Broadband game just beginning

It's been a tough game of Takeover Twister for MediaOne and its suitors. Now that the game is done and everybody's won, what does it mean?
Written by Michael Fitzgerald, Contributor and  Margaret Kane, Contributor

For starters, broadband Internet access for most consumers remains years away. But it should trigger quicker deployment, particularly in America where local phone companies will have to respond, than if AT&T Corp. hadn't made its broadband play

"This deal is probably a tremendous stimulus for accelerated deployment of DSL," said Frank Dzubeck, president of Communication Networks Architects, a Washington consultancy. DSL, or Digital Subscriber Line, is a high-bandwidth technology that runs over existing telephone lines. Dzubeck said that regional Bell operating companies in America were the only big losers in the deal, since AT&T can use cable lines to deliver local phone service.

That much is clear from the convoluted deal, which saw AT&T trump Comcast Corp.'s bid for Media One, only to have Microsoft Corp. and America Online Inc. hint that they might step in as white knights. Thursday's deal should please most of these parties, as Comcast gains some 5 million subscribers from Media One's lists, Microsoft gets a British cable company in addition to its Windows CE guarantee from AT&T, and AT&T expands its local telephone market.

But don't expect to see high-bandwidth providers knocking on your door tomorrow. Analysts say that while AT&T intends to roll out combined voice/data/video service packs to consumers in the year 2000, there's no guarantee that it will be for large chunks of the market. "I don't think it will have any impact real fast," said Van Baker, an analyst at International Data Corp. "We're very much in a position in cable where it's experiment time. Nobody knows what will stick with consumers." In that regard, Baker thinks that e-mail is the only no-brainer, though he allowed that e-commerce may have merit.

The deal will also have plenty of time to unfold, since even with accelerated broadband deployment, "the real benefits won't appear for the vast majority of people for the next four or five years," according to Craig Mathias, principal at Farpoint Communications, in the US.

That will leave plenty of time to answer a number of questions, such as Microsoft's motivation. Some observers wonder why the software maker would spend $5bn (£3bn) for a non-exclusive deal for a set-top box operating system. Some expect that Microsoft will ultimately leverage this deal into some most-favoured-nation status on AT&T's access side, though AT&T Chairman and CEO C. Michael Armstrong insisted Thursday that AT&T will keep things open.

While AT&T has bet more than $120bn on cable technology -- through the combined purchases of Tele-Communications Inc. and MediaOne -- it remains unclear whether the investments will ultimately pay off.

Besides DSL, satellite and wireless technologies will vie for share in the broadband market, analysts say. But no one doubts that broadband -- as the MediaOne tagline says -- "is the way."

"Anybody who's had exposure to broadband wants it," said Mathias.

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