PC-telco deal shows brands' power

What's in a name? If you're Microsoft, Intel, or Compaq, that's enough to jump-start exotic technologies that have yet to prove themselves.

Jeff Pelline Staff Writer, CNET News.com
Jeff Pelline is editor of CNET News.com. Jeff promises to buy a Toyota Prius once hybrid cars are allowed in the carpool lane with solo drivers.
Jeff Pelline
4 min read
What's in a name? If you're a company such as Microsoft, Intel, or Compaq Computer, that's enough to jump-start exotic technologies that have yet to prove themselves to the masses or generate any profits.

That is precisely what happened today with word that these computer industry heavyweights were teaming up with telephone Infographic: Where the rollouts are companies to provide high-speed Net access over phone lines. The group wants to have modems and software on store shelves by Christmas.

The nascent technology--known as DSL, or digital subscriber lines--is not new within the industry. Dozens of companies, including giant telcos, have been testing it and rolling it out, albeit with some technical and marketing glitches.

But news of Microsoft, Intel, and Compaq forging a DSL "consortium," even before any announcement, suddenly has started a new buzz about DSL--owing to the power of brand recognition.

It is the telephone companies, in fact, that will provide the service, or the actual "pipe" through which information will flow. Companies such as Microsoft and Intel are competing to become customers of such telcos as US West, Ameritech and Pacific Bell--not the other way around.

"Every time Microsoft puts its name in a business, it shifts the Earth," said Benjamin Berry, vice president of marketing for DSL provider Amati, which recently was bought by Texas Instruments.

"Their names are big," which builds marketing hype, added Ross Rubin, an analyst with Jupiter Communications. "It's good these computing giants are pressuring the telecos to reach some consensus on DSL standards," he said, but they can't do much about pricing and service, the cornerstones of obtaining widespead consumer acceptance.

When it comes to technologies such as DSL or cable modems, Microsoft and Intel actually appear How real is DSL?to be hedging their bets, trying to make sure they back the winner--or don't back the loser. Last year, for example, Microsoft touted cable modems through its $1 billion investment in Comcast. This year, Microsoft chief executive Bill Gates made the New Year's prediction that DSL would make a big splash, with no mention of cable modems.

"They're working both industries," said Bob Wilkes, an analyst with Brown Brothers Harriman.

Regardless of where it surfaces, the power of Microsoft's and Intel's involvement is proving magical. Analysts say their brand name and "mind share" are golden, while the telephone companies are saddled by a lingering perception that they lack efficiency and marketing savvy. Their shortcomings in rolling out ISDN, the predecessor to DSL in high-speed Net access over phone lines, is a classic example.

"It's going to be important for the Baby Bells to get something that's easy to use and reasonably priced," Wilkes said. "The Achille's heel of ISDN has been costly installation."

The Microsoft-Intel alliance has also helped revive the moribund cable television industry. Last June, Microsoft announced its $1 billion investment in Comcast, one of the nation's largest cable TV providers. Gates said the deal would help accelerate the roll-out of cable Net access in "millions of homes"--and ensure Microsoft's participation in that business.

More recently, the software giant has been striking deals with other cable TV giants such as Tele-Communications Incorporated to provide software for the ballyhooed convergence of PCs and TVs.

Microsoft's participation has been a boon to the cable TV industry, lifting its depressed stock price on hopes that it will generate new profits from Net access and interactive television. Many of the cable stocks are trading at or near 52-week highs.

@Home, which provides high-speed Net access via cable lines, last November welcomed Microsoft into the fold, despite a previous agreement with its archrival Netscape Communications. According to @Home chief executive Tom Jermoluk, Windows NT was a "notable solution" to its service for businesses, dubbed @Work, though it continues to work with Netscape.

The power of the Microsoft-Intel juggernaut extends to other technologies aimed at ending the "World Wide Wait" as well. On Monday, for example, Intel announced the launch of a Web-caching system dubbed "Quick Web" that speeds the delivery of Web pages to users' desktops.

Here again, the technology is not new. A laundry list of companies have similar technologies, including Netscape, Cisco Systems, and Novell, as well as dozens of smaller ones.

But Intel's involvement has caused a stir, not only among competitors who worry about its clout, but among Web publishers who worry that the explosion of such technology may hinder their ability to deliver the most current information to users, as well as accurately measure how many surfers visit their sites. (Intel denied this.)

In the end, the goals of both Intel and Microsoft are the same: The more people come to the Web because it's faster and more user friendly, the more chips and software they sell. "Microsoft thinks bandwidth is a key issue whether the pipeline be DSL or cable modems," said a Microsoft spokeswoman. "We're looking into all types of initiatives to encourage rapid deployment of high bandwidth solutions."

The telco and cable industries, meanwhile, don't mind going along for the ride. "We are interested in working with whoever we can to make DSL widely available," said an Ameritech spokeswoman.

(Intel is an investor in CNET: The Computer Network.)

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