Without a doubt, I’ve seen the most curious range of emotions from retail
investors during this latest market correction. Whatever wild volatility
high-tech stocks have dished out, my readers have never been at a loss for
words to sound off in response to my analysis on a bevy of topics that
affect Wall Street and Main Street alike. I’m tickled by a pair of trends
that I see from the stack of love letters and hate mail that I get week in
and week out investors absolutely love AOL and positively hate WIPO. And,
it’s the former of the two that I’d like to ponder for a moment.
just the point. The blue chip ISP
It’s no secret that I’ve never been a fan of America Online’s takeover of Time Warner
since news of the
deal first broke wind. The stakes from this proposed mega-merger are far
too high for mainstream consumers to accept the deal at face value. It
deserves a triple-dose of scrutiny, and neither company’s laundry list of
empty promises should be taken lightly. My vocal opposition to the marriage
has stirred up a veritable hornet’s nest of angry investors who have an
obvious vested interest in seeing this deal sealed with a kiss.
But a funny thing happened just last week as AOL’s share price began to
tumble to 52-week lows ahead of the ISP’s earnings release. Investors began
openly bad-mouthing the bellwether and filled my mailbox with words of
praise for voicing my opposition to the Time Warner land-grab. Perhaps
these readers were a silent majority I never had the pleasure of meeting
before, or maybe the stock price’s unprecedented fall left AOL ripe for
criticism from sunshine patriots and smarting investors (a point I touched
on last week). Whatever the reason, I hate to disappoint those
sympathizers, but my stance toward the deal has softened somewhat.
During last year’s irrational exuberance, the wellspring of abundant
venture capital had no equal. Good ideas received funding at a breathtaking
pace – some better than others. One benefit from the market’s froth was
that for every hundred failures, one truly great brainchild would likely
see the light of day; and, the average time to market was easily cut in
half. The heated rivalries between me-too start-ups proved to be a boon for
the average consumer. One key innovation bearing mention that scrambled to
market, fueled by Web enthusiasts’ insatiable appetite for the information
superhighway, was high-speed Internet access.
Since mid-April’s high-tech wilting on the vine, we’ve witnessed a
pessimistic sentiment that’s infected nearly every facet of the Internet
and technology in general. A byproduct of that pessimism and
belt-tightening in the capital markets is that some innovation has started
tapering and the time to market has slowed. That’s also left the
once-aggressive rollout of broadband Internet access stalled for many
consumers. Fewer marketing dollars are being dog-eared to promote faster
Net access, and the pace of costly upgrades to cable and phone networks
have suffered.
Having Net access “always on” and surfing at DSL and cable speeds
dramatically changes the way people use the Internet. But most consumers
won’t make the switch because high-speed access either isn’t available in
their area, costs too much, or they’re simply apathetic to the prospect of
broadband. Any way you slice it, that’s the fault of the phone and cable
companies. What consumers need is a broadband proponent that both truly
understands the benefit of high-speed Internet access and has a vested
interest in wiring a fat pipe to every connected household. See where I’m
going with this?
A colleague of mine once appealed to me that love ’em or hate ’em – America
Online bridges a crucial divide for those who aren’t already Net savvy.
I’ve asserted in the past that AOL is akin to the Internet with training
wheels and at the end of the day, that’s
has figured out how to make getting online a no-brainer. What’s more,
AOL-Time Warner has an ultra-aggressive initiative to promote broadband Web
access should the merger get approval.
Maybe the idea of AOL alone feasting on the high-speed access pie will be
enough to scare rivals into boosting and accelerating their own broadband
initiatives. At this point, I don’t see any competing ISP nearly as hungry
as AOL to satisfy consumers’ need for speed. I’m still a firm believer that
regulators need to go over this merger with a fine-tooth comb and address
potential anti-competitive concerns. That said, I think if officials impose
intelligent restrictions to prevent future abuses, this deal should get done.
Any questions or comments, love letters or hate mail? As always, feel
free to forward them to kblack@internet.com.
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