What the AOL deal means to you

Deal means the ultimate in convergence, with set-top boxes, fast Internet access and better online content on the way

The merger of Time Warner and America Online will mean a wider variety of online content and services for consumers, and could hasten the arrival of Internet set-top boxes and broadband services, according to industry observers.

These benefits will be slower to arrive in Europe, however, where both companies have less presence than in the US.

AOL and Time Warner merged Monday in a stock swap valued at $350bn (£217bn), with the deal expected to close by the end of 2000. The combination will create a company with $40bn in revenue in its first year of operation and encompass properties ranging from ICQ to the WB television network.

Among other things the deal represents the merger of an online powerhouse with one of the leading providers of high-speed Internet access. AOL has begun pushing its online service into consumer appliances such as AOL TV and broadband services such as cable-modems and digital subscriber line (DSL), while Time Warner controls an extensive cable-based broadband network.

Cable modems and DSL are considered the next generation of Internet access, bringing constant Internet connectivity and high data transfer speeds into the home for a reasonable price.

Research manager with IDC in the UK James Eibisch says another significant benefit of this deal for consumers is likely to be terms of content, with Time Warner's TV, magazine and film properties spreading to every corner of AOL's Internet empire. "A lot of Time Warner's brands have international operations and international appeal," he says. "Time Warner gains a very strong Internet channel and AOL gains content."

Time Warner's many different media interests will undoubtedly bolster AOL's Internet content and supply. Popular brands such as Time, CNN, Warner Bros., Sports Illustrated, People, TNT, Cartoon Network, Warner Music Group and Entertainment Weekly will certainly mean an increased variety of information and entertainment for AOL's many customers.

Mikael Arnbjerg, market analyst with IDC in Denmark, says the impact on European consumers is likely to be delayed. "I'm not sure that this is going to have a huge impact in Europe," he says. "We [European consumers] are not really what they had in mind when they made this deal. AOL is big in Europe but only because it is joined with Bertelsmann. There could be conflict between Bertlesmann and Time-Warner."

Bertelsmann has made assurances that it sees no conflict with Time Warner, and intends to continue its AOL Europe partnership unchanged. AOL Europe is a joint venture between Bertelsmann and AOL.

Research director at IDC Europe Ken Frazer, on the other hand, says the merger could is likely to speed up the rate at which broadband and TV-based Internet are brought to European consumers. "Maybe the magic words are 'CNN', 'Bertelsmann' and 'Web TV' as far as Europe is concerned," he says. "Time Warner's infrastructure is not really relevant to Europe except for CNN. The infrastructure for Web TV may be US-specific but the device itself is not, and Bertelsmann could provide the infrastructure for this in Europe. This is where the European effects may come bubbling out."

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

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