Wall Street reacted with glee to last week's complex set of deals which will see CompuServe acquired by fellow on-line service provider America Online. Under the deals, which value CompuServe at $1.2 billion (#759,500 million), US telecoms giant WorldCom is purchasing H&R Block's 80% shareholding in the on-line service company and simultaneously selling CompuServe's consumer business to AOL. In exchange AOL is selling to WorldCom its Internet access division, ANS Communications, for $175 million cash. In a related deal, AOL's European partner Bertelsmann is paying AOL $75 million and both will invest $25 million in an expanded joint venture to operate CompuServe's European on-line service.
AOL will immediately be able to add three million consumer customers to its own nine million, a figure that includes 850,000 CompuServe customers in Europe, where AOL has had limited success to date. The deals also mean that AOL will off-load its networking infrastructure to WorldCom, allowing it to concentrate on what it does best - providing content. That has got to be good news for subscribers (remember the problems AOL encountered following the introduction of its flat rate scheme?)
Meanwhile WorldCom, which only about a year ago bought MFS Communications and gained ownership of UUNet Technologies, becomes a dominant player in the business Internet service market.
According to US reports, last week's series of manoeuvres will make AOL roughly six times the size of its next largest competitor, MSN. AOL's share price rose almost 10% on the news, to just over $76 a share.
But compared to the positive reaction from Wall Street, subscribers to both the CompuServe and AOL services are expressing serious reservations about the plan. According to research carried out by PC Week US, users are concerned that the deals will narrow consumer choice, force local ISPs out of business, lead to price rises and see the return of AOL's "infamous busy signals".
"AOL has trouble serving the nine million members it already has," claimed AOL subscriber Darrell Glendenning. "One third more are certainly not going to help matters much."
CompuServe users were even more scathing. "I won't be part of AOL's subscription base," said Daniel J McCoy. "Their overpriced, over-hyped, under-powered services aren't what I want and I refuse to pay for them." McCoy has since cancelled his account.
Such alarmist reaction is not unusual with deals of this nature but users would do well to consider the facts in this case. AOL and CompuServe have pledged to keep their services separate, extra investment has been earmarked for CompuServe's European on-line service and AOL can now focus on improving content for its customers. Furthermore, H&R Block had made no secret of its intention to sell its shareholding in CompuServe and had been looking for a buyer for about a year. CompuServe clearly was not strategic to its business.
Geoengineering on the sea floor near glaciers would form a new ice shelf to prevent melting
Alterations in capillary blood flow can be caused by body position change
Curiosity rover is in 'normal mode' but not transmitting scientific data back to base
NatWest outage comes a day after Barclays' IT systems shut out customers and staff