As previously reported by CNET News.com, Gateway is positioning the appliance as part of its "connected home" concept, and AOL will fit the device into its "AOL Anywhere" strategy. The companies had planned to unveil the Web appliance at next week's Comdex trade show but moved the announcement up to Friday.
Along with the Touch Pad, Gateway unveiled another product for the connected home--the Connected Music Player. The device, which plays MP3 files, looks like a stereo system component but connects to a PC.
Gateway won't start taking orders for either device until December, but it plans to have them on display at its Country Store retail outlets later this month.
Built around a 10-inch LCD display, the $599 Touch Pad is designed to sit on a kitchen counter, table or desk. And, unlike a PC, it is intended to be used strictly for access to the Internet or email. Gateway provides the hardware, while AOL is responsible for the software, called Instant AOL, and Internet access.
In the future, the Touch Pad could become a vehicle for broadband connections and streamed entertainment.
"There's no question that we see a great opportunity partnering with the cable companies and enhancing the capabilities inside the house to make a lot of the things that they want to do more attractive," Gateway CEO Jeff Weitzen said.
Compaq Computer and Microsoft beat Gateway and AOL to market with the iPaq home Internet appliance, but the latter two are hoping that niceties such as a touch screen with large icons will give them an edge.
Gadgetry alone, however, won't necessarily translate into strong sales. In recent years, a number of computer makers and other companies have toyed with variations on this theme, without sparking a fire among consumers.
"I am hesitant on this whole concept, as other people have been there and haven't made a lot of inroads thus far," said Gartner analyst Kevin Knox. "The Gateway appliance, with the exclusion of including AOL, isn't going to make that much of a difference."
Steadily falling PC prices dilute the argument for a strictly Web-access device, Knox said. If the Web appliance cost much less, on the order of $200 or even $300, rather than about $600, the appeal might be much larger, he said.
"The challenge for Gateway is they have to subsidize the hardware somewhere, whereas AOL and some of the other software providers--it's a good move for them," Knox said. "I don't know if they can sell enough of these things to justify the production cost."
The Touch Pad differs from the Compaq-Microsoft appliance in several ways. Rather than running a flavor of the Windows operating system, Gateway and AOL chose Mobile Linux. The device also uses Transmeta's Crusoe processor and Netscape's Gecko engine for Web browsing. The Instant AOL graphical user interface features AOL 6.0 rather than Microsoft's MSN service.
AOL sees the new devices opening the way for a change in consumers' computing habits.
AOL, Gateway reveal new Web appliance
Jeff Kimball, executive director, AOL Client and Services
Schuler said that among AOL's 25 million subscribers, two people per household use the company's service, but only 25 percent of subscribers' homes have more than one computer.
"They're ready for their second computer," Schuler said. "It's not unlike where television was in the '50s and '60s." He likened the Web appliance to the second, smaller television set that consumers placed in a bedroom to complement the larger model in the living room.
Like Compaq's iPaq, the Touch Pad features a wireless keyboard, augmenting the touch screen, which can be activated by stylus or finger.
Gateway is positioning the Touch Pad as the first in a series of products focused on the connected home, a concept it will promote through its more than 300 Country Stores. The Touch Pad features Home Phoneline Networking Alliance (HomePNA) 2.0 chipsets from Broadcom, which let consumers link devices in a network over a telephone line.
San Diego-based Gateway has quietly included the HomePNA chipsets in Performance and Select PCs shipped for about the past five weeks. The company plans to market a number of products with HomePNA, including other consumer electronic devices.
Gateway chief executive Jeff Weitzen summed up the announcement for the New York audience: "One, we're simplifying technology. Two, we're bringing the power of the Internet literally to every room of the house."
He added that consumers will be able to share content in ways most could not have imagined, simply "by plugging into your existing telephone lines."
Both the music player and Touch Pad feature HomePNA, with the latter requiring the technology to take advantage of high-speed, or broadband, connections such as those available with DSL and cable modem. The Touch Pad comes with a modem for connecting to the Internet but must be networked over a phone line with a PC to take advantage of broadband.
Gateway isn't the first company pushing phone-line networking. Compaq has been offering the option on some consumer Presario PCs for some time. Rival Dell Computer sells a digital music device that, like Gateway's, uses a phone line to connect to a PC.
While Sonicblue (formerly S3) provides the technology used in Dell's music player, Gateway partnered with Voyetra Turtle Beach. In mid-December, Voyetra Turtle Beach will start selling a retail version of the music player under the AudioTron brand.
Gateway is gambling that the relationship with Broadcom will put phone-line networks in a number of other consumer electronic devices, which could then be hooked together or linked to a PC, to give it an edge over rivals.
Next year, Gateway plans to introduce Broadcom adapters and Gateway middleware for television sets, stereos and other consumer electronic devices, allowing them to connect to a PC. The PC maker is also readying a wireless device jointly developed by AOL and Gateway and powered by Transmeta's Crusoe processor that will provide instant-on Internet access and untethered movement from room to room, Weitzen said.
In addition, Gateway is working on telephony products to give each phone in a home a unique Internet address, allowing phone-to-phone intercom capabilities using a single phone line, Weitzen said.
The Gateway chief executive emphasized that this technology "isn't science fiction" and that products are in the final stages of development, due to reach the market by the middle of 2000.
Gateway will begin taking orders for the Touch Pad and for the $299 Connected Music Player Dec. 1 and will begin shipping the devices Dec. 15.