The Washington Post has reported that no one has signed on the dotted line but that AT&T is negotiating with Prodigy and America Online.
The reports are circulating just one week after AT&T unveiled its dial-up WorldNet service, which will provide AT&T long-distance customers with five free hours of Internet access per month and unlimited access for $19.95 per month. The service is slated to launch on March 14.
Although none of the parties involved are confirming that an announcement will be made, financial analysts are already endorsing the idea.
"Such a content license would make a lot sense [for AT&T]. It would make sense for AT&T to have all three [online services] as options," said Keith Benjamin, a senior analyst at Robertson Stephens, an investment banking firm in San Francisco. Benjamin speculated that AT&T could offer an a la carte AOL option to WorldNet subscribers for about $10 a month on top of regular Internet access fees.
Other industry analysts say that online service providers such as AOL want to join AT&T to avoid competing with the new mammoth kid on the ISP (Internet service provider) block. "AOL wants to make sure they don't get left out of the picture," said Peter Krasilovsky, an analyst with Arlen Communications, a consulting firm. "AOL wants to make sure they get in as many households as possible, which has been their strategy for three years."
Joining AT&T will also save online services money. "The average cost to acquire subscribers for AOL is $40. AT&T can relieve AOL of that cost by bundling in with its service, and that's quite an incentive," said Krasilovsky. "It will also save (AOL) a tremendous amount of transmission costs."
He added that AT&T's name recognition could draw new customers to AOL.
"AT&T's offerings are definitely likely to reach the 89 percent of the American homes that aren't online," said Krasilovsky. "Remember that AOL mails a disk to every single person in the United States, and a large majority don't bother to use it. Joining AT&T might help out."
Although all the online services appear to be feeling the strain of competing with Internet access providers, subscribers continue to sign up. AOL's subscription list increased 200 percent in 1995 to 4.5 million, according to the Electronic Information Report's Year-End Online Survey. The survey said CompuServe doubled its subscriber base in 1995 and now boasts 4 million, while Prodigy grew by 16.7 percent to 1.4 million.