AOL/Time Warner Merger

Unless you've been living under a rock, you've heard the buzz surrounding the AOL/Time Warner deal by now. Two huge companies merge, bringing together a nationally known consumer online service that reaches millions of homes and a major network broadcasting company. According to the January 11 Wall Street Journal, "Time Warner has about 20 million cable subscribers, who eventually could be offered high-speed Internet access, which will make it possible to offer movies, video-based news, and other data-rich services that today can't readily be sent over the Internet."

I don't buy it. First, Time Warner's broadband network is cable-based. You share your cable-modem connection with other people in your neighborhood. When everyone's at work and the lines are quiet, you might be able to watch a movie. In the evenings or on weekends, however, when everyone decides to catch up on their favorite shows, you're going to have bandwidth problems. True, cable has a higher bandwidth capacity than a 56Kbps dial-up connection, but I had a cable modem for 3 years and I know firsthand that shared bandwidth isn't limitless.

Second, using computers in this way requires a complete sea change in how people use computers at home. This change might be inevitable in the long run, but not now. At this point, people use computers and television sets differently: Computers are for interactive applications, such as business applications, games, and email; televisions and stereos are for media that wash over you. In general, television isn't an interactive medium today.

Maybe I spend too much time around computers during the workday; but when I curl up with a movie, I want to get away from the computer. Perhaps, I'll feel differently in the future. Since I signed up for Digital Subscriber Line (DSL) at home and bought some good speakers, I've been thinking about where to put a terminal in the living room to play online radio stations. But right now, my television and stereo are separate from my computer—and I'm geekier than most people I know who use AOL for their ISP. I also have higher bandwidth into my home.

If I were a major online company targeted at consumers and had a cable network, I'd focus less on delivering movies and music and go after the existing market for games and applications. I'd tell customers, "You don't have to worry anymore about installing your applications—we'll do it for you." Or, "Want to be sure that your tax records are saved? We'll store them for you and back them up." Or, "You don't really want to upgrade to the next version of TaxMaster yourself, do you? Let us handle it, and we'll even provide online training."

Basically, rather than concentrating on selling capabilities that people have elsewhere in the house, I'd try to sell an easier way of getting the capabilities that people already use a computer for. Frankly, this approach is more suited to cable-modem access than selling movies is at this point.

I'm not a Luddite. I'm a big fan of progress in technology when it really is progress. AOL acquired bandwidth that's well suited to business applications by buying Time Warner. AOL already has the customer base to sell online applications. Rethought, this combination might give AOL an excellent shot at becoming a large-scale, consumer-oriented application service provider (ASP) and supply a genuine need for better customer application support.

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