IP Democracy: Okay, Now It's Comcast-Google-AOL?

The media titans are pumped while the rest of us are dog-tired from tracking their multiplying deals. The Wall Street Journal is reporting that top cable operator Comcast might be collaborating with Internet giant Google to buy a minority share of America Online, the faltering dial-up leader that seems to have become a hot property over the past two months.

The report cites people close to talks among Comcast, Google and AOL parent Time Warner, who contend the investors value AOL at about $20 billion. The potential deal, which still seems very fragile at this point, makes a lot of sense.

First, the alliance between Microsoft and Yahoo on IM interconnection, announced today, did seem like a clear signal that the talks of a merger between AOL and Microsoft have been suspended, leaving open the prospect for other potential AOL partners. Or maybe the reverse is true: the AOL-Microsoft talks were interrupted by a better offer from Comcast-Google.

Secondly, Google already has a tight relationship with AOL, generating $300 million in annual revenue for AOL, while Microsoft has been a long-standing foe of the nation’s number one online service.

Finally, although Comcast seems like an odd partner in this heated mix of Internet behemoths, the Philadelphia, PA-based cable company is the number one high-speed Internet access provider in the world, not just the U.S. Comcast’s footprint, however, is not global, or even national, given that only Comcast customers can gain access to Comcast’s web portals. While highly clustered in big metro regions, Comcast serves only about 40% of all cable homes passed in the U.S.

Moreover, despite its track record of strong success, Comcast is starting to appear a little old-fashioned to investors as Google, Yahoo, Skype and other Internet companies capture the imagination of Wall Street. A pact with Google that results in expanded online presence could give Comcast a lift on the stock market.

Update: The New York Times confirms that Google and Comcast stepped into the fray after learning of the merger talks between AOL and Microsoft. The Times article says that one motivation for Comcast would be to convert some of AOL’s dial-up customers to Comcast’s high-speed service. However, that seems like a minor motivation given that Comcast won’t likely gain that many more subscribers from holding an ownership stake in AOL compared to simply stepping up advertising on AOL’s services. Moreover, only about 40% of AOL’s dial-up base is likely to be in Comcast franchise areas.

Posted by Cynthia Brumfield on October 12, 2005 7:40 PM to IP Democracy