For all the superlatives that have been lavished on the America Online-Time Warner merger proposal, the question for most consumers boils down to something basic: How many new types of services and products would this colossal convergence of forces produce?
The answer may well be "surprisingly few," at least in the short term.
To begin with, the deal is likely to take at least nine months to close, assuming no major hitches. And after that, the new entity will be wrestling with the nitty-gritty issues of integrating operations and running one of the largest companies in the nation.
In the meantime, the companies will be taking a few baby steps toward their goal of bringing high-speed Internet connections to the masses, and filling that digital pipe with terabits of video, music and a variety of other offerings.
America Online has been talking for several years about a type of television connected to the Internet that viewers would use to buy products, communicate with friends and interact with shows.
However, the idea of interactive television has been tried unsuccessfully by others, never quite catching on with consumers, in part because no one has managed to make interactivity with a TV sufficiently easy or compelling. It may be years before an AOL Time Warner or a competitor comes up with the mix of price and programming that will make this combination technology worthwhile.
AOL's interactive television service--which will focus on bringing the proven popularity of AOL chat features to television--is set to debut this year, AOL spokeswoman Regina Lewis said. The acquisition of Time Warner would make available a host of television shows and movies that could be part of the service.
Bundled packages of cable television, cable Internet access and AOL service would certainly be among the new company's first marketing initiatives.
Whether these bundles would mean cheaper prices is uncertain, but there are a host of possible extras, such as tying online shopping with cable television or more targeted marketing of products, that could make money for the new company and eventually lead to lower prices for consumers.
"If they do this right, they shouldn't have to compete on price," said Martin Goslar, principal analyst with Phoenix-based e-commerce consulting firm Organizational Research and Technology Services. "The price of access will become almost immaterial to the services available."
One of AOL's chief aims in recent years has been to break into the high-speed-cable Internet access business.
Time Warner owns the second-largest cable system in the country, so the move into that market would be certain to accelerate, said Frank Gens, senior vice president for Internet research for International Data Corp., the Framingham, Mass.-based research firm.
Gens noted that AOL already had plans to launch its AOL Plus service this year. This enhancement is designed to provide video and sound over the Internet to AOL subscribers who already have high-speed connections.
In many ways, however, the biggest force in the coming year may not be the combined AOL Time Warner itself, but rather the fear of a combined AOL Time Warner.
Jon Goodman, executive director of EC2, a new-media think tank at USC, said that new-media companies that have been standing on their own so far, such as Yahoo, are now under enormous pressure to find their own big-league partners.
"Every big new-media company, every [Web] portal and access provider is looking now to see what combination they need to make in order to have the market clout," Goodman said.
One immediate benefit to consumers may be lower Internet access prices or a wider offering of free Internet service from other rivals.
AOL has no immediate plans to cut its pricing in the U.S., although the company has begun to experiment with the idea in Europe.
Goodman said the AOL-Time Warner deal creates an incentive for companies on the free-service bandwagon to try to grow fast to counter the market clout a merged AOL Time Warner would enjoy.
Goodman said it's likely that free access will be only one of many strategies smaller companies will employ in an effort to find the niches where they can survive in competing with a company as large as AOL Time Warner would be.
NetZero, for example, based in Westlake Village, has become the second-largest Internet service provider in the country, amassing 3 million subscribers in just 15 months by providing Internet access to consumers. It is depending not on subscription fees, as AOL does, but rather on advertising for its revenue.
The power of the free-access movement lies not just in the appeal of a great price, but in the possibilities for bundling and packaging with other products that consumers will pay for--such as a new computer that requires a three-year commitment to one service provider.
