George, here is what we can expect for tomorrow: from IBD Wednesday 5/19/99 edition:
Real Broadband Battles Still Await
AOL-Microsoft
Date: 5/19/99
Author: Doug Tsuruoka
Is America Online Inc. jumping feet first into the speedy Internet-access
arena called broadband, or is it just dipping in a toe?
Most analysts seem to believe the answer is the latter. But all analysts are
asking that question ahead of AOL's annual investor meeting, slated for
Wednesday in Washington.
AOL Chief Executive Steve Case is expected to unveil the company's
plans for using broadband. This refers to technologies that offer a bigger
''pipe'' for accessing the Internet than users get using today's dominant
avenue, normal copper phone wiring via modems.
Investors are hungry for the report in light of several recent moves. Most
recently, AOL last week unveiled an agreement with four companies to
co-develop a set-top box to let satellite TV viewers get Internet access and
interactive services. Analysts see it as a move against rival Microsoft Corp.,
which offers Internet access via the TV with its WebTV unit.
Terms of last week's deal weren't revealed, however. And analysts say last
week's agreement isn't anything close to a full immersion into broadband.
''If you ask AOL, they'll admit (the set-top deal) really doesn't have much
to do with broadband. It could evolve into that, but now that isn't the case,''
said Bruce Kasrel, an analyst with Forrester Research Inc.
For one thing, last week's deal doesn't even talk of offering AOL service
via satellite TV, even though one of the partners - Hughes Electronics
Corp. unit DirectTV - is the leader in the field. Also, broadband extends
beyond satellite TV service. More prevalent is broadband access via
cable-TV wires or via DSL. Digital subscriber lines speed access over
normal copper phone wires.
Analysts say AOL wants to show investors that it's moving quickly into
new technologies. But regardless of what AOL reveals Wednesday, some
analysts say the company has come up short on broadband.
Meanwhile, Microsoft said this month that it will invest $5 billion in AT&T
Corp. to ensure it can access broadband cable technologies.
That's a key partnership for Microsoft. AT&T upped the broadband ante
earlier this month when it said it would buy cable TV provider MediaOne
Group Inc. It already owns what was once Tele-Communications Inc. The
two will make AT&T the No. 1 cable company.
By contrast, AOL's set-top deal wasn't nearly as direct a move into
broadband, though the media played it that way.
But AOL is far from done. Analysts say AOL might invest up to $1 billion
in Hughes Network Systems, another Hughes Electronics unit and one of
its partners in last week's pact.
But don't make too much of AOL's satellite TV moves, Kasrel says. ''This
isn't an attempt to take control of broadband,'' he said. Kasrel says the
set-top deal, or even a big Hughes investment, is far less strategic than
Microsoft taking a stake in AT&T.
Besides DirectTV and Hughes Network, the other partners in last week's
announced deal are Royal Philips Electronics NV and Network Computer
Inc., a unit of Microsoft rival Oracle Corp.
While AOL and its partners say their set- top box will be ready early next
year, Internet-enhanced TV still has many years before it attracts many
users, says Scott Reamer, an analyst at SG Cowen & Co. in New York.
Analysts expect AOL will take a much bigger plunge into broadband, but
later.
''Broadband is still a very evolving strategy,'' said Mark Cavallone, an
analyst with Standard & Poor's Corp. in New York. ''Less than a million
people access the Internet through DSL and cable technology.''
Given this situation, it might make sense for AOL to dip its toes in a few
spots rather than jump in at one location. ''AOL could (opt to) offer all of
them - cable, DSL and satellite Internet access,'' Reamer said.
AOL has made other broadband moves. It has deals with regional Bells
SBC Communications Inc. and Bell Atlantic Corp. to provide broadband
access to AOL customers using DSL.
The world's biggest online service also has said it could partner with any
company that has technologies that can deliver Internet service over
hand-held devices, pagers and cellular telephones.
AOL might be holding back because it's unclear which companies will lead
the field when high-speed access to the Net through broadband becomes
the norm. ''In terms of AOL vs. AT&T and Microsoft, it's pretty premature
to start declaring winners and losers,'' Cavallone said.
(C) Copyright 1999 Investors Business Daily, Inc.
Best regards,
Paul |
