@Home raises portal stakes

It was not a major media company, but rather a high-speed Internet access provider that caused the latest shakeup in the Web landscape.

Today @Home became the latest player to buy a Web portal. The company announced it would acquire Excite for $6.7 billion in stock, giving its high-speed cable modem access service a more popular face and brand.

Though the move represented the first of its kind for an access provider to buy a Web portal, it comes amid increasing moves toward consolidation in the Web content and aggregation space. A handful of portals have joined forces with either major offline media companies or other players of late, and many analysts and observers do not anticipate consolidation to end here.

In a report released at the end of 1998, International Data Corporation analyst Frank Gens made a series of predictions regarding the portal space in 1999, including the likelihood that major offline media companies Time Warner and CBS would take a stake in a major Web portals such as Yahoo.

Right now, with broadband access becoming more and more of a reality for consumers, the push has become offering that high-speed Internet access to users with the home page interface and services to which they have grown accustomed. However, with another change in the portal space taking place, as major offline brands also are teaming up with portals, the goal du jour seems to be offering users popular original content--such as with Disney and Infoseek's joint Go Network--along with services such as free email, all wrapped up in one package sent to users via high-speed connections through either cable modems or digital subscriber lines (DSL).

Last week, America Online and Bell Atlantic signed a deal to provide AOL's proprietary content via DSL. NBC and News.com publisher CNET: The Computer Network today unveiled a version of its Snap portal, called "Cyclone," for users with high-speed access.

Likewise, streaming multimedia provider RealNetworks joined forces with @Home last week to create a new standard for the delivery of audio and video clips over broadband networks.

Gartner Group analyst Mike West said @Home's deal with Excite will not necessarily spark a significant spike in cable modem subscribers.

"I don't see this as necessarily booming the sale of cable modems," he said. "Is there anything about Excite that is so exciting to go out and buy a cable modem for it?" he said.

Instead, he said, the deal becomes one in a series of announcements between portals and broadband providers that bring high-speed access closer to home for consumers. The acquisition also potentially could serve as a catalyst for a further blurring of the lines between television and the Web.

"I think this is moving past email and moving past browsing and moving into interactive media," West said. "All of these deal together are a catalyst for broadband solutions."

Broadband validation?
Broadband Internet access appears to be gaining momentum as content companies continue to team with access providers to make certain they are not left behind by the high-speed revolution.

In addition to the recent content deals, analysts are pleased with @Home's subscriber growth, as well as that of chief competitor Road Runner. Combined, the two companies reach more than 500,000 users, and many analysts expect those numbers to balloon over the next two years as standards-based cable modems reach the retail market.

But deployment and marketing remain the largest challenges facing the growth of broadband.

Many potential customers still cannot access cable modem or DSL services because they do not live in areas where the networks have been upgraded.

About 45 percent of U.S. cable systems have been upgraded to the two-way cable necessary to carry high-speed Internet services, according to Anthony Stoss, a technology analyst at Southeast Research Partners, a boutique investment banking firm.

DSL faces similar limitations in all but the largest of metropolitan areas. Moreover, until SBC Communications recently cut the price on its DSL offering, many analysts said the cost of DSL hamstrung the broadband technology with consumers.

Broadband companies must also focus on marketing the service to users.

"How are you going to convince [users] this is something they need, want, and will want to pay more for?" said Yankee Group DSL senior analyst Michele Pelino.

@Home and Excite need to develop and encourage others to make interesting content to entice the average user to pay more for a broadband service, she said.

However, as West noted, this deal and others do not guarantee adoption of cable access services by consumers.

Two to go?
In the aftermath of today's acquisition, all eyes are focusing heavily on whether the remaining independent portal giants--Yahoo and Lycos--will become the next companies to fall into the hands of a larger, wealthier suitor.

"I think [Lycos chief executive] Bob Davis has a really big smile on his face right now, seeing the valuation that Excite received," said Jupiter Communications analyst Patrick Keane. "Lycos is definitely in a pretty keen position to partner with a number of players."