Google Fiber Roll-Out Zips Along in Kansas City

by Peak Positions

Story first reported from USA Today

KANSAS CITY, Mo. – It doesn't take long to figure out Google's pitch for Fiber. The potentially disruptive broadband service that Google is making available to residents in certain Kansas City neighborhoods is all about speed —Usain Bolt fast.

The search giant recently opened the Google Fiber Space store that I visited here to explain the promise of Fiber to the public and show it in action. The main virtue is speeds of up to 1 "gigabit per second" (1,000 megabits per second, or Mbps), a whopping 100 times zippier than the typical Internet. The results of a speed test during my visit: download speeds of 800.54 Mbps and upload speeds of 945.29 Mbps.

It's one thing to look at a number. It's another to put it in perspective. Where it might take you more than 2 minutes to download a high-definition movie on what is considered a fast connection today, and a lot longer on a poky connection, Google Fiber promises to do so in seven seconds. Fetching 100 photos might take three seconds on Fiber vs. close to a minute on a setup today. The blurring and buffering delays you might experience before a Street View on a Google Map materializes or a painting in the Google Art Project comes into focus all but disappear. At the Fiber store, there was no visible lag as Google streamed games off the OnLive streaming platform. And Google says Fiber will be ready to handle televisions based on so-called 4K (4,000-plus pixels) supersharp video tech.

While residents of Kansas City, Kan., have first shot at Fiber — ahead of their Missouri neighbors — there are restrictions that could prevent some people who want it from getting it. Either way, it'll be a slow roll-out for the rest of the country. Google isn't specifying when Fiber comes to a town and city near you. But it's a long-term effort.

Those eligible for Fiber can preregister in person at the Fiber store in Kansas City or at fiber.google.com and must do so by Sept. 9. The $10 to preregister is applied to your service. But to actually get Fiber, you may have to rally your neighbors. Google will start building out the network in a given community only if enough people in that neighborhood sign up. Google established thresholds based on size and density as well as speed and ease of Fiber construction. As the company explains it, houses that are spread out in the suburbs require more time, fiber and labor, and therefore are more difficult to connect than homes in a dense urban environment. There are 204 Fiberhoods (as Google calls them) so far; 64 have qualified. Fiberhoods with the most preregistrations get first dibs on Google starting construction.

Those who get the green light from Google have three plan options. The first provides free monthly Internet for a period of at least seven years, provided you pay a one-time $300 fee (or $25 a month for 12 months) covering the cost of construction. Under that plan, Google promises speeds only on par with today's Internet — up to 5 Mbps download and 1 Mbps upload. There are no data caps, and you can upgrade to superfast Fiber at any time. Google will supply a network box (with up to 4 gigabit ethernet ports, plus Wi-Fi).

If you want to cruise the Internet fast lane, you have to sign up for either a Gigabit Internet plan or Gigabit + TV plan. Under both plans the $300 construction fee is waived. The Gigabit Internet plan costs $70 a month and comes with a network box as well. Plus you get 1 terabyte of cloud storage backup on Google Drive. Optional add-on: a Google Chromebook for $299.

The Gigabit + TV plan delivers 18 local channels, plus more than 100 cable channels, with additional premium channels available for a fee. For now, some key channels are missing, including ESPN, Disney and HBO. You also get a 2 TB box to store up to 500 hours of high-definition television and record up to eight shows at the same time. Google is also throwing in its Nexus 7 tablet, which can double as a remote control and search vehicle for the TV.

At the very least, what Google is promising with Fiber should force broadband rivals to step up their game. Time Warner Cable is confident, says spokesman Justin Venech. "Kansas City has been a highly competitive market for some time now, and we take all competitors seriously."

The bottom line:

fiber.google.com

$300 construction fee for free plan (for at least seven years). Construction fee is waived for Gigabit Internet and Gigabit TV plans that are $70 and $120 month, respectively.

•Pro. Gigabit service is blazing fast and affordable. Option for free Internet (at slower speed) for seven years.

•Con. Only available in Kansas City for foreseeable future. Even there, folks who want it may not be able to get it. "Free" plan requires one-time $300 construction fee. Google TV lacks certain popular channels for now.


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AOL Spinning Out of Time Warner Control
By Associated Press

When AOL flashed $147 billion in stock puffed up by the dot-com boom, Time Warner, one of the world's biggest media companies, fell into its arms in 2001. They swooned over their combination of Internet access and traditional media.

But before long, reality intruded. Among other problems, AOL's dial-up Internet access business was fading, diminishing whatever benefits there might be in having AOL spread Time Warner content online.

Finally, Time Warner filed for the corporate world's version of a divorce Thursday. It said it will spin out AOL as a separate company and get on with its life as a movie, TV and publishing conglomerate.

Now AOL will try to bounce back with the help of its online advertising business, a challenge that falls to former Google Inc. advertising executive Tim Armstrong, 38, who was hired as AOL CEO in March.

Time Warner owns 95 percent of AOL and will buy out Google's 5 percent stake during the third quarter for an undisclosed amount. From there, AOL and its 7,000 employees will be spun off into a separate publicly traded company around the end of the year.

"For AOL, becoming a standalone company will give it more focus and strategic flexibility," Time Warner's chief executive, Jeff Bewkes, said at Time Warner's annual shareholder meeting Thursday in New York.

Meanwhile, Time Warner will focus on movies, cable TV networks such as HBO and CNN, and publishing magazines such as Time, People and Sports Illustrated.

Originally known as America Online, AOL once defined the Web for millions of people. But much of its original revenue came from providing dial-up access, a business that peaked for AOL in 2002 at 26.7 million subscribers, back when the company stuffed free trial CDs in magazines and mailboxes. The march of broadband ate away at the business, and AOL had just 6.3 million dial-up subscribers at the end of the last quarter.

The decline undercut the premise that the content created by Time Warner's media empire would become even more valuable as AOL plumbed it to expand its Internet audience.

Even after AOL broadened its reach by giving away content and running free, ad-supported sites, that didn't create many new opportunities for Time Warner. Bewkes acknowledged last month that AOL helped promote material such as Warner Bros. movies or TNT television shows, but didn't bring in new revenue for the content. That function can be served just as well by Web portals the company doesn't own, like Yahoo or MSN.

It's no wonder that AOL Time Warner quickly disintegrated into one of the worst combinations in history. In 2002 and 2003, Time Warner absorbed nearly $100 billion in charges to account for the rapidly diminishing value of the combined company. Time Warner even dropped AOL from its corporate name. Today, the combined value of AOL, Time Warner and Time Warner's recently spun off cable business totals around $40 billion.

At AOL in particular, the falloff has been stark. When Google agreed to pay $1 billion for its 5 percent stake in late 2005, the investment pegged AOL's market value at $20 billion. This past January, Google estimated its investment had plunged by more than 70 percent, leaving AOL with a market value of about $5.5 billion.

Today AOL gives away most of its services, like e-mail, to drive traffic to its ad-supported Web sites. But after a few strong quarters, ad growth slowed and then began declining. AOL also has Platform-A, a business that places ads on sites all over the Web, not just ones run by AOL. Yet that reach hasn't mattered enough: Both Yahoo Inc. and Google mine bigger profits from their ad businesses.

Although AOL's operations make money, its operating profit of $150 million in the first quarter marked a 47 percent drop from the same period in 2008.

Meanwhile, AOL's Web sites, which include celebrity gossip site TMZ and tech blog Engadget, averaged 106 million unique U.S. visitors each month during the first quarter, according to comScore Media Metrix - a drop from 110 million visitors in the first three months of 2008. The top three Web companies all posted gains in traffic in that same period: Google, Yahoo and Microsoft Corp.

Time Warner shares rose 55 cents, or 2.4 percent, to close at $23.55 on Thursday.

Frederick Moran, an analyst at The Benchmark Co., said investors and Time Warner shareholders will be pleased by the spinoff news because AOL has acted "almost like an anchor" on Time Warner's stock over the last few years.

Time Warner also recently spun out Time Warner Cable, which provides cable TV and broadband Internet access. Since then, Time Warner Cable's stock has risen 26 percent - but Time Warner shares have been essentially flat.

Ted Leonsis, an executive who retired from AOL in late 2006, said the decision to spin off AOL emphasizes a shift from seeking size and scale - two attributes that were in vogue 10 years ago - to a focus on being nimble and innovative.

"I'm thrilled for the employees and I don't see any other plan, so while it's a great decision it was an inevitable decision," he said.

Former Time Warner CEO Gerald Levin, who was instrumental in AOL's takeover, recently declined to comment about the looming breakup. Levin now works as director of a rehabilitation center in Southern California.

AOL co-founder Steve Case, the other main architect of the 2001 deal and the founder and CEO of investment company Revolution LLC, wrote Thursday on the short-messaging site Twitter that he is glad to see AOL set loose. He said it "has been a long, tortuous journey" and now is "time to open a new chapter."

Time Warner Prepares to Shed AOL
Story from the Wall Street Journal

Time Warner, Inc. gave the clearest sign yet that it plans to move beyond its disastrous 2001 merger with AOL, saying it expects to press ahead with a spinoff of all or part of the ailing Internet unit.

Jeff Bewkes, who took the CEO reins 15 months ago, has been pushing through a vision of the media company as a slimmed down parcel of mostly television and film businesses. The company has already spun off its cable-TV service business.

Executives cautioned that an AOL spinoff isn't cemented, but a decision on AOL is expected "very soon."

Time Warner on Wednesday also posted a 14% drop in first-quarter profit. Deterioration at AOL and the Time Inc. magazine business offset improved movie studio and cable-TV profits.

"Advertising at AOL and Time Inc. especially is proving even tougher than expected," Mr. Bewkes said.

As the media conglomerate moves to jettison certain businesses, attention is turning to the future of Time Inc., where advertising sales swooned by 30% in the first quarter and ad declines are expected to continue for the rest of the year. Mr. Bewkes has said Time Inc. generates a steady stream of cash and contains important brands, but he also repeated Wednesday that its future within Time Warner hasn't been decided.

"Jeff Bewkes is the kind of CEO who's not sentimental; he's about putting things behind him and focusing on content" said Tom Eagan, an analyst with Collins Stewart.

Time Warner stressed that it is still exploring its options, but in a sign that it is preparing for a standalone AOL, the company last month hired Tim Armstrong, a well-regarded Google executive, as AOL's new chief. Time Warner also amended debt agreements to clear obstacles for an AOL spinoff. On Wednesday, Time Warner disclosed that it also plans to buy back Google Inc.'s 5% stake in AOL.

In 2006, Google paid $1 billion for the investment as part of a deal to handle searches on AOL's Web sites. Since then, Google has written down the value of its stake to just $274 million, or a $5.5 billion valuation for all of AOL. Some analysts have suggested AOL is worth far less.

For the quarter, Time Warner said net income fell to $661 million, or 55 cents a share, from $771 million, or 64 cents a share, a year earlier, adjusted for a reverse stock split. Revenue slid 7% to $6.95 billion, excluding Time Warner Cable.

If Time Warner sheds AOL, the cable networks -- which include CNN, TBS and HBO -- will be the company's primary profit driver. In the quarter, however, the company's ad-supported networks showed signs of strain as ad revenue fell 2%. The company said the weak economy will make it tough for the networks to increase ad revenue this year.

Time Warner's film division posted a 7% decline in revenue though operating income before depreciation and amortization rose 10% thanks to cost cuts.

Time Warner Hunts Head At Google For New AOL Chief
Originally Posted at The Wall Street Journal

Time Warner Inc. announced a leadership overhaul at its AOL unit Thursday, naming Google Inc. Senior Vice President Tim Armstrong to succeed its chairman and chief executive, Randy Falco.

In a move that could be a precursor to a spinoff of all or parts of AOL, Time Warner said Mr. Falco and his No. 2 -- President and Chief Operating Officer Ron Grant -- will leave the company, clearing the way for 37-year-old Mr. Armstrong to take AOL's reins next month.

Mr. Armstrong's vault to AOL is seen as a major coup for the Time Warner unit, which has been limping badly in its efforts to shift to an ad-supported business model under Mr. Falco. Mr. Armstrong said he looked forward to exploring "the right structure and future for AOL."

The reshuffling is the latest in a number of shakeups at AOL. As the unit's performance has soured and its brand faded, Time Warner Chief Executive Jeff Bewkes has flagged a possible spinoff or merger with a rival. Mr. Bewkes spent much of last year attempting to orchestrate a merger with Yahoo Inc., but a deal failed to materialize.

AOL, which saw a 20% slide in total revenue last year, has ushered in several new senior executives, including former Yahoo executive Gregory Coleman last month to succeed Lynda Clarizio as president of its Web advertising division. He became the third top ad sales executive at the company in little more than a year.

Mr. Armstrong's move is a blow to Google, which has lost several senior executives in the past year. The company's senior connection to Madison Avenue, Mr. Armstrong was a member of Google's Operating Committee, the core group of executives who lead the company, and on the front lines of its plans to expand into new advertising formats.

But those efforts have been slow going, despite major acquisitions Mr. Armstrong helped shepherd, and people close to Google have suggested there wasn't much further he could climb.

He considered leaving the company in 2007, according to people familiar with the matter, but stayed after Google CEO Eric Schmidt and others fought hard to keep him.

In a statement Thursday, Mr. Schmidt praised Mr. Armstrong's contributions to Google and said the company would announce an internal candidate as his successor in the coming weeks.

Mr. Armstrong said in an interview that Time Warner came to him in recent weeks to discuss taking over the top job at AOL. He said his first priority is to meet with company employees to better understand the culture, then plot out his strategy for the Internet company.

"They've done a very nice job of growing traffic. They are in a position now to be a major player in all types of Internet- based advertising," he said.

AOL is the fourth-largest Web property behind Google, Yahoo and Microsoft, attracting 108.4 million unique visitors in January, according to comScore.

Pali Research analyst Rich Greenfield said Mr. Armstrong's appointment was a "significant positive" for Time Warner shares, and noted that the only reason an executive of his pedigree would take such a role would be "the ability to manage a public company of his own in the near future."

The overhaul is an admission that AOL's strategy has fallen short of Time Warner's expectations. Mr. Bewkes plucked Mr. Falco from NBC to run AOL in November 2006.

He also dispatched Mr. Grant, a trusted lieutenant, to help reshape the struggling unit, which had become a thorn in Time Warner's side since its disastrous merger in 2001.

Mr. Falco and Mr. Grant couldn't be reached to comment.

While Mr. Falco had little Internet industry experience, Time Warner executives hoped that his cachet with Madison Avenue would help the company in its transition to an ad-supported business.

But Mr. Falco struggled to shake off criticism that he was a television executive who didn't understand the Web.

Mr. Falco attempted to turn around the business with more than $1.6 billion of acquisitions. But AOL is still struggling to digest those acquisitions, against a backdrop of slowing advertising growth and slumping subscription revenue.

Time Warner Takes $25 Billion Hit

Aol On Deathbed

Responding to past problems and the future perils of the economic downturn, Time Warner Inc. attempted to clear its slate by writing down $25 billion of assets to account for the tumbling value of its cable, publishing and AOL businesses.

The move, coming as the advertising outlook sours, could signal more write-downs for media and cable companies. After a rash of acquisitions at peak prices, companies in those industries are having to scale back accounting values in the now-sullen climate. The media industry also faces secular declines in areas such as newspapers, broadcast television and radio, which are being ravaged by ad declines.

Time Warner CEO Jeff Bewkes has signaled a shift to focus more on the TV and movie businesses.

Coupled with weaker-than-expected advertising revenue,Time Warner's fourth-quarter write-down is expected to swing the company to an annual loss for 2008 -- its first in six years.

Time Warner Cable Inc., whose shares have fallen 50% in the past couple of years, represented the bulk of the non-cash write-down, at nearly $15 billion. The news also highlights the lingering effects of Time Warner's disastrous 2001 merger with AOL and a gloomy outlook for the magazine-publishing business.

Time Warner has made a slew of acquisitions since the company's last major write-down in 2002 for the value of AOL and its cable systems. Time Warner Cable spent about $9 billion of cash and 16% of its equity acquiring assets from rival Adelphia in 2005. AOL also has been on a buying spree in its bid to revamp itself as an ad-based company. Investors chided AOL last year for the steep $850 million price tag of its Bebo acquisition.

Cable-TV company Comcast Corp. similarly plans to write down its stake in wireless broadband company Clearwire Corp., whose shares have fallen about 60% in the past 12 months, said people familiar with the situation. Last October, CBS Corp. recorded a $14.1 billion charge, largely for the shrinking value of its local television and radio stations. "We believe that similar announcements from other media companies could be forthcoming," said UBS analyst Michael Morris.

Time Warner's write-down says a lot about the challenges that face Chief Executive Jeff Bewkes. Mr. Bewkes has signaled a shift to focus more on the TV and movie businesses and less on non-content assets such as Time Warner Cable, which he expects to spin off by the end of the current quarter.

But he still needs to find long-term solutions for AOL and publishing. Time Warner CFO John Martin, speaking at an investor conference, said the company is still interested in finding AOL a partner, after on-off talks with potential candidates, but noted the current climate "is not conducive to" quick action.

Time Warner rang more alarm bells about the advertising climate, saying "the economic environment has proved somewhat more challenging" than previously expected, particularly at its AOL and publishing units. The company scaled back its operating projection for 2008, saying it now expects adjusted operating income before depreciation and amortization to be $13 billion, up 1%, a drop from its previous forecast of a 5% increase.

Time Warner shares were down 6.3% at $10.29 in 4 p.m. composite trading on the New York Stock Exchange, while Time Warner Cable stock was down 4.8% at $21.56.

In addition to the write-down, Time Warner will record charges of as much as $380 million in the fourth quarter, including as much as $60 million from the restructuring of a lease for floors in its Time & Life Building in Manhattan held by Lehman Brothers Holdings Inc.; a $40 million increase in its credit-loss reserves for bankruptcy filings by retail customers; and $280 million for a court judgment against its Turner Broadcasting System Inc.

Time Warner still expects cash flows for 2008 to total $5.5 billion, matching its outlook provided in November, because of strong performances from its film division and its cable-television networks.

Time Warner was expected to come under pressure to write down assets as it carried over $42.5 billion in goodwill on the books for 2008. Mr. Martin said he expects no "adverse impacts" from the write-down, noting there are no debt covenants or tax implications that will lead to more financial pain.

The Time Warner Cable write-down reflects the decline in the market value of the company, a drop in the value of its franchise rights and lowered expectations for cash flow amid increased competition and higher borrowing costs. Time Warner Cable said it also plans to take a charge of about $350 million related to its investment in Clearwire.

Time Warner is to report fourth-quarter earnings Feb. 4.

Time Warner, Comcast to Test Web-Usage Plans

Time Warner & Comcast Need to Rethink Network As Internet Traffic Increases And Slows Things Down

Comcast Corp. and Time Warner Cable Inc. will Thursday each begin tests of ways to manage Web traffic on their Internet networks, a contentious issue that has drawn scrutiny from regulators and consumer groups.

Comcast said it will test limiting bandwidth available to heavy Internet users at times of network congestion. The cable operator will test the approach in the Chambersburg, Pa., and Warrenton, Va., markets Thursday. Tests will also soon be under way in Colorado Springs, Co.

Time Warner Cable will try a different approach. The cable operator said it plans to start metering new subscribers -- charging them $1 a gigabyte for Internet usage above a monthly allowance -- beginning Thursday in Beaumont, Texas.

"We realize this will require a cultural shift away from the all-you-can-eat model consumers have grown used to and we want to see what our customers' response will be," said Time Warner Cable spokesman Alex Dudley.

The growth of video and music file sharing has created problems for Internet service providers but particularly cable companies, whose Internet networks are shared among users at the neighborhood level. That means users consuming lots of bandwidth can slow the network performance for those living nearby.

Comcast had said it would experiment with ways to cope with surging Internet traffic on its network. The company had admitted to slowing certain types of bandwidth-heavy applications such as peer to peer file sharing technologies. But advocates of so called net neutrality, who say service providers should not prioritize one type of Internet traffic over another, argue Comcast's approach unfairly targets certain applications and will ultimately hinder consumer choice. By curbing the amount of bandwidth available to heavy users rather than throttling particular applications, the company may deflect some criticism.

Congress is considering legislation that would rein in a carrier's ability to throttle traffic on its network, and the Federal Communications Commission is also investigating the issue.

Time Warner says about 5% of the company's subscribers account for half of local bandwidth use. Mr. Dudley said metered billing is an attempt to deal fairly with the explosive growth of Internet traffic, and the huge amounts of bandwidth consumed by a minority of customers. "We want to find the most equitable way to deal with this issue," said Mr. Dudley.

By: Vishesh Kumar
The Wall Street Journal; June 04, 2008

Comcast, Time Warner Cable in Wireless Talks


The two biggest U.S. cable providers, Comcast Corp. and Time Warner Cable Inc., are discussing a plan to provide funding for a new wireless company that would be operated by Sprint Nextel Corp. and Clearwire Corp., people familiar with the talks say.

The partnership would create a nationwide wireless network using WiMax technology, which is designed to provide high-speed Web access from laptops, cellphones and other mobile devices, as well as high-quality mobile video. Sprint and Clearwire have been working for months to cooperate on a WiMax rollout and are now trying to raise at least $3 billion for a joint venture.

Under the plan the parties are reviewing, Comcast -- the largest cable operator with 24 million subscribers -- would put as much as $1 billion into the venture, with No. 2 operator Time Warner Cable adding $500 million. The sixth- biggest cable operator, Bright House Networks, is also involved in the talks and would contribute between $100 million and $200 million, people familiar with the matter said. Comcast Chief Executive Brian Roberts has played a prominent role in the talks.

Sprint, of Overland Park, Kan., and Clearwire, a Kirkland, Wash., start-up founded by wireless pioneer Craig McCaw, are trying to line up other funding too. Intel Corp. has signaled a willingness to put in about $1 billion or more, depending on the terms, people familiar with the discussion say. And Google Inc. could provide hundreds of millions of dollars, the people say. The exact amount each would contribute could change, and people involved in the discussions said it is still possible the entire deal could fall through. Google and Intel both declined to comment.

Entering the wireless business is becoming a bigger priority for cable companies as they compete fiercely for customers with telecom giants AT&T Inc. and Verizon Communications Inc. Those phone companies have encroached on cable's turf by entering the pay-TV business and are positioning themselves to offer a " quadruple play" of services that includes landline phone, high-speed Web access, cellphone, and video. "That's obviously a concern, if Verizon can put together a converged service offering that starts to peel people away from cable operators, " said Mark Rowland, head of the wireless practice at IBB Consulting.

Cable companies' push into wireless would mark the next chapter in that escalating rivalry. It isn't clear precisely what wireless services the cable operators intend to offer via the WiMax venture. Executives at some of the operators feel the U.S. wireless market is already crowded, with 80% of U.S. consumers already owning a cellphone.

The companies are likely to try to distinguish themselves with advanced mobile data and video services that take advantage of the stockpiles of content they are already adept at licensing. People familiar with the discussions said some cable companies are looking at options to develop their own mobile devices in partnerships with manufacturers.

Sprint CEO Dan Hesse is pressing all parties to wrap up discussions in time for the wireless industry's trade show next week in Las Vegas, so Sprint can have something to present to investors. In addition to the $3 billion Sprint and Clearwire are trying to raise now to start rolling out WiMax, they will likely need more to complete a nationwide network. Sprint previously had told Wall Street the venture would cost $5 billion by 2010.

Mr. Hesse wants Sprint to begin building the WiMax network quickly so it can get a head-start over competitors AT&T and Verizon Wireless on advanced wireless broadband services. WiMax promises faster speeds than current technologies and a wider range of video and other services.

In exchange for funding the WiMax joint venture, the cable companies would get equity in the business and would be able to purchase wholesale access to the network to offer their own high-speed wireless data and voice services to customers, the people familiar with the discussions said.

The cable industry has been flirting with the idea of getting into wireless for years, but hasn't had a clear strategy. Investors have also discouraged cable companies from embarking on any big spending projects. A consortium of cable operators including Comcast, Time Warner Cable, Bright House Networks and Cox Communications Inc. bought more than $2 billion in radio spectrum in a 2006 government auction but never put it to use.

The same companies created a separate joint venture with Sprint in 2005, dubbed Pivot, that offered cellphone service in about 30 markets by the time it stopped marketing late last year amid low demand. One key problem was that cable providers didn't have significant control over pricing and marketing. They are asking for that control in the new WiMax venture. Comcast and other cable operators have also mulled acquiring a major wireless carrier.

Cox, the third-biggest cable operator, appears to be pursuing a separate wireless push. It acquired 22 radio spectrum licenses for $305 million last week, which would allow Cox to offer wireless service in its markets, predominantly in the south and southwest.

If cable operators dive into wireless, that will put more pressure on satellite TV providers, their other major competitors, to do the same. Satellite providers on their own can't offer high-speed Web access or voice services. Dish Network Corp. took a step into the wireless business through the FCC auction, winning 168 licenses throughout the country for $712 million. DirecTV Group Inc. hasn't announced any plans in wireless.

"This is like a game of three dimensional chess because the cable operators aren't just thinking about how this helps them compete with Verizon and AT&T, but how this helps them block potential threats from DirecTV and Dish," says Bernstein analyst Craig Moffett.


By Amol Sharma and Vishesh Kumar
The Wall Street JournalMarch 26, 2008

AOL Ad Project, 'Platform A,' Plots Plan B

Digital Effort Aiming To Unite Multiple Fronts Faces Various Obstacles

Over the past two years, Lynda Clarizio has helped build Advertising.com, AOL's ad network, into one of the hottest properties in online advertising. Her reward: She gets to try to clean up one of the Internet company's messiest divisions.

Time Warner's AOL unit is aiming to transform itself from an Internet service provider into a full-service digital-advertising business. To that end, it has spent about $1 billion to buy seven ad-technology firms with different areas of expertise, from behavioral targeting to video ads. The next step is to knit them together with Advertising.com -- an entity AOL has dubbed Platform A, but has yet to take to market.

AOL's future largely hinges on the success of that transformation, which involves aggressively slashing costs, forsaking billions of dollars in overall subscription revenue, and laying off thousands of employees. Time Warner Chief Executive Jeff Bewkes has said that mission is key to plotting a new course for a company whose stock price has stagnated in recent years.

But Platform A is off to a rocky start. In its first six months, it has been marked by failed sales targets, tensions among its different business groups, and, most recently, the dismissal of its president, Curt Viebranz. A number of marketers say they are ready to spend their ad dollars with Platform A, but can't because the disparate units still operate independently.

The idea behind Platform A is that AOL can be a one-stop shop for placing ads both on AOL's own Web sites and on the broader Web, through its ad networks like Advertising.com, which sell ads on thousands of Web sites. So far, though, the company is a long way from that reality. AOL is fourth among the major Web portals -- behind Google, Microsoft's MSN and Yahoo -- in ad revenue, and the pace of its ad-revenue growth has also dropped off. AOL's ad revenue grew 12% in 2007, compared with 37% in 2006 and 38% in 2005, according to research firm eMarketer.

Even Advertising.com, a rare bright spot in AOL's business recently, is facing new pressures. A major part of a two-year deal with its biggest advertiser, Apollo Group's University of Phoenix, ended in January. Advertising.com was University of Phoenix's exclusive online marketing partner, managing its ad buys both on its network of sites and on other ad networks. The deal generated $215 million for AOL in 2007, up $58 million from $157 million in 2006, and accounted for 17% of AOL's ad-revenue growth last year. (University of Phoenix will continue to buy ads on the Advertising.com network, but decided to take its ad buying in-house.)

AOL's biggest competitors are developing their own ad networks, which will make life tougher for Advertising.com. "If I get the inkling they are not innovating, I'm going to look elsewhere and talk to Yahoo or any of the other Web giants," says Tom Hespos, president of Underscore Marketing, a closely held digital agency in New York.

AOL executives have picked Ms. Clarizio, 47 years old, to rescue Platform A, which has the widest reach of any ad network in the country -- reaching 90% of the U.S. online audience, according to comScore -- but isn't able to effectively sell across that spectrum yet. A nine-year veteran of AOL, Ms. Clarizio led the deal team that acquired Advertising.com in 2004 for $435 million. That unit has accounted for nearly a quarter of AOL's revenue and is one of the fastest-growing parts of the company.

Trained as a lawyer, Ms. Clarizio is known internally for an analytical mind and an ability to delegate. A graduate of Princeton University and Harvard Law School, she came to AOL from Washington law firm Arnold & Porter, where she was a partner for seven years and also worked as an AOL outside counsel.

While AOL is known as a relatively slow-moving, bureaucratic company, Advertising.com has developed a different reputation. "AOL has reinvented itself so many times. It is hard to keep track," says Adam Schlachter, senior partner and group director at Mediaedge:cia, a media-planning firm that is a part of WPP Group's Group M. "(Advertising.com) has been able to grow steadily, consistently and innovate."

Ad.com grew from a cramped townhouse on the outskirts of Baltimore, where brothers Scott and John Ferber opened a digital advertising company called TeknoSurf in 1998. Their idea was to piece together a network of Web sites where they would buy ad space, then resell it to advertisers at a premium. It changed its name to Advertising.com in 2000.

Ms. Clarizio tried to embrace Ad.com's start-up spirit. The company remained at its Baltimore headquarters, instead of relocating to AOL's Dulles, Va., base, 60 miles away. She dressed up for Halloween and competed in relay races.

She also has tried to get the company's various sales teams and engineers working on common goals. During daily 9 a.m. meetings in Ad.com's "War Room," midlevel executives discuss the previous day's results and chart the next day's goals.

Ms. Clarizio wants to replicate that culture at Platform A, which suffers from duplication among its sales, tech and other groups. Different ad units, for instance, call on the same clients -- in essence competing for the business. One of Ms. Clarizio's first moves in her new post was to announce a "leadership team" for Platform A. The new structure puts in place one sales team, one technology team, one product and operations team, one marketing team and one publisher-services team to cut across all the company's different ad units.

Some digital-advertising executives question whether combining sales teams is the right strategy. They fear Ad.com's emphasis on data-driven results will come to dominate Platform A, frustrating bigger-brand marketers used to the tailored campaigns they have gotten from some of AOL's ad-sales teams.

But Ms. Clarizio is moving full speed ahead with the integration. AOL also announced last week that it has integrated two of the companies that provided separate search-engine-marketing services -- Advertising.com and Quigo, a contextual targeting ad firm AOL acquired last fall. "It's an example of what we need to do across the board. It's definitely an iterative process and takes a lot of work to do that," Ms. Clarizio says.

By Emily Steel
Wall Street Journal; March 26, 2008

Yahoo Sees Blue Skies, but Clouds Brew in China
Yahoo Inc. is pressing its case to shareholders this week on why it's worth more than Microsoft Corp.'s bid for it, even as moves by its Chinese partner underscore investor doubts that Yahoo can stay independent. Alibaba Group, the Chinese Internet company that is 39% owned by Yahoo, is in advanced talks with investors to finance Alibaba's purchase of Yahoo's stake in an effort to expand its management independence should Microsoft's bid prevail, according to people close to the situation. While it's not pushing for a Yahoo sale, Alibaba believes that a change in control at Yahoo would trigger an opportunity for it to buy the stake under the companies' agreements, though that could be subject to interpretation. The talks signal Alibaba's belief that Microsoft could still succeed in its quest to buy Yahoo, which owns stakes in Internet companies in Japan, South Korea and China, where Alibaba is the third largest Internet search company. Alibaba's interest in purchasing the Yahoo stake could also represent a new wrinkle in any negotiations. For Microsoft, gaining Yahoo's Asia stakes was a key attraction when it made the bid Jan. 31, an offer now valued at about $42 billion. Alibaba's move coincided with the kickoff of Yahoo's roughly week-long road show at which company executives will meet with major shareholders to make the case that Yahoo's value exceeds Microsoft's offer, which company directors last month rejected as insufficient. Chief Executive Jerry Yang, Chief Financial Officer Blake Jorgensen and President Susan Decker are among those at the meetings, which began yesterday. As part of road-show documents filed with regulators, Yahoo reaffirmed its financial guidance for 2008 and projected strong revenue and cash-flow growth in 2009 and 2010, releasing financial projections first presented to its board in December. Based on the projections, it is easy to calculate a standalone value for Yahoo close to $40 a share, and any additional strategic value to Microsoft could make a deal worth more than that, says a person close to the situation. Microsoft's cash-and-stock offer, valued at $31 a share when first announced, has a value of about $29.49 a share based on Microsoft's price in 4 p.m. trading on the Nasdaq market yesterday. Some major Yahoo shareholders had previously said they expected Microsoft to raise its price and a deal to happen at about $ 35 a share. But it isn't clear whether Microsoft will increase its bid. The Redmond, Wash., technology company declined to comment. Analysts said Yahoo's reaffirmation of its modest guidance for the first quarter and the year means it's less likely to be vulnerable to a Microsoft takeover because it misses its projections. But they said it would be a stretch for Yahoo to hit its estimates for 2009 and 2010, which are well above current analyst expectations. "Those are not easy numbers," says Mark Mahaney, an analyst with Citi Investment Research, whose parent company has done business with Yahoo and makes a market in its shares. "We think it's the most likely outcome that Microsoft buys Yahoo, and at a higher price than $31," he adds. Imran Khan, an analyst at J.P. Morgan, estimates Yahoo's 2009 revenue at $6.4 billion after commissions paid to marketing partners are factored out. That is below Yahoo's guidance of $7.1 billion, in part because he isn't as optimistic as the company about search-related improvements. People familiar with the matter say that Yahoo's strong prospects in display advertising, such as banner ads, are central to the case the company is making to investors. Yahoo's road-show presentation doesn't include any specific mention of scenarios it has discussed with News Corp. and Time Warner Inc. about folding some of their Internet assets into Yahoo in return for significant Yahoo stakes. Such discussions about possible alternative deals -- considered long shots by people close to the situation -- haven't progressed, although as of earlier this week Yahoo and the possible partners were still talking, according to people familiar with the matter. News Corp. Chairman Rupert Murdoch said at a media conference last week that the company wouldn't get in a fight with Microsoft. ( News Corp. owns Dow Jones & Co., publisher of The Wall Street Journal.) If Microsoft's bid goes through, Alibaba aims to exercise a clause in its 2005 deal with Yahoo that exchanged Yahoo's China operation and $1 billion in cash for a stake in Alibaba. Alibaba believes the "right of first offer" clause in the agreement would be triggered by any Microsoft deal for Yahoo, say the people familiar with the matter. Under Alibaba's interpretation of the agreement, if Yahoo decides to transfer its stake in Alibaba to Microsoft as part of a broader deal, Yahoo would first have to offer that stake to other Alibaba shareholders. The Chinese company's other main shareholders include Alibaba management and Japan's Softbank Corp. Alibaba would finance the purchase of the stake with help from two lead investors and a group of others, including large Chinese institutions, the people say. Alibaba has hired Deutsche Bank and Wachtell, Lipton, Rosen & Katz as advisers, people familiar with the matter say. A Wachtell Lipton spokeswoman confirmed that the law firm has been hired as legal counsel. At the core of Alibaba's move is an effort to keep Chinese management control of Alibaba, say people familiar with the plan. Alibaba's management -- led by founder Jack Ma -- controls the company's operations despite Yahoo's stake and one board seat. Alibaba executives are concerned that Microsoft's size and history of hands-on management could jeopardize Alibaba's autonomy and its image as a Chinese company. China's government restricts Internet content and is suspicious of foreign Internet companies -- which, partly as a result, have fared worse than their domestic rivals in China. After Microsoft's bid for Yahoo surfaced, Chinese regulators contacted Alibaba about how it could be affected by a deal. Such concerns are partly driving Alibaba's search for alternative shareholders, the knowledgeable people say. Spokesmen for Alibaba and Microsoft declined to comment. Alibaba's efforts are bad news for Microsoft. While selling off Yahoo's stake would fetch a chunk of cash, the software maker would lose a foothold in an increasingly important market. Alibaba is one of China's biggest Internet companies, with a broad portfolio of businesses. Its flagship unit is Alibaba.com Ltd., a business-to-business trading platform that listed in Hong Kong in November 2007 after raising $1.7 billion in the biggest initial public offering ever by a Chinese Internet company. That unit reported on Tuesday that its profit more than quadrupled in 2007, while revenue jumped nearly 60%. Alibaba also runs Yahoo China, as well as a consumer-auction site, a payment- processing service, a software company and an advertising-trading platform. In Yahoo's road-show presentations to investors this week the company is valuing a portion of its Asian holdings at $12.6 billion, or $8.97 for each Yahoo share, based on Friday's prices. That includes Yahoo's 28% stake in Alibaba.com, which the company values at $3.2 billion, but not its stake in Alibaba Group's other, unlisted operations. Alibaba.com's share price has fallen sharply this week. But putting a value on Yahoo's entire stake could be difficult. Alibaba's nearly 80% stake in Alibaba.com, its Hong Kong-listed unit, is valued close to $ 8 billion based on its current share price. But the valuation of Alibaba's other businesses is tricky: Its Taobao unit is by far the dominant consumer auction site in China, but it is believed to have relatively little revenue because it offers most of its services free. If Microsoft acquires Yahoo, and Alibaba and Microsoft cannot agree on a price for Yahoo's stake in Alibaba, the shareholder agreement stipulates that the matter would then go to arbitration. By Kevin J. Delaney, Rebecca Blumenstein, and Robert A. Guth; Jason Dean, Jessica E. Vascellaro and Sky Canaves also contributed to this article. The Wall Street JournalMarch 19, 2008