AOL Invests $1.5 Billion in Hughes Electronics for High-Speed Internet Expansion

America Online's decision to invest $1.5 billion in Hughes Electronics marks a significant challenge to the cable TV industry's dominance in the high-speed Internet market. This move widens the choices available to customers, potentially disrupting the cable industry's plans to lead the development of interactive television and entertainment-on-demand services. The agreement between AOL and DirecTV aims to capitalize on their combined customer base to market new services, including high-speed satellite connections and television-based functions.

Key Takeaways:

• AOL invests $1.5 billion in Hughes Electronics, expanding high-speed Internet options for consumers.
• The deal widens the choices available to customers, potentially disrupting the cable industry's plans for interactive television and entertainment-on-demand services.
• Cable companies have made high-speed Internet services available to only a few hundred thousand customers.
• Local telephone companies are rolling out their own packages at a slow pace.
• Companies like AT&T and Microsoft have invested multibillion-dollar in cable TV operators, expecting cable lines to become a leading distribution channel.
• The agreement between AOL and DirecTV will allow them to jointly market new services, including AOL-Plus and AOL TV.
• AOL-Plus will provide high-speed connections over satellite, while AOL TV will offer television-based functions like interactive shopping, Web surfing, and electronic chat.

Statistics:

• $1.5 billion: AOL's investment in Hughes Electronics
• 16 million: AOL's customer base
• 7 million: DirecTV's TV subscribers
• Few hundred thousand: the number of customers with access to high-speed Internet services from cable companies

Sources:

• Los Angeles Times
• United Press International (Copyright 1999)