Thursday January 21 1:22 AM ET
Nettrends: New Wave Of Internet Access Sparks Mergers
By Dick Satran
SAN FRANCISCO (Reuters) - Excite Inc (Nasdaq:XCIT - news) is one of the most visited sites on the Web -- and AtHome Corp. boasts super-fast Internet connections. Their high-powered combination should be, as they say, ''the new media network for the 21st century.''
But other big players will have something to say about what happens
next, most notably the giant that lurked in the shadows behind AtHome
Corp.: telephone behemoth AT&T Corp. (NYSE:T - news) After it wraps up
its proposed merger with cable television giant Tele-Communications Inc. (Nasdaq:LBTYA - news), AT&T becomes AtHome's largest shareholder.
In the acts to follow, other big names will step onto the stage, and
borrow from the same script, looking for a way to combine powerful new
Internet connections about to reach consumers' homes with well-known
brand names.
Lycos Inc. (Nasdaq:LCOS - news), the last search engine-portal company
not spoken for, jumped on speculation it would be next to go. It soared $25.06 to $112.94, in heavy Nasdaq trading, on speculation that a telecommunications player with a high-speed Internet unit will buy it.
In a sense, all of the players are gunning for America Online Inc.
(NYSE:AOL - news), the online service that did it all, putting Internet connectivity, a community of AOL-loyal users and a sea of content under one roof. With over 14 million users, it's the biggest Internet service provider by far, and has a commanding presence in the emerging e-commerce sector.
Now, though, with a new generation of high-speed Internet services
coming from telephone companies and cable modem companies like AtHome,
there is an opening. The service providers are moving fast to pair up
with content-rich search engines so that they can put a ''face'' on
their wires, which all tend to look alike.
''It's a fairly old business model where the access provider dresses up the service with compelling content -- it's called an online service,'' said Ron Rappaport of Zona Research.
But think ''online service on steroids,'' or think of television as it started to become color television. ''It was a lot easier to sell shirts in color than in black and white,'' said Zona's Rappaport.
''With broadband (high-speed Internet access) it becomes faster and
easier to sell things over the Internet'' said Halsey Minor, chief
executive officer of CNet Inc., whose Snap online service launched a
high-speed venture with its partner, General Electric Co.'s NBC network, and a long list of telephone companies.
A number of service and content providers are getting the same idea at
the same time, with an increasing number of players launching
online-type services that wed high-speed Internet connections to Web
sites. America Online itself has launched such a service with Bell
Atlantic Corp. (NYSE:BEL - news)
''Before, we had to convince people that broadband was actually going to become a reality,'' said Minor in an interview. ''Now, people are pretty convinced that it's the case.''
The high-speed connections are now the fastest-growing segment of the
Internet, and the pace is starting to pick up, with regional telephone
companies becoming more aggressive players and cable modem finally
building an installed base.
That makes a host of new applications that simply weren't possible
becoming viable almost over night, said Minor. He cites as a key example the downloadable music format known as MP3, which sends music over the Internet.
Web surfers who had to wait hours to get recordings delivered that way
over the widely used 56-kilobit-per-second modems will get them at least 10 times as fast now over the digital subscriber lines, or DSL's, that telephone companies are offering.
On the Snap search engine that Minor's CNet operates, MP3 and music show up as one of the top five search requests. Snap will start to offer its ''Cyclone'' service to high-speed Internet users, so it can spit bits of multimedia files at users who make such requests. One of the content providers to the Snap high-speed service is a ''digital radio station'' that lets users listen to music, make orders online and receive the recording as an immediate download.
''There's already huge demand out there for that information -- and it's going to grow with high-speed ordering and delivery,'' Minor said.
Minor's Cyclone is just one of the groups racing after the prize --
Microsoft Corp. (Nasdaq:MSFT - news) is working on high-speed access
plans, partly with its Web TV unit, as are a number of regional
telephone providers.
AOL has the installed base so important in the software business. But
AOL hasn't been acting the behemoth lately, mostly because it's been
hearing AT&T's footsteps on its turf.
The growing rivalry has ranged from the comical -- as in AOL's lawsuit
trying to stop AT&T from using the expression ''You Have Mail'' in its
WorldNet Internet service -- to the far more serious, the claim that
AT&T, as a historic common carrier, will monopolize Web access with its new AtHome/TCI cable modem service.
Some see the AtHome and Excite deal as another factor heating up the
looming war between AT&T and AOL, citing AT&T's previous failed attempts to start an online service, Interchange, which competed with AOL, and then making an offer to buy AOL.
''AT&T is the godfather at the shotgun wedding of AtHome and Excite,''
said Zona's Rappaport. ''AT&T needed this because of its failure to
build a viable Internet service. So it was forced to buy.'' |
