Verizon is moving into the content and media business with its planned purchase of AOL. If regulators approve the $4.4 billion USD deal, Verizon will join the likes of Comcast which is not only a telecommunications giant but also a major media conglomerate.
The acquisition would involve the entirety of AOL becoming a wholly owned subsidiary. Of course, the purchase includes the old dial-up internet service with 2 million customers that AOL is famous for. This will net Verizon about $168 million in revenue a year. Other noteworthy mentioned include The Huffington Post, TechCrunch, Engadget, MAKERS, AOL.com and AOL’s advertising network. AOL is expected to operate independently of Verizon at least in the short-term and AOL CEO Tim Armstrong will stay on.
One major hurdle being faced by Verizon and AOL is regulatory approval. On one hand, an approval has precedence. Comcast was able to move ahead with its acquisition of NBC after the previous Federal Communications Commission (FCC) Chairman gave approval. However, the regulatory landscape has changed with new FCC Chairman Tom Wheeler who recently implemented Net Neutrality rules which aim to prevent companies from using their monopoly to leverage advantages. What is likely to happen is that the FCC will grant approval but with some rules that Verizon will have to follow regarding AOL.
While purchasing AOL’s dial-up service sort of makes sense, it will be interesting to see how Verizon will make use of their media and content acquisitions. Both consumers and the FCC will be sure to watch the acquisition carefully to guess if Verizon will abuse its new position as a media outlet.