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ZDNet: Why AOL holds all the keys

“America Online is leveraging everything it has, from its
Time-Warner merger to customer-controlling client software, to
undermine rival ISPs.”

“Indeed, AOL (NYSE: AOL) is attacking rival ISPs on four fronts.
First, the company’s pending merger with Time-Warner sets the stage
for broadband Internet services via Time-Warner’s cable network. It
also gives AOL access to loads of content. Next, AOL is quietly
hedging its cable bet with an aggressive move into the DSL market.
The final and most controversial step involves AOL’s new client
software, which allegedly cuts off customer connections to rival
ISPs.”

“Galaxy Internet Services (GIS) filed suit against America
Online on April 4, claiming version 5.0 of AOL’s software
“attempted to eliminate competition in the Internet Service
Provider Market” by preempting the existing dial-up settings of
other ISPs’ customers. There “is no legitimate business
justification for the features of AOL 5.0 which cause it to
interfere” with subscribers accessing other ISPs, the suit
says.”

“Meanwhile, AOL is hedging its broadband cable push with a
massive DSL effort–which is part of the company’s AOL Plus
service. The strategy involves delivering DSL services today and
AOL-Time-Warner cable and DirecPC services tomorrow. AOL is
providing these services in partnership with the Baby Bells. At an
estimated price of $21.95 a month for DSL, CLECs and ISPs could
find it extremely difficult to compete on a price/performance
basis. While AOL Plus is still just being rolled out, the threat is
clear.”


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