Gemmers..........
"Who will win the Broadband Era?"
(Warning this is long but very interesting)
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Who will rule the Broadband Era?
By Rob Lemos
June 25, 1999
ZDNN
The race is on. Companies from the disparate worlds of cable, media, software and even chip manufacturing are scrambling to piece together a broadband jigsaw puzzle -- one whose pieces consist of the key assets that will eventually position them for leadership in the brave new world promised by fast Internet connections.
They're grabbing for parts of the basic infrastructure (cable systems and satellite partnerships) as well as the packaged content that will come into high demand once the fat pipelines are in place to deliver bigger, richer data files and media types over the Net.
For many, the first priority is access to the basic unit of consumption in America. "Whoever gets to the household first will win," said Kathie Hackler, an analyst with market researcher Dataquest.
That makes AT&T (NYSE:T) the king of the broadband hill. Now that it's added the vast cable networks of Tele-Communications Inc. and MediaOne Group to its telephone and cellular holdings, AT&T can plug in to more U.S. households than any other provider.
"AT&T has a choice -- they can pick their ammunition -- when approaching a specific market area," Hackler said.
But AT&T isn't the only player with connections.
The pipeline players
Other telecommunications companies, such as Sprint Communications Corp. (NYSE:FON), MCI/Worldcom (Nasdaq:WCOM) and all the regional Bell operating companies, are capable of integrating broadband with their voice services.
Sprint, for example, recently announced the deployment in three major cities of its ION service. It's a package deal. For between $100 to $150 a month you get a full DSL (digital subscriber line) connection plus four telephone lines, each with unlimited calling and hours of long distance.
"It is not going to take us 10 years to get [to broadband leadership]," said Terri Morrow, vice president emerging markets for consumer services. "We are going to be first in integration."
All the cable companies are wired in, literally, to the broadband future, too. Time Warner (NYSE:TWX), Comcast, Cox Communications and Charter Communications are the biggest up and coming players. The smallest of these, Charter, the seventh largest cable provider held by software billionaire Paul Allen, may also be the most influential.
Allen a driving force
"Paul Allen has been in this position of trying to drive this business digital, and the others are listening," said John Ryan, chief analyst with RHK Inc., an industry research firm in South San Francisco, California.
Allen, who co-founded Microsoft, has been funding research to deliver faster and richer content to TVs as well as PCs, as part of a broader, self-proclaimed "wired world" philosophy.
With nearly complete coverage of U.S. households, digital satellite has a strong card to play as well. DirecTV, a division of Hughes Electronics Corp., has been pitching a service called DirecPC, which beams data into your PC.
Its rival, EchoStar Corp., which offers a similar Internet data service, has done deals with such interactive TV players such as TiVo Inc. to deliver video and data service to a set-top box.
However, satellite has a problem: It's great for delivering data, but sending it back isn't cost-effectively possible.
Content companies
But broadband is about more than the copper wire, coaxial cable or satellites beams that carry content. It's also about turning multimedia into bits, and the bits into fetching pieces of content. And that's why American Online Inc. (NYSE:AOL) has emerged as a major player.
It's renowned for its consumer-friendly packaging. "We bring the ability to bring it all together to make it engaging, fun and everything that people want, " said George Vradenburg, senior vice president of global and strategic policy for AOL. "People don't buy technology, they don't buy a cable line or an ADSL line; they buy services."
Unlike AT&T, AOL doesn't own the connection between its service and its users. But it's working on that. It's at the forefront of an effort to force cable operators to open up their systems -- so that AOL could access TCI's cable systems in much the same way that MCI/Worldcom accesses AT&T phone lines.
Yet, cable companies have repeatedly pulled the plug on talks with AOL, leaving the Internet service provider looking for other options. It seems to have found at least one. Last week, the company announced plans to invest over $1.5 billion in satellite-TV provider DirecTV to start an Internet-over-satellite service.
For now, AOL has time to develop the infrastructure, said Vradenburg. "Narrowband will dominate broadband for quite a while. If you ask people if they want higher speed, they say yes. But if you ask them if they want to pay $20 more for it, many will say no."
Niche multimedia
Other content companies are holding strong hands, too. They include: Disney, which owns ABC, ESPN, and Infoseek; NBC, which has interests in MSNBC, CNBC and Snap; Sony Corp., with its Playstation game console and its Columbia Tri-Star and Sony Pictures movie studios; and Yahoo! Inc., which recently bought Broadcast.com.
Then again, the networks and production studios can't count on simply delivering their broadcast, as is, over the Net. "Companies are going to be sorely, sorely disappointed if they think things are going that way," said Ross Rubin, vice president of multimedia market watcher Jupiter Communications Inc.
RHK analyst Ryan thinks broadband will require multimedia content, tailored to niche audiences. "Everyone is divided up into a huge number of communities depending on nationality, race, gender, interests and location. We feel there will be a huge proliferation, an explosion of content, for those groups."
The technology enablers
Developing the technologies to deliver such content has put Microsoft (Nasdaq:MSFT) and Intel (Nasdaq:INTC) in the running as well. Microsoft has been making high-profile investments in cable companies such as Comcast and technology providers such as WebTV Networks Inc. For its part, Intel has been more subtly working behind the scenes.
"We don't care if its cable; we don't care if its phone. Broadband is a good thing for all of us," said William Giles, a spokesman for the Intel Architecture Labs.
The PC chip maker has been a strong proponent of the easy-to-install G.lite specification, which became a standard after it passed the International Telecommunications Union last week, and DOCSIS, a specification for making next-generation cable boxes work with each other. In addition, Intel has a technology called Intercast that enables data to be transported as part of analog and digital video streams.
Little guys
While the behemoths have a decided edge in the race for broadband hegemony, they don't have a lock on it. It's still early enough for a small player to nab a stake and grow with it.
That means the door is open for any dark horse that can figure out the right keys to consumers' hearts. Smaller companies, such as ReplayTV Networks Inc., are well placed to make a difference. Replay makes a system that allows you to store TV programs on a hard drive, providing what may well be an interim step to pure video on demand.
"By adding computer power and digital storage, they are giving the consumer incrementally more power over video," said RHK's Ryan. "It is not quite video on demand, but it takes us further along the path than we have been before."
See Also:
Compaq launches own Net service
Meanwhile, Gateway eyes EarthLink
Company Finder:
Sprint Communications Corp.
AT&T
NBC Inc.
Tele-Communications, Inc.
Yahoo! Inc.
Broadcast.com
Hughes Electronics Corporation
MediaOne
Cox Communications, Inc.
Jupiter Communications
WebTV Networks, Inc.
TiVo Inc.
Charter Communications
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