The Real Reason Verizon Acquired AOL

The Internet has been torn asunder at the news of Verizon buying AOL. The PR machines are on overdrive trying to figure out the reason “why Verizon acquired AOL”. There are dozens of theories on “why the acquisition” and most of them talk about mobile videos, ad revenue, advertising technology, and so on. However, the first thing we need to do is to “get out of the ad network mindset, and into the phone company mindset”. Verizon is the typical everyday regulated phone company that sells pots lines, Internet access, GPON, toll free numbers, wireless, etc. If we look at things that have been happening in the wireline and wireless business, we’ll find out answer.

For the last few decades, Verizon was a powerhouse in the wireline business. Today, the wireline business has become a commodity business, hence the reason Verizon selling a big chunk of their wireline and cell tower business for $15.6B to Frontier and American Towers. In another time zone, AT&T acquired some phone companies in Mexico, and their goal is to become the #1 carrier in Mexico in the next decade, bumping aside Carlos Slim’s America Movil. Verizon and AT&T are making these moves for no other reason to counter GAFAN. Verizon and AT&T are regulated phone companies that are under tremendous pressure in the US market. There aren’t too many other markets to expand into, except expanding vertically and across Mexico.

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