AOL Time Warner puts pressure on European ISPs

Should Europe's domestic ISPs be quaking in their boots at the prospect of AOL and Time Warner joining forces to become the world's first "company for the Internet century"? Or will home-grown Internet companies flourish in the face of an American monolith?

AOL Europe is the second-largest ISP in both Britain and Germany and is the third most popular provider in France. AOL has, however, been slipping down the rankings in Europe over the last year and not long ago lost the top-spot in Britain to free Internet service provider Freeserve.

James Eibisch, research manager at IDC in the UK, argues that the deal between AOL and Time Warner will give AOL the edge over other European ISPs. He says: "AOL has been losing market share with regard to the competition, especially free ISPs. This will make it much more content rich and content heavy."

Market analyst at IDC in Denmark Mikael Arnbjerg disagrees, arguing that these days it takes more than great content to lure users towards an ISP. "In the [European] ISP market today there are much more radical trends. People are doing retail deals and offering free-Internet. It will be difficult for Time Warner to come up with anything original."

Arnbjerg also points out that the effect of such US-specific deals have traditionally had little impact on Europe: "If you look at when Netscape was bought by AOL, they launched Netscape Online, nothing really happened here. What does Time Warner have to offer to Europe? It's hard to see any real attraction."

A source within the ISP industry, who asked to remain anonymous, also says that this merger won't offer anything new or fresh to European Internet users. "It's an American deal," the source says, "and people have repeatedly said that they don't want to go online for American content."

The source suggests that in certain ways the technology that the European Internet service provider marketplace is pioneering is years ahead of the technology that AOL is forging away with in America. "America might be leading with Web TV but that is only because they haven't had access to broadband wireless technology and GSM. Handheld wireless devices are becoming very popular and mobile phones are outselling PCs."

The source said the prospect of email and Internet browsing on mobile technology is far more alluring to European Internet users.

Since AOL, along with Microsoft, is pioneering TV-based Web access, it could have an ace up its sleeve when broadband technologies finally launch in Europe, says analyst Eibisch. And the Time Warner alliance could further this advantage: "This... positions AOL very well with regard to broadband," he says. "Content will be developed specifically with broadband in mind and Time Warner gains a very strong international-based distribution channel."

For full coverage, see the AOL-Time Warner News Roundup.

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