AOL Goes Into Orbit
June 28, 1999
America Online made a big bet last week on satellites, announcing it would invest $1.5 billion in DirectTV, a subsidiary of Hughes Electronics, in an attempt to offer fast Internet service via television satellites.
The capital markets will take some time to digest the move, sources said, and for investors to decide if they approve of the deal. But at the outset, it appears to give America Online, which had seen its stock lagging by about 30% over the past three months, a chance to deliver lightning-fast Internet service and downloading time on items that used to take an excruciating five minutes or so, analysts said.
When a DirecTV customer logs online and tries to download a document, the connection will be made in the same way as before. But the difference is, now the return trip of actually getting the document to the customer's hard drive will take the final step through his or her rooftop antenna.
And the intent will be to increase the satellite TV customer base, analysts said. In fact, some in the market said that America Online's U.S. subscriber base could be increased to 30 million within three years, up from about 16 million now.
The two firms also plan to offer a satellite version of a previously announced service called AOL Plus, which was originally going to use digital subscriber line, or DSL, technology.
DSL technology - and now the satellite platform -are both methods used by America Online to reach the customers in competition with the ever-growing cable companies, analysts said. The cable operators have resisted legislative initiatives to open up their systems to allow competitors like America Online to offer services over their system.