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AOL-Time Warner Merger to Drive Demand for Fiber Optics

Strategic Insights

— 2 min read

The AOL-Time Warner merger, announced on January 10, has sparked speculation about its impact on the fiber optic industry. However, industry experts caution that while the merger will drive requirements for increased broadband capabilities, it will not accelerate demand for fiber deployment in the immediate future. According to Craig Johnson, principal of PITA Group, a high-tech consultancy, users must demand higher bandwidth, price points must be correct, and infrastructure for the last mile must be in place before the market will demand more fiber. Chris Nicoll, analyst for Current Analysis, agrees that there will be fiber optic ramifications down the road, citing AOL's push for high-bandwidth access services and Time Warner's early entry into cable distribution.

Key Takeaways:

  • The AOL-Time Warner merger will drive requirements for increased broadband capabilities, but it will not accelerate demand for fiber deployment in the immediate future.
  • Users must demand higher bandwidth, price points must be correct, and infrastructure for the last mile must be in place before the market will demand more fiber.
  • Chris Nicoll, analyst for Current Analysis, agrees that there will be fiber optic ramifications down the road, citing AOL's push for high-bandwidth access services and Time Warner's early entry into cable distribution.
  • Brad Bradshaw, analyst with the Yankee Group, predicts that two-thirds to three-fourths of Internet access will still be dial-up three years from now, but a certain portion will be through high-speed channels, primarily through cable.
  • The merger will help drive the need for higher performance infrastructure in the back end of the systems, where all the data goes.
  • Time Warner Telecom, a CLEC serving 21 metropolitan markets in 11 US states, is 51 percent owned by Time Warner and offers dedicated phone lines and access, switched phone services, data and video transmission, and Internet services.

Statistics:

  • AOL-Time Warner merger announced on January 10
  • 20 percent of the cable infrastructure is owned by Time Warner
  • 12,100 employees at AOL
  • $4.8B in FY 1999 revenue for AOL
  • $762M in FY 1999 net income for AOL
  • 2.35B shares outstanding for AOL
  • Market value of AOL at $164B
  • Time Warner has 70,000 employees
  • $26.8B in 1998 revenue for Time Warner
  • $168M in 1998 net income for Time Warner
  • 1.5B shares outstanding for Time Warner
  • Market value of Time Warner at $97B

Sources:

  • AOL Time Warner merger announcement, January 10
  • Craig Johnson, PITA Group, 503/287-7542
  • Chris Nicoll, Current Analysis, 703/404-8497
  • Brad Bradshaw, Yankee Group, 617/880-0323
  • Bob Meldrum, Time Warner Telecom, 303/566-1354

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