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Meeting ISPs at the intersection

As networking companies enter the consumer market, they're finding that the quickest way to the home may be through the ISP.

In their efforts to move into the consumer market, some networking hardware companies are finding that their fastest way into the hearts--and wallets--of consumers is through their Internet service providers.

And ISPs are only too happy to cooperate with their newfound hardware partners. From "We don't make money off the hardware. We make money off the
service."
--Mike Kallet, senior vice president, Netcom their perspective, bundling modems and other equipment with Internet services makes getting wired an easier, cheaper, and more painless experience for the consumer.

"We sell a solution, not just the technology," said Mike Kallet, senior vice president of products and services with Netcom. "Access, software, hardware, value-added services--it's a more cost-effective way, and a simpler way, to buy and sell."

Netcom's solution-driven strategy currently applies primarily to its business customers, to which it provides a router from Cisco Systems along with a dedicated access line. But plans are under way to start treating individual customers the same way.

In the next few months, Netcom will start offering consumer services that bundle together access and hardware, including high-speed ISDN modems and digital subscriber line equipment. Consumers stand to save money with a bundled modem, Kallet said, not only because Netcom will procure the hardware in volume but because the company will not raise the price.

This approach is a model for the future, according to analysts, especially for companies targeting the lucrative small office/home office market. 3Com, for example, automatically bundles its adapter with every ISDN line PacBell sells or leases.

"There are millions of home office people out there for whom a complete solution Some networking hardware companies are taking an incentive approach with ISP
customers. would be very interesting," said analyst Jill Frankle of International Data Corporation. "It makes sense for Netcom. If they have a good partner in the hardware space, it could really close up some strong business for them."

Some networking hardware companies are taking an incentive approach with ISP customers. 3Com, for instance, offers a $50 rebate for its 56kbps modem for users of AT&T's WorldNet service.

"We don't make money off the hardware," Kallet said. "We make money off the service, and the discount gets passed through to the customer."

Gateway 2000 has taken the concept one step further this month by launching its own ISP. The Internet service comes preloaded on Gateway's G-series and Destination computers, along with an x2 modem from 3Com.

More consumer opportunity lies ahead for companies in the cable modem business. Currently, cable modems are bought and leased out to consumers by service providers, but @Home and Intel are collaborating on a specification that would bring the devices to the retail market. If and when that happens, @Home may consider bundling modems with its high-speed cable Internet service for home Internet users. (Intel is an investor in CNET: The Computer Network.)

"We're looking into it," @Home spokesman Matt Wolfrom said, "but it's too early to discuss any retail plans." @Home expects the cable modem specification to be finalized by early next year and a product to be on store shelves in the second half of the year.  

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