PointCast, telco deal in the works?

Sources said such a plan is under consideration, but no deal has been completed. It calls for telcos, including BellSouth, to invest in PointCast and use the company's push technology and content partnerships to help the industry offer high-speed Net access known as DSL.

DSL, short for digital subscriber lines, represents the Bells' strategy for providing Net access to compete with cable, led by providers such as @Home, Time Warner, and MediaOne's Road Runner.

PointCast chief executive David Dorman would head the DSL effort, returning him to the telephone industry if the deal is completed. Before coming to PointCast, Dorman held senior management positions at SBC Communications, Pacific Bell, and Sprint. Since he joined PointCast, Dorman has recruited former telco executives, including Bob Sofman, senior vice president of marketing and business development.

The joint venture with a telco or a consortium of telcos could give Dorman another shot at taking a company public, one of his stated goals in departing the Bell world for PointCast.

PointCast declined comment.

As reported, BellSouth has surfaced as a leading candidate to buy PointCast, which has been seeking a strategic partner since it canceled its IPO plans in July. Other major telcos also have expressed an interest in PointCast.

Among the telcos, US West, Bell Atlantic, and SBC all have been at the forefront of rolling out DSL. GTE also is a leading DSL provider among the telcos.

News of the plan came on the same day that five of the biggest local telephone companies, led by BellSouth, joined with Compaq, Microsoft, Intel, and Gateway to petition the Federal Communications Commission for new rules governing Net access. It is another example of the telcos' push into high-speed Net access.

Many analysts liked the idea of PointCast teaming up with the telephone companies to help provide high-speed Net access.

"Everybody looks at America Online and @Home and drools at the concept of partnering content plus access," said Ron Rappaport, an analyst at Zona Research.

Added Michele Pelino, an analyst with Yankee Group, a high-tech consulting firm: "[Such a partnership] would be a solid way to strengthen the [telcos'] content, which is lacking right now. The Bells aren't making any alliance for content, but the cable companies have the content to back up broadband."

As competition lowers profit margins in the voice business, telcos need to find a niche in the data market to offset those declines, said Ford Cavallari, vice president of Renaissance Worldwide, an industry consulting firm.

BellSouth is a prime candidate to lead the effort, too, he added. "They're sort of the bachelor of the Bells right now," having been left out of the recent spate of mergers, he said. "They are most primed to move quickly."

Some analysts dismissed the plan. "It's so far out of the range of their competency that I don't see it happening," said Abhi Chaki, an analyst with Jupiter Communications. "This is not what the Bells want to get into."

Cable television giants led by Tele-Communications Incorporated, Comcast, and Cox Cable have invested in @Home, which provides Net access via cable networks. @Home has grown from a start-up into a highly successful public company with more than 200,000 subscribers as of last quarter.

@Home's chief executive is Tom Jermoluk, a former chief operating officer of Silicon Graphics. But sources said Dorman also had been a candidate to lead @Home, a sign that the executive has been interested in the potential for a content-access combination for some time.

PointCast's technology previously has been criticized as a bandwidth hog, which left many corporate network managers reluctant to install the push product. But DSL technology, which provides downloads at speeds of up 1.5 Mbps, would alleviate those concerns. DSL has been touted as a cheaper alternative to T1 lines for small and medium-sized businesses. @Home has a business called @Work, aimed at the small to medium-sized business market.