America Online May Move Towards Cable Model

NYT has an interesting story on how AOL will move towards a cable TV model, as it negotiates with the looming AT&T Comcast cable television giant to distribute its Internet service. The top executives at AOL Time Warner–which owns cable channel HBO, among other cable channels–now hopes AOL can fit into a similar mold. After years of insisting that America Online had to “own” its customers and trying unsuccessfully to persuade cable operators to lease the use of their lines as “dumb pipe” for high-speed Internet access, AOL Time Warner’s executives came to a realization this summer: The only way to persuade AT&T and Comcast to distribute the cyberspace service over their cable lines was to package America Online as if it were a premium movie channel.

The new approach means that viewers who use the AOL service over the cable lines of the combined AT&T Comcast will be billed by AT&T Comcast–not by AOL–the way the price of HBO is included in a customer’s cable bill, rather than the customer receiving a separate invoice from HBO. Therefore, America Online will probably have to invest tens or hundreds of millions of dollars in the coming years to develop the Internet equivalent of ESPN’s “SportsCenter” or MTV’s “TRL” ? material that is available nowhere else.

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