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Verizon invests in online game company

Stake in SCI, which hosts online games, is part of effort to build game portfolio and fill broadband pipes.

First the phone company went after TV, and now it's after online games. Verizon Communications is investing in new applications that will help its customers fill their broadband pipes.

On Monday, the company announced it has taken a minority stake in Super Computer International (SCI), a company that hosts online games for multiplayer video-game developers and publishers, such Microsoft and Sony.

Verizon and SCI have been working together since last year, when Verizon introduced its Verizon Game Network (VGN), a video game messenger application that lets users easily join one another online to play interactive games. The service, which costs $7.95 per month, allows subscribers to create their own private servers and invite other players to play with them. Players can also track statistics for games they play and chat with friends using voice over IP technology.

Now that Verizon has invested in SCI, the companies will jointly develop Verizon's next-generation online game browser called PlayLinc. This new platform will give gamers more control over their multiplayer game interactions, a richer set of social-networking tools and a wider variety of gaming experiences, Verizon said.

For example, Verizon and SCI will work with AOL to make it easier for PlayLinc players to find buddies on AIM, according to Mitch Dornich, product development manager for Verizon Games Services. The PlayLinc browser and communications platform will begin beta tests in June. PlayLinc is being demonstrated to members of the media at the massive Electronic Entertainment Expo, or E3, an annual game trade show that takes place in Los Angeles this week.

"When we first got into the gaming market, we came out with a 'me-too' product that wasn't very differentiated from our competitors' products," he said. "Now we're working with SCI to maximize the network assets we both have to take full advantage of the technology."

While it may seem strange that Verizon, born out of the 100-year telephone industry, would get into online games, it actually fits well into the company's strategy. As Verizon loses its traditional local-access telephone lines at a rapid pace, the company has been focusing on growing other parts of its business, particularly broadband.

Verizon has already spent billions of dollars upgrading its access network with fiber optic cables that reach from its central offices directly to the sides of homes. The new Fios network, which was available to 3 million homes and businesses at the end of 2005, will provide virtually limitless bandwidth. Now the company is looking to sell applications to customers, so they can fill these pipes. In addition to building an online game network, the company is offering a paid TV service.

"We need to give consumers a reason to subscribe to Verizon broadband," Dornich said. "And online gaming highlights the value of a high-speed connection."

Verizon made its first foray into online gaming in September when it launched the Verizon Games Service, which included the Verizon Game Network, a service developed for serious gamers, and Verizon Games on Demand, a service for casual gamers that allowed them to rent or buy games.

While Verizon will continue to service the casual gamer, the real money seems to be with serious players. Verizon sees this 18- to 34- year-old male demographic as early adopters of new services and valuable customers, because they are more likely to buy expensive services.

"Serious gamers are already making significant investments in communications equipment and services," said Bobbie Henson, a spokeswoman for Verizon. "They are the ones that are really interested in our Fios service, because they are the ones who get a specific benefit from the high speeds the fiber network offers."