter an agreement with AT&T that gives them exclusive ISP access to any AT&T cable system (FCC, 2001). Telecommunications Act of 1996 The goal of this act ―is to let anyone enter any communications business—to let any communications business compete in any market against any other‖ (FCC, 2001). This act affects telephone, Internet, cable, and video services. The Telecommunications Act of 1996 was created ―to promote competition and reduce regulation in order to secure lower prices and higher quality services for American telecommunications consumers and encourage the rapid deployment of new telecommunications technologies‖ (Thomas, 2001). The merger of AOL Time Warner is stirring up criticism in regards to the Telecommunications Act of 1996. Many people have voiced their opinions on this subject. But the merger is disturbing in at least one aspect. The Telecommunications Act of 1996 was meant to stimulate further investment in infrastructure (like new lines to homes). But the big players (AT&T and AOL) who could provide that infrastructure are buying up the old infrastructure instead. So there’s no new channel for competitors, no new benefits to end-users (Oram, 2001). According to Frank Beacham (2001), a writer specializing in technology criticism, stated, ―This merger demonstrates the failure of the Telecommunications Act of 1996 to provide competition…. AOL was concerned that it didn’t have access to broadband cable lines; now they have bought that access.‖ The restrictions were set by the FCC and FTC to protect consumers and other competing companies in the telecommunications industry. Benefits on the Micro Level AOL Time Warner will provide Athens with appealing technological advancement. This new digital technology has many options and benefits that regular phone wire and coaxial cable could never offer before. Here is a list of benefits the average consumer within Athens will experience with digital technology: Cost Efficient: Digital cable will be very cost efficient because it will drive prices of other ISPs down. The new digital cable from AOL Time Warner is moderately priced. Non-cable subscribers can receive Road Runner service for $45.95, and current cable
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subscribers can receive Road Runner for $39.95. It is better than its main competition, DSL, because it is 3 times faster. Furthermore, it is 100 times faster than a 28.8 dial-up phone modem, and has 100% availability to be logged on always. There are no expensive modems to buy and no charge for a DSL line. AOL Time Warner is going to offer Road Runner, which is a high-speed broadband service. Ohio University: Ohio University will benefit by using AOL Time Warner. Time Warner’s premium package will include Ohio News Network, which was requested from Scripps. Ohio University currently buys Time Warner’s basic channels, but will receive 16 more channels along with the 22 channels they receive from satellite. Another great advantage is a configured Internet service. This will allow customers to be able to use Ohio University’s library databases. Community: Residents can purchase digital cable, which has a better picture and sound quality than basic cable. AOL Time Warner will also offer free stations such as: Government Channel and Public Access. The prices of their services are cheaper than other competing Internet Service Providers in Athens. AOL Time Warner will provide free cable to schools and city buildings in Athens. Road Runner will provide a larger bandwidth, which will increase the transfer rate and the amount of information that can be processed at one time. Schools: AOL Time Warner is introducing a new website called AOL@school. This is currently being offered to Athens East Elementary School. This provides homework help, teaching tools, how to research a topic, and a free email service. It is designed to aid students, teachers, and administrators in the teaching and learning processes. Jobs: Guy Phillips (2001), Athens City Council President, stated that AOL Time Warner will use local residents to staff offices, and once Road Runner becomes popular they will use more local technicians to install the service. Benefits on the Macro Level Today’s society has turned into a technical revolution. With the ever-growing popularity of the Internet, more and more people are using it for more than just checking their email. In the past few years, the Internet has grown not only in size, but also in technology. The first basic Internet designed for users came about with the introduction of the dial-up modem. At speeds of 28.8kbp/s, people thought they were at the cutting edge of technology. Eventually, faster speeds were brought about and for a while, no one imagined the Internet would be faster than 56kbp/s. Technology proved us all wrong with the development of DSL (Digitally Subscribed Lines) technology. Digital cable is now the revolutionary phenomenon of household Internet usage. Digital cable has revolutionized the way people are able to use the Internet due to its fast speeds and other user-friendly characteristics. Here are a few examples why digital cable is taking the world by storm: Multi-tasking: With broadband service, the average user will be able to talk on the phone, watch TV, and use the Internet at the same time. This is a convenience that no other ISP provides.
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High Transfer Speeds: The digital service is fiber optic, therefore, download times have been cut by more than half. Broadband can max out at 30Mbs/s as opposed to its leading competitor DSL, which can max out at 9Mbs/s. Multiple Users: Digital cable enables multiple people to be using the Internet at the same time from the same complex. By using a relatively inexpensive computer hub, several people can ―Surf the Net‖ without having to fight to see who gets the computer next. Digital Cable Option: Digital Internet technology runs into a house on an ordinary coaxial cable. There are no additional cables or wires being run for digital cable or the Internet, since it runs off of the original coaxial cable. HDTV (High Definition Television) is not required for digital cable. As far as sound and picture quality, they far exceed anything normal cable can provide. Digital cable provides superb, digital picture quality along with CD quality sound. Digital cable offers large amounts of channels, CD quality music stations, and pay-per-view movies. Digital cable for your TV is a wonderful option to have. E-Commerce: E-Commerce is becoming the way people all over the world conduct business; with extremely fast Internet speeds, the ability to have multiple users, several e-mail accounts, and affordable pricing. People, world wide, can use and appreciate these advances within the Internet world. Digital cable will definitely have an effect on everyone and how they live their daily lives. Synergies Financial The $350 billion merger between AOL and Time Warner has created a multimedia/communications monster. The new company expects revenue to grow by 12-15 percent, $40 billion, and have a 30 percent increase of adjusted earnings of $11 billion this year. The company also plans to cut 2,400 jobs, reshuffle division heads, and have a $5 billion stock buyback. Collectively, the new corporation expects to save $1 billion in merger savings, including $300 million in savings from the job cuts, and another $100 million from paying some managers less by giving them better stock options. As far as debt, AOL helped offset weaknesses of Time Warner with its 16 percent fourth-quarter earnings drop from their ―Box office flop‖, ―Little Nicky‖. A combined total shows that AOL Time Warner reported a pro forma revenue of $36.2 billion (which comes from cable, music, TV. networks, filmed entertainment, AOL, and publishing) and adjusted earnings of $8.3 billion. After a few one-time charges, AOL Time Warner only had a pro forma net loss of $4.4 billion. This $4.4 billion loss has worried some investors and AOL Time Warner is reassuring them by making deals with other large corporations such as: Nortel Networks Corp., Cendant Corp., Compaq Computer Corp., and Purchase Pro. Referring to their balance sheet, AOL Time Warner only has $18.6 billion of net debt and $1.6 billion of liquid investments. Currently AOL Time Warner has $14 billion in financial capabilities. They are expected to increase to over $50 billion within a few years (Solomon Smith Barney, 2001).
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Operational The merging of AOL and Time Warner is beneficial to both companies. Combining the second largest cable company with the largest Internet provider offers both organizations the opportunity for growth and market penetration. An operational synergy is formed when two companies come together as one and combine their strengths to penetrate a new market. Also, the merging of two similar companies, like AOL and Time Warner, helps reduce redundancies. AOL has a rock-solid grip in the technological Internet realm, while Time Warner has a stable grip within the media industry. Together, AOL and Time Warner own magazines such as Teen people, Fortune, Entertainment Weekly, Time, and several others. CNN, TBS, HBO, and TNT are just a few television networks they own. They also own the Warner Music group, Warner Bros. Stores, New Line Cinema, Warner Bros., AOL, Winamp, Road Runner, AOL Instant Messenger, Compuserve, and many others. The ability for AOL Time Warner to penetrate both the media and technological aspects of society makes them a force to be dealt with. The merging of the two companies also gives them the ability to cross-exploit one another. AOL can correct its bandwidth problem by being distributed through Time Warner’s cable lines. Furthermore, Time Warner can provide media exposure for AOL through their cable system. AOL is developing video steaming, which will be able to play full-length movies of Time Warner’s over the Internet. Music, which comes in the form of 40 channels through Time Warner’s digital cable, is in the works of being broadcasted through AOL. This is another market to penetrate, the music industry combined with interactive media. E-commerce is a way for each company to cross-promote each other. Both Internet sales of AOL’s and cable sales of Time Warner’s will definitely increase due to advertisement from one another. Music, movies, clothing, and more offered within one company, could make AOL Time Warner a ―One-stop-shopping place‖ (Solomon Smith Barney, 2001). Tax In a report from LEXIS-NEXIS, AOL Time Warner reported to analysts, ―…that it is sitting on about $11 billion worth of future tax write-offs, thanks mainly to AOL employees who exercised stock options during the past few years‖ (Pender, 2001). This means that AOL probably won’t be paying taxes for several years to come. However, if AOL and Time Warner had merged in 2000, instead of 2001, they would have only owed $551 million in federal, state, and foreign taxes. Since the newly formed company is giving options to all their employees, their tax benefits could increase dramatically if their stock continues to do as well as it has been (Pender, 2001).
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Marketing Mix Target Market The target market that AOL Time Warner is focusing on includes all current Time Warner cable subscribers in the Athens City and the Plains area. According to our survey of 200 Athens Citizens, 180 of them are using dial-up modems for their Internet service. The others are using DSL for their service. Among the 200 users, 55 percent claimed that they were unsatisfied with the current speed of their modem connection. Twenty-seven percent said that they would be willing to pay for the upgraded service of AOL Time Warner. Of our respondents, 38 of the 163 students were willing to pay for the upgrade, 14 of the 34 Athens resident were willing, and 3 of 3 businesses were also willing. It is apparent from this survey that AOL Time Warner’s biggest market will be non-student residents. Off-Campus students alone will not consume enough service for AOL Time Warner to be successful (February, 2001 survey). Product Time Warner will offer two types of cable services and the Road Runner Internet service to the Athens area. The first cable product is the basic analog. This offers two different options including the 26 channel basic service and the 36 channel standard service. Their second cable option is digital cable. Their digital cable offerings include more than 200 channels and up to 40 music channels. Digital basic includes 62 channels with these additional options: digital access package-includes 40 channels of music; digital variety package-includes 25 variety channels and the digital access package; digital movie package-includes 10 digital movie channels and the digital access package; premier digital package-combines the digital access, variety, and movie packages into one; and lastly, expanded premium channel selection-includes 24 premium channels. Their final service offered is the Road Runner service. This is a high speed, unlimited access, broadband Internet connection. It redefines surfing on the Internet with speeds capable of 50 times faster than the traditional analog phone modems (Time Warner, 2001). Price Chart 1 shows the prices that will be offered to the Athens community. It also shows the current prices offered to the cities of Columbus and Cincinnati. When comparing these options and prices we noted the Athens’ offerings were similar to those of Columbus. Granted, the prices for Athens are a few dollars more in comparing the 72 channel basic option. Also, premium channels were roughly a dollar more compared to Columbus. Overall the prices were similar. When comparing the prices and services to Cincinnati, we noted there are huge discrepancies. First, the options available to Cincinnati for digital cable were much smaller than Athens. Secondly, the prices were much higher when comparing the digital package and the options of premium channels.
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Chart 1 Type of Service Athens Monthly fee Basic Analog: 26 channel 36 channel 72 channel Digit Cable: Access Package Variety Package Movie Package Digital Package Media choice package Premium Channel Selection: One premium channel Two premium channels Three premium channels Four Premium channels Five Premium channels Road Runner (with cable) Road Runner (without cable) $10.95 $23.00 $33.95 $4.30 $6.30 $8.25 $10.25 Columbus Monthly fee $11.95 $18.40 $30.35 $4.30 $6.30 $8.25 $10.25 Cincinnati Monthly fee $12.19 $20.19 $32.38
$18.59 $12.29 $24.48 $32.18 $38.58 $44.98 $51.28 $39.95 $49.95
$10.95 $19.95 $26.95 $32.95 $37.95 $39.99 $45.95
$10.00 $19.00 $25.00 $28.00 $39.95 $49.95
These findings have led us to conclude that the pricing is fair to the Athens’ consumer. If you take into consideration all the options we will be receiving, and the prices compared to metropolitan cities, the prices and services can be deemed reasonable (twcol, 2001, twcinci, 2001). Competition ISP Competition. Local: In the City of Athens, unlimited access dial-up modems can be purchased for around $20 per month. These providers include HorizonBright.Net, Dragonnet, and Frognet. Other companies such as Dialnet and HorizonBright.Net offer packages that will charge hourly rates instead. ISDN is another service offered. The following companies offer these services: Bright.Net-$89.95 per month; Dragonnet-$77.90 per month; and Eureka Net-$59.95 per month. DSL is another service that can be obtained in the city. These companies include: Frognet-$52.45 per month; Dialnet-$58.50 per month; and Verizon-$40 per month. National: For the national level, there are dial-up and satellite services that can be purchased. Some dial-up networks include AOL, MSN, Earthlink, and Prodigy. All of these providers charge $19.95 per month except MSN who charges $21.95 per month. MSN also offers DSL for $72.45 per month, and they also offer a high-speed satellite service for $59.95 per month. AT&T is another company that is a competitor. AT&T is offering a service called 7/7. This offers seven cents a minute long distance and seven cents a minute for a dial-up modem service. For more information, see chart 2 in Appendix C, page 24.
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Cable Competition. Local Berwick TV and Satellite systems (available to Athens) Direct TV – Total choice package $31.99: 100 channels - Basic package $21.99: 55-60 channels Nelsonville TV Cable Co (only available to parts of Athens) Basic Package $18.50: 40 channels With HBO $26.50 With Showtime $25.50 With Both $33.50 --$25.50 for a hook-up fee Dish Network (available to Athens) Basic Package $21.99: Top 50 channels $30.99: Top 100 channels $39.99: Top 150 channels Movie package-HBO: $12.99 Movie package-Cinemax: $10.00 Everything package $69.99: Cinemax, Showtime, HBO and basic channels Pegasus satellite TV (available to Athens) Select choice $21.99: 45 basic channels Total choice $31.99: 100 basic channels Total choice $64.99: 7 HBO, 5 Showtime, 2 movie, 3 Cinemax, and 100 basic channels National. AOL Time Warner is facing competition with national cable companies such as AT&T, DirectTV, Primestar, Comcast, Charter, Cox, Adelphia, Dish Network, Cablevision, and Pegasus. Their two biggest competitors are AT&T and DirectTV. Refer to appendix D on page 25 for information on market share for the industry.
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How Digital Cable Works In order for cable companies to offer Internet service, they will have to act as their own ISP provider. The cable companies will establish a connection to the Internet through a router, which will connect the head-end controller. The head-end controller receives its information via satellite, which is encoded into a digital form and sent out to the subscribers, over digital cable. Digital cable utilizes fiber optic technology to transfer TV and Internet at extremely fast speeds. Fiber optic cable consists of a group of tiny, glass threads, each of which is able to transmit information modulated into light waves. (See appendix B, page 22) The information is transferred over this cable digitally, which means it sends a combination of ones and zeros to respectively represent TV channels or the Internet. Digital cable customers do not receive their information directly in digital form; the information actually goes through several transitions before it enters the customer’s home. The head-end unit sends its information to a laser transmitter, which converts the information into a digital form. Then it sends the information out to another laser transmitter at the edge of the customers’ neighborhood. This turns the digital information back into analog form, so it can be transmitted over regular coaxial cable into the customer’s home. Once the information is ran into the home it goes to a splitter, which runs one line to their TV and one to their computer. The line to their TV goes into a cable box that unscrambles any pay channels the customer might have ordered. The line to the computer goes into a modem, which converts the analog information back into a digital form that the computer can understand. To see a visual explanation of this refer to appendix B, page 23. Advantages of Digital Cable AOL Time Warner Digital Cable provides several advantages over their competitors when it comes to the Internet. These advantages include larger bandwidth, which provides for faster speeds, it has no dial-up that ties up your phone line, and it is reasonably priced. When it comes to speed, digital cable is up to three times faster than wireless cable and DSL lines, and it is up to one hundred times faster than the 28.8 dial-up modem. Digital cable has no dial-up and it does not run through the phone line. AOL Time Warner’s digital cable is priced very competitively. Digital cable has a cost of $70 for installation and a $40 monthly fee for the service. Verizon, Frognet, and several other Internet companies provide DSL. On average DSL providers have a cost around $200 for installation and a $50 monthly fee for service. Satellite Internet service is offered through companies like StarBand, and Hughes Network Systems, which has a cost of around $500 to buy the equipment, another $100 to install it and has service cost that can range from $10 a month up to $130 a month.
Competing Technologies
DSL: Digital Subscriber Line or (DSL) provides a broadband digital connection from your ISP directly to the customers home using existing telephone wires. To be able to provide the Internet over telephone wires, filters were used to split the voice phone lines into low frequency for regular telephone and high frequency for Internet. This technology can support download speeds of up to 8 mbps, and upload speed of up to 640 kbps. One disadvantage of DSL is that in order to receive the service you must live within 18,000 feet of the provider (cnet, 2001).
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Satellite: Another competitor to digital cable is satellite. To be able to receive the Internet from a satellite, the customer must purchase a kit that includes a dish, a PC interface card, and software. This all costs around $500. An advantage about Internet provided over a satellite is that, if the customer can see the sky from were they live then they can receive the service. This is particularly beneficial for people who live in areas where DSL and Digital Cable are not available. The speed for Internet provided over a satellite can be up to 400 kbps for downloads and 256 kbps for uploads (cnet, 2001). ISDN: ISDN or integrated services digital network, is similar to DSL in that it runs over the phone lines. ISDN can support data transfer rates up to 64 Kbps or 128 Kbps. Most telephone companies offer two lines at once for ISDNs, these are called B channels. The customer has the option of using one of the lines for voice and the other for data transfer, which will provide a speed of 64 Kbps. The customer can use both of the lines for data transfer to receive speeds of up to 128 Kbps. This is three times faster than the fastest dial-up modem (Internet.com Corp, 2001). Wireless: Wireless Internet is provided over a digital cell phone. This means all web surfing is done off of a small screen on the cell phone. Most wireless phones that support the Internet have a transfer rate of 14.4 kbps. Although it has a slow transfer speed, it is estimated that over 50 million people have web-enabled phones. Many people are using web enable phones; however, this should not be considered a major competitor to digital cable. The majority of people use the Internet on their cell phone to check their email and to do other small tasks when they are away from home. For this reason, it is not used as a replacement for the Internet on their home computer (sprintpcs, 2001). Dial-up: Dial-up is the most popular way of receiving the Internet. It is also the slowest way to receive the Internet other than by a wireless phone. Dial-up connections max out at download and upload speeds of 56kbps. Dial-up Internet runs off a person’s home phone line, this means that whenever a person is online no phone calls can be received or sent on that same line. Where dial-up lacks in speed it makes up in security. Unlike DSL, ISDN, and digital cable, dial-up receives a new IP address every time a person logs on, which makes it much harder for a hacker to find your computer. The next best thing about dial-up Internet is cost. Depending on where you live, monthly service can cost anywhere from $20 a month to nothing at all. This is one of the main reasons why so many people use it (Feldman, 2001).
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Future Problems Security: Security is a major concern to all of cable’s skeptics. Because you receive a permanent IP address anyone can have easy access into your computer. This is a major concern for businesses dealing with sensitive information, and also consumers that don’t want their privacy invaded (Personal interview with Chip Macintosh, President of Frognet, 2001). Shared bandwidth: Most web sites offer a top download speed of 1.5Mbps and a top upload speed of 300Kbps. The downfall is you have to share that bandwidth with your cable neighbors. When your neighbor is downloading a big file it will cause your download speeds to plummet. Variable download speeds mean you have to schedule your heavy downloads to avoid rush hours. Home users might not mind the inconvenience, but businesses need something more stable (Robinson, 1998). Information and Service Regulation: Time Warner and AOL were huge companies before they merged. AOL owns about 13 Internet Service Providers while Time Warner owns six magazines and eight television properties. While this may be great for business, it is horrible for the free flow of information. The conglomerate will now be prone to only publish things that are beneficial for the company and its associations (Metcalfe, 2001). Recommendations After researching the overall advantages and disadvantages of AOL Time Warner’s new services, we have prepared recommendations regarding this introduction of new technology into Athens. We recommend that the City Council accept AOL Time Warner’s proposal to bring digital cable into Athens. Time Warner bought out MediaOne in July of 1999. We believe Time Warner should continue the existing eight-year contract the city had with MediaOne. AOL Time Warner should mainly target their market to non-student, Athens residents and businesses. Their secondary market includes off-campus students.
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References Cited AOL@SCHOOL. (2000). [Online]. America Online, Inc. [2001, February 27]. AOL Time Warner. (2001). [Online]. AOL Time Warner Inc. [2001, February 27]. AOL Time Warner Cincinnati. (2001). [Online]. Time Warner, Inc. [2001, February 20]. AOL Time Warner. (2001). [Online]. AOL Time Warner, Inc. [2001, February 25]. Beacham, F. (2000, January 10). AOL Time Warner Merger. [Online], http://www.accuracy.org/press_releases/PR011000.htm [2001, February 28]. CNET Networks, Inc. [Online]. (2001, January). [2001, February 27]. Detourn, N. (2001, February 9). [Online]. AOL Time Waner: Deploy and Commoditize. [2001, February 27]. Fabrikant, G. & Schiesel S. ―Satellite Vs. Cable: A Rivalry Beyond TV.‖ New York Times, 19 February 2001. FCC Approves AOL Time Warner Merger. (2001). [Online]. Federal Communications Commission. [2001, February 19]. Feldmann, S. (January, 2001). [Online]. NetZero, Inc. [2001, March 1]. FrogNet Internet Services. (2001). [Online]. FrogNet, Inc. < http://www.frognet.net > [2001, February 25]. FTC Approves AOL/Time Warner Merger with Conditions. (2000, December 14). [Online]. Federal Trade Commission. [2000, February 19]. Internet.com Corp. (2001, January). [Online]. [2001, February 17]. Metcalfe, R. (2000, February 21). From the Ether: If America Online and Time Warner Merge, they Must Unplug their Cable. [Online]. [2001, February 15]. Olavsrud, T. (2000, December 14). FTC Approves AOL Time Warner Merger with Hefty Restrictions. [Online], < http://www.Internetnews.com/ispnews/article/0,,8_536161,00.html> [2001, February 28].
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Oram, A. (2000, January 21). The AOL/Time Warner Merger Impact on Cable Access. [Online], < http://webreview.com/pi/2000/01_21_00.shtml> [2001, February 28]. Pender, K. (2001, February 2). Stock Options Free AOL from Taxes. The San Francisco Chronicle. [Online]. [2001, February 19].
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