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COVD 1.34 + .11 Beaten down DSL provider

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rrufff   Thursday, 06/02/05 06:18:23 PM
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COVD 1.34 + .11 Beaten down DSL provider being looked at by AOL to stop the bleeding as they try to keep customers who drop dial-up. COVD also offers VOIP so more may be coming.

http://www.washingtonpost.com/wp-
dyn/content/article/2005/06/01/AR2005060101918.html

AOL Aims to Get Up to Speed With DSL

By David A. Vise
Washington Post Staff Writer
Thursday, June 2, 2005; Page D05

America Online Inc. yesterday began offering high-speed Internet
access with AOL e-mail and content in the Washington area and
Chicago, a move that company officials hope will stem the loss of
dial-up users as the service is rolled out nationally later this year.

The Dulles-based firm has lost more than 5 million subscribers to
faster and cheaper Internet services in recent years. The new $29.95
per month service, dubbed AOL High Speed, gives the company something
fresh to offer fleeing dial-up users. AOL officials said they plan a
series of cable television ads and online marketing to encourage the
firm's dial-up subscribers, who pay $23.90 per month, to switch to
AOL High Speed.



Dulles-based AOL's outdated dial-up service has lost millions of
customers. (By Joe Raedle -- Getty Images)

America Online and Time Warner
America Online Inc. is trying to find ways to keep customers coming
back to its Internet community while parent company Time Warner Inc.
seeks ways to expand its Internet empire.

"This makes a lot of sense," said Charlene Li, an analyst with
Forrester Research. "If you have any desire to stay with AOL, you are
going to look at this deal very seriously. It sounds smart."

Despite losing about 2.3 million subscribers in the past year alone,
AOL, a division of Time Warner Inc., remains the nation's biggest
Internet service with 21.7 million subscribers. The company's ad
revenue has begun picking up again after a few years of decline.

The new high-speed product is the first time AOL has offered a
simple, competitively priced way for its subscribers to get faster
online access and keep AOL services and content, too.

In the Washington area, AOL High Speed is priced in the same range as
standard high-speed Internet services sold by Comcast Corp. and
Verizon Communications Inc., which dominate the market. But in
Chicago and other cities yesterday, rival service provider SBC
Communications Inc. began aggressively cutting the price of its Yahoo
high-speed offering to just $14.95 a month, bringing prices for fast
Internet connections below the cost of AOL dial-up for the first time.

Both the AOL and SBC high-speed offerings operate over the same lines
used by home telephone service. Cable television companies typically
charge more for their services, which they say are even faster.

The five-week test in Washington and Chicago by AOL reflects a
fundamental shift in the online business environment and demonstrates
how the company is trying to adapt. Several years ago, AOL made its
name by offering a one-size-fits-all dial-up service. But the world
changed, and computer users left for cheaper dial-up or faster
connections provided by others.

Now, with its $9.95 Netscape dial-up service, its $29.95 AOL High
Speed and its traditional dial-up offering, AOL has a broad range of
products at different price points, a move analysts said is essential
given the segmentation in the marketplace.

AOL is also looking to capitalize on the boom in Internet advertising
by beefing up its free AOL.com Web site. It hopes to attract millions
of computer users to the site with music, games, news and other
content, as well as by giving away free AIM.com e-mail accounts. If
it works, the AOL.com portal strategy would be similar to Yahoo
Inc.'s business model.

To provide the one-stop shopping experience for high-speed Internet
service, AOL is partnering with telecommunications wholesaler Covad
Communications Group Inc., a California firm that leases phone lines
from the regional phone companies, providing access to about 50
million homes.

AOL will handle all the branding, marketing and customer-service
calls while Covad will provide the high-speed phone lines and modems.
David McMorrow, executive vice president of Covad, said the
partnership with AOL is likely to benefit both companies because
consumers will have the ability to get high-speed service through one
phone call to AOL. He predicted that AOL's strong brand name
nationally, coupled with Covad's coverage, would give America Online
a way to begin recovering from subscriber losses.

"The two parties are putting together a compelling offer in the
market, not only for AOL users, but for folks looking for a good
combination of broadband and content at a competitive price,"
McMorrow said. "They have customers and brands and experience at the
Internet layer, and we have the infrastructure, footprint and
systems."

But if yesterday's aggressive price cutting by SBC leads to slashing
in the price of high-speed Internet connections around the country,
AOL and Covad may find themselves with fewer customers and less
revenue to share than they had projected.



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