AOL speeds broadband plans
The online giant taps Mario Vecchi, cofounder of Road Runner, as vice president of development.
Vecchi will serve as AOL's vice president of broadband development and report to Miles Gilburne, senior vice president of corporate development. At Road Runner, he was a senior vice president and chief technology officer, and oversaw technical operations and engineering.
AOL has made it clear that it plans to prepare its service for high-speed access once the bandwidth opens up and becomes more affordable for home users. The company is currently undergoing trials for digital subscriber line (DSL) service in a number of cities across the United States, and plans to offer the high-speed service for $49.95 per month.
DSL uses common copper phone wires to transmit information at speeds more than 25 times faster than is possible with 56-kbps dial-up modems. Access via cable is an alternative, and cable access providers such as Road Runner and @Home are competing for the consumer market by offering Internet access at comparable or greater speeds than DSL.
AOL also has indicated it wants to be a major player in the cable access market. But AOL spokeswoman Kathy McKiernan declined to elaborate on how it plans to do so.
"We are confident that we will be able to provide broadband access to our customers," McKiernan said. "We'll be partnering with both 'narrow band' and broadband [providers], and will be making available the best technology."
"[AOL] knows that this is slowly but surely becoming a broadband world, and they need to be there when it happens," said Mark Mooradian, an analyst at Jupiter Communications.
But AOL's foray into the cable access market so far has been impeded by regulatory roadblocks as well as the cable industry's reluctance to share its networks with outside Internet access providers. Indeed, cable access companies such as @Home are positioning themselves not only to provide high-speed access to consumers, but also to build out their content offerings in a challenge to popular Web navigation and search services such as Yahoo and online services such as AOL.
This puts access providers like AOL in a quandary. While the online giant has committed itself to having a broadband presence, it is unclear whether AOL would want to play second fiddle to cable access firms. Being unable to provide access could make AOL search for other ways to compete in the cable access space. However, analysts point out, AOL may be forced to bite the bullet and subject itself to cable access providers' control.
"TCI has a controlling stake in @Home, so @Home wants to be the portal for their broadband service," said Mooradian. "They do not feel obliged to give AOL carriage. They would want AOL to pay them dearly for that."
Though Vecchi's appointment may give AOL more of a technological boost in developing its broadband architecture, his presence may also be a necessary step to improving AOL's relationship with cable access providers.
Some analysts say that AOL's best strategy at this point is to leverage its marketing strength--the Dulles, Virginia, company boasts 13 million subscribers--and try to partner with cable access providers. "[Vecchi] can certainly help the cause, but they've got a lot of ground to make up," said Michael Harris, president of Kinetic Strategies.
"They need business relationships," he added. "They need to do deals with the @Homes and Road Runners of the world."
However, providers such as @Home may be hedging their bets before shaking hands with the online giant. In light of AT&T's $48 billion deal to acquire TCI, @Home, which is partially owned by TCI, has content and navigation plans of its own.
"If you view @Home as a portal, do you want these subscribers to go into AOL at all, or do you want them to stay in your playground?" said Harris. "They've got a pretty impressive content offering right now.
"The ball is in AOL's court to get the cable operators interested to do deals," he added. "They can continue to whine to the FCC to open up the systems, but that's disingenuous."
Mooradian echoed Harris's concerns, but suggested that the appointment of Vecchi could be the necessary push AOL needs to strike positive long-term relationships with the providers: "The point is, Road Runner could be AOL's angle into the broadband world. [But] AOL would want to cooperate with both of them rather than one of them."