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AT&T sets sights on ASP market

The fast-changing long-distance giant is about to latch on to one of the Internet's hottest trends: the budding rent-an-application market.

AT&T is about to latch on to one of the Internet's hottest trends: the budding rent-an-application market.

The long-distance giant plans to announce a broad new campaign Thursday aimed at establishing AT&T as the infrastructure provider of choice for the young application service provider (ASP) market, according to people familiar with the company's plans.

Under a strategy tentatively dubbed "Ecosystem for ASPs," AT&T aims to have these online software providers essentially serve as resellers of Ma Bell's network-based services, such as data storage or Web site hosting, the people said. The thinking is that an ASP is welcome to utilize the giant's technology as long as its bits fill up AT&T's network.

The services could then be co-marketed by AT&T and the ASP partner.

New York-based AT&T declined to comment.

The new effort marks the latest step in AT&T's campaign to reinvent itself as an Internet-focused network provider, rather than a long-distance telephone company. Its acquisitions of high-speed cable TV networks have moved toward this goal on the consumer side, but the company also has consistently added new network features and outsourcing services aimed at Net businesses over the last year.

The ASP, or "rent-an-app," market is still in its very early stages, but analysts expect it to take off as businesses adjust to the notion of outsourcing their software needs. Established firms such as Compaq and Microsoft have already given their nod to the idea, investing hundreds of millions of dollars in the budding industry.

Market research firm Dataquest recently forecast that the ASP market would be worth nearly $23 billion by 2003.

Under the ASP model, businesses contract with an outside firm for a piece of software such as Microsoft Word, and employees download the application or access it over a fast network connection as needed. The model requires bandwidth and network services galore--and that's where AT&T comes in.

"The big gating factor for ASPs is (network) capacity," said Joshua Greenbaum, an industry analyst who heads Enterprise Applications Consulting in Berkeley, Calif. "A lot of these firms are starting more as marketing companies than as actual infrastructure companies."

By contrast, companies such as AT&T have considerable bandwidth to spare on their networks, and have every interest in setting an early footprint in an industry that will likely be a enormous customer down the road, analysts say.

"It makes a lot of sense for AT&T or anyone with a capacity," Greenbaum said. "These guys have tremendous capacity they can leverage this way for this model."

The company gave its Web hosting division a shot in the arm late last year, pledging to build 26 new data centers around the country. That put it on the same trajectory as Web hosting leaders like Global Crossing's GlobalCenter and Exodus Communications.

AT&T will build on its existing Internet assets with a few new and nearly new elements in its package. Sources say that it will include expanded data storage and content distribution technology in the offerings. The company touted plans for its "intelligent" content delivery system last September, but had not yet settled on a partner to provide the underlying service.

AT&T also would likely create a fund that ASP partners would be able to tap into for marketing purposes, the people familiar with the matter said.

The new campaign is expected to be announced Thursday at the ComNet 2000 telecommunications industry trade show in Washington.