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AOL-TWX to speed change
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January 10, 2000: 5:59 p.m. ET
Deal will fuel consolidation, speed broadband access, experts say
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NEW YORK (CNNfn) - America Online’s plan to merge with Time Warner is likely to have a strong ripple effect throughout the rest of the Internet industry, market observers said.
On Monday, AOL, the world’s No. 1 Internet service provider (ISP), agreed to buy Time Warner, the world’s second-largest media and entertainment company, for roughly $181 billion in stock and debt.
The combination would broaden AOL’s already diverse offerings to include content from Time Warner’s media outlets such as Warner Bros. Studios, HBO, CNN, Warner Music, Time magazine and CNNfn.com.
And that’s going to leave other content-oriented Internet outfits, such as Web "portals” like Yahoo! and Alta Vista, scrambling to compete, analysts said.
"It becomes a survival issue for them,” said George Barto, an analyst at DataQuest. "Strategic alliances and mergers are certainly going to come out of this.”
Investors also seemed to get that impression as well, sending some Internet stocks soaring in a flurry of buying on Monday.
Shares of Yahoo! (YHOO) added 28-13/16 to 436-1/16. Lycos (LCOS) ticked up 9 to 79-3/4. CMGI, an Internet "incubator” with holding in dozens of companies, added 31-1/2 to 306-1/2. And Excite@Home (ATHM) picked up 1-3/16 to 40-1/8.
The merger also promises to change the competitive landscape among commercial ISP’s, noted Mark Winther, Internet analyst at International Data Corp.
Over the past year, a number of companies began offering free Internet access through customized connections that push targeted advertising into the customers’ browsers along with the Web content they are viewing. Last month, Juno Online Services (JWEB) was the latest outfit that threw its weight behind the free Internet access model, which had been viewed as a potential threat to AOL’s market dominance.
"We saw lots of free ISPs start up out of nowhere with nothing but venture capital and a business plan that were able to build a new kind of consumer online service with a cost structure that could support zero dollars from subscribers and cover costs in other ways such as advertising and e-commerce,” Winther said.
Based on AOL’s legacy as a subscriber-based online service, offering free access would have been financially unfeasible. However, the proposed merger changes that scenario substantially, according to Winther.
"With Time Warner (TWX), AOL has a lot more channels to reach its market,” he said. "It has a lot more ways to bundle its audiences for advertisers. Now, AOL (AOL) could create its own free ISP as some kind of off brand and leverage that.”
Finally, the merger could accelerate the move toward providing broadband Internet access, Winther said.
Broadband refers to a high-speed data transmission medium capable of sending and receiving audio, video and data signals simultaneously. Broadband networks operate on coaxial or fiber-optic cable networks.
In addition to its media holding, Time Warner is the second-largest provider of cable television services and recently has begun offering its customers high-speed Internet access through its "RoadRunner” service.
"Time Warner’s RoadRunner service really has lacked a clear direction,” Winther said. "But I think that is going to quickly become focused.”
"This changes the picture of broadband deployment,” Winther added. "I think it’s going to accelerate broadband access overall.”
ISP’s that got a lift on Monday include Concentric Network (CNCX), up 9-5/8 at 39-5/8; EarthLink, up 2-11/16 at 43-11/16; and MindSpring (MSPG), up 1-11/16 at 27-11/16. 
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