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ISPs: Content vs. connections

Large Internet access companies are trying hard to be all things to all customers. Analysts say that may be a big mistake.

Internet access companies like America Online (AOL) and CompuServe (CSRV) have been trying hard to be all things to all customers.

And that's a strategic mistake that could cost them a lot of business, concludes Kate Delhagen, an analyst at Forrester Research, who wrote a recent study based on interviews of 400 online consumers.

Netizens are getting increasingly picky about the service and content they get on the Net. That means when they get upset over problems such as email outages and connectivity problems, they often pack up and move on to the next ISP.

So instead of trying to give customers both content and their connectivity, Delhagen says, ISPs should specialize and form joint ventures, with each partner focusing on its specialty.

"The whole trend is to stick to your strengths," Delhagen said. "If you're going to do great content, do great content. Don't get distracted by other stuff."

In the future, telephone, cable, and large connection companies will rule the connectivity race because they'll have the network backbone, she said. Today's announcement that GTE (GTE) is buying BBN (BBN) fits in perfectly with that strategy.

GTE clearly bought the property to "build a rock-solid, reliable network and make access their backbone," Delhagen said.

It was a smart move and the kind of deal that will probably be repeated as the Internet industry matures enough to make it prohibitive for young players to enter the market. But while new players have the ability to innovate quickly, they also make mistakes.

And as more people jump onto the Internet expecting smooth sailing, they won't put up with those mistakes. That's why companies like AOL, which is focusing its efforts simultaneously on content and much-criticized connectivity, should be looking at forming partnerships with companies whose primary missions are to provide great connections.

"AOL is trying to straddle these two very fast-moving worlds," Delhagen said. "They're simply not able to keep up. We're saying pick one. They need to pick one if they're going to survive."