AT&T makes new Net hosting bid

As reported earlier, Ma Bell is aiming to partner with smaller application service providers (ASPs) in hopes of capturing the lion's share of their network traffic and boosting use of its own network services. The company said it would spend $250 million on infrastructure supporting the new companies.

The ASP model is aimed at allowing customers to download software on demand, or to access it over a network, instead of keeping applications on individual computers' hard drives. While the market is still in its infancy, analysts predict it will take off quickly as high-speed Internet connections become more widely used.

Market research firm Dataquest recently forecast that the ASP market would be worth nearly $23 billion by 2003. That's music to AT&T, which sees dollar signs in this kind of radically increased use of network capacity.

"This (campaign) is a natural extension for AT&T," said Harry Tse, an industry analyst with the Yankee Group. "They need to try to find a way to get this network traffic onto their own (layout)."

AT&T has launched efforts on a number of fronts in the last two years aimed at recasting its traditional business as a high-tech, Internet-focused networking company. On the consumer side, its purchase of high-speed cable TV networks has given it local Net access, while on the business side it has rolled out a suite of new services aimed at supporting high-tech companies.

Today's campaign, unveiled at the ComNet 2000 trade show in Washington, D.C., builds on the work that was announced earlier by Ma Bell's Web hosting division. Already it has committed to building 26 sprawling new data hosting centers around the world.

The next step is to persuade companies to use the networks connecting these data centers and their offices as a more vital piece of everyday business--and the ASP model fits this goal perfectly.

"We see this as one of the core elements (of our business)," said AT&T Data and Internet Services president Kathleen Earley. "We see this as part of a profound statement to serve many customers across many markets."

The company is building an "intelligent content distribution" capability into its networks, using caching and traffic-direction technology aimed at speeding downloads of Web pages and hosted applications. Along with advances from AT&T Labs, this feature will draw on technology from InfoLibria, Inktomi and Novell.

The company also is partnering with Sun Microsystems, EMC, IBM and Cisco Systems for hardware boosting the capabilities of its data storage centers, it said.

During the first quarter of 2000, the company is also kicking off a co-marketing campaign with individual applications service providers that will allow the outside companies to resell AT&T network services as a part of their own advertised packages.

But some analysts say that AT&T may ultimately try to capture part of this market for itself, rather than leaving it to smaller partners.

"I believe that AT&T might eventually want to move upstream, and try to take on a part of the applications service provider responsibility as well," Tse said.

But Earley denied any intention of competing with companies that provide applications other than communications services such as Internet voice calls, fax and messaging.

"If you think of that as an ASP, then yes, you could think of AT&T as an ASP going forward," she said. "But AT&T has no desire or core competency to become an applications service provider for what are thought of as more traditional applications."