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AOL, WorldCom Divvy Up CompuServe

America Online picks up CompuServe%squots 2.6 million customers in a three-way deal with WorldCom but will operate the online service independently.

By Brian McWilliams, PCWorld   

The company was bought up by giant telecom provider WorldCom, which turned around and swapped it to America Online as part of a complex three-way deal. WorldCom is keeping CompuServe%squots network services, but giving CompuServe Interactive, the online service with 2.6 million members, to America Online in exchange for cash and AOL%squots ANS Communications Internet access division.

%dquotWe%squotll continue to manage CompuServe as a separate brand with its own set of services, technologies, and networks,%dquot promised AOL CEO Steve Case. %dquotIt%squots hard to predict how this market will develop. We%squotre essentially acquiring 2.6 million members and a fairly significant revenue stream--we want to make sure those members continue to be happy to protect that revenue stream.%dquot

As for AOL users, Case said they%squotll benefit from a new, long-term strategic relationship formed today with WorldCom in which AOL will get significantly expanded network capacity at favorable prices. Case said AOL and WorldCom will work together to deploy broadband access options for AOL members, including Asynchronous Digital Subsciber Line access in 200 cities by the end of the year.

By bringing the CompuServe brand under its wing, AOL will now own a commanding piece of the online services business. But Case said he%squots confident today%squots deal won%squott run into problems on antitrust grounds.

%dquotThe Internet is an extraordinarily competitive marketplace with thousands of service providers, a lot of major global communications companies like AT&T, and almost all the regional Bell companies playing a significant role in this business,%dquot observes Case. %dquotBecause there are low barriers to entry, lots of people can be players. It%squots probably among the most intensely competitive marketplaces that exist.%dquot

Despite the fact that AOL now owns its biggest competitor, Case also said that the acquisition of CompuServe won%squott impact how AOL prices its services. WorldCom and AOL said they expect the deal to be finalized within the next six months.