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Broadband could cost AOL $1bn in revenue by 2005

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AOL could lose $1bn in revenues by 2005 because of the growth of broadband in the US.

So say analysts at technology research and consulting outfit, Strategy Analytics, who reckon that AOL could be clobbered financially for the growth in broadband.

In its report Can AOL Bridge the Broadband Gap?Strategy argues that AOL will lose out financially as the dial-up market, which it dominates shrinks (as more and more people sign up to broadband).

Even if punters sign up to AOL's "Bring Your Own Access" scheme, which lets users who get broadband from cable or telephone companies sign up to AOL's content service for $14.95 a month, Strategy estimates that it would cost AOL almost $9 a month per punter in lost revenue.

The report speculates that the "combination of a shrinking dial-up market and the diminished margins produced by broadband subscriptions revenue could cost the company nearly a billion dollars by 2005."

James Penhune, of Strategy Analytics said: "Broadband subscribers account for only about a quarter of the US online audience today.

"But by 2005, we expect that half of all online homes will be using broadband connections, most of them provided by cable and telephone companies.

"AOL may be able to maintain a commanding share of the dial-up audience, but the overall size of this market will have declined significantly."

Last month AOL Time Warner announced that it lost $99bn in 2002. ®

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