The agreement marked a significant step forward in AOL's efforts to win a place for itself in the broadband world. The deal also lends new weight to the telephone companies' push for digital subscriber line technology (DSL), which has lagged behind high-speed cable modems in the consumer market.
The two companies said that many America Online members in Bell Atlantic's East Coast territory will be able to upgrade their Net access connection to DSL starting in mid-1999. AOL said it will offer the high-speed service for a monthly upgrade price of about $20, for a total of a little more than $40 per month for the package.
DSL service uses existing phone lines to create an always-on, high-speed Internet connection. The speed of the connections can vary, but the companies said the AOL service would average about 640 kbps (kilobits per second), or about 20 times faster than standard 28.8-kbps modems.
AOL, which has signed up more than 15 million members on the strength of its dial-up access and proprietary content, has long been trying to establish a foothold in the high-speed Net world.
The company already has DSL trials ongoing with MCI WorldCom and GTE. It has petitioned federal regulators to force AT&T and Tele-Communications Incorporated to open their cable Net access system to it and other ISPs. Last year, it acquired NetChannel,a Web-based television company AOL executives said would help them develop an interactive TV service.
"We've always said we would talk to a number of partners, both cable and DSL," said Wendy Goldberg, an AOL spokeswoman. "We've always been very committed to offering all broadband technologies in the marketplace once they become available."
Goldberg said that some new content, designed for high-speed users, would be available on the service as a result of the deal, but did not offer any details.
The service will be available this summer in Washington, Pittsburgh, Philadelphia, New York, Boston, and parts of New Jersey, a Bell Atlantic spokeswoman said.
AOL will boost DSL's credibility
Analysts said the deal will help boost the momentum of the Baby Bell's DSL services, which have lagged behind cable modem companies like @Home or Road Runner.
A recent study by the Strategis Group estimated cable Net service subscribership at about 500,000 by the end of 1998, compared to fewer than 60,000 subscribers to DSL service.
"Partnerships between ISPs and [local phone companies] are critical for the success of DSL," said Andy Fuertes, a senior communications analyst with Allied Business Intelligence. "I would say they're the biggest door to widespread access to the consumers."
Consumers are most likely to go to their own ISP to upgrade their service to broadband, Fuertes noted. This provides a natural marketing tool for phone companies, easier than winning users over to a new technology and new ISP at the same time.
"If you look right now, DSL really is losing the publicity battle to cable operators," Fuertes said. "This really gives DSL the credibility and publicity it needs."
DSL uber alles?
Most of the big telecom providers have boosted their DSL offerings in recent months, and prices for the service are falling sharply. SBC Communications yesterday said it would sharply step up the rollout in its territory, and offer DSL service for just $39.95 a month. MCI WorldCom plans to have close to 1,000 points of presence around the country by March of this year.
Bell Atlantic, which also offers its own $39.95 per month plan, said today that close to 7.5 million people in its service area would be able to get the high-speed service by the end of 1999.
The company also is talking to 45 other ISPs in its service area about upgrading their facilities to offer DSL access, said spokeswoman Joan Rasmussen. "We expect with AOL being the premier provider that they will set the trend for this industry," she said.
Despite this renewed push, DSL service isn't yet a natural fit for consumers, many analysts say.
The service has expensive start-up costs, often ranging to $400. Either the Bell companies or ISPs such as AOL also must demonstrate that consumers will get something new beyond the simple convenience of saving a few seconds on download times, said Yankee Group DSL senior analyst Michele Pelino.
"They're not going to want to pay the extra dollars if content's not different from today," Pelino said. "The key is going to be, 'What am I seeing differently, what am I hearing differently than from my regular modem?' There's not that much out there today."