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The week in review: AOL's broadband imperative

Countering AT&T's winning the MediaOne sweepstakes and $5 billion from Microsoft, AOL signs set-top deals and moves on other "broadband" options.

On the heels of AT&T's winning the MediaOne sweepstakes and a $5 billion investment from Microsoft, dial-up hegemon America Online moved to develop other "broadband" options.

In the TV set-top box arena, a market that's expected to get rolling later this year, AOL announced partnerships with DirecTV, Hughes Network Systems, Philips Electronics, and Network Computer (NCI) to help develop AOL TV services. The agreements are intended to popularize interactive TV while extending AOL franchises.

AOL Anywhere
Television set-top box makers Scientific-Atlanta and General Instrument neared 52-week highs on the stock market amid the high-profile deals.

Meanwhile, with Microsoft now an AT&T ally, AOL is considering the Linux operating system as one option for running an inexpensive Internet access device, according to sources familiar with the project, and has approached Compaq as a possible manufacturer of a Linux-based AOL access device. AOL also is reportedly exploring satellite options, doing its best to get its brand and some version of its content onto every Net-connected consumer device possible, from televisions to PCs to wireless phones.

Established cable TV networks, widely expected to be the most popular high-speed route to the Net, are off limits to AOL and other dial-up Internet service providers, as leading Net-over-cable service @Home is controlled by Ma Bell.

Next up
Apple introduced Sherlock II, an upgraded search engine technology that may form the basis of the company's e-commerce strategy. The software culls the price and availability of products from designated Web sites and traces transactions and traffic, meaning Apple could conceivably receive a cut of any sale or charge a fee to companies listed on the service.

Also at its developers' conference, Apple announced two new high-end notebooks, but news that the company will stay the course with its Macintosh OS X operating system carries more long-term impact. The company has frequently changed its software strategy.

Star Wars fans tried to buy tickets to Phantom Menace via MovieFone, which conducts sales for several major theaters, but suffered through slowdowns and even periods when users couldn't get through.

Visa and MasterCard are turning to their member banks and major technology companies to revive SET, their secure transactions protocol, which has been sitting on the sidelines of the e-commerce boom.

It's over
USA Networks and Lycos agreed to end their proposed merger, thanks to resistance from Lycos shareholders. The two companies had agreed to combine Lycos with several USA Networks assets, including Ticketmaster Online-CitySearch, in a deal was valued at about $18 billion when first signed February 9. The Net company's shares jumped, but most observers expect Lycos will need to find another partner.

Ironically, Gateway made a $200 million investment in CMGI, an influential venture fund company that led the opposition to the Lycos-USA Networks deal. The move is part of the PC maker's plan to explore setting up new "collaborative" business ventures and strategic investments in Internet companies.

Sony Music will sell protected downloadable music from its extensive catalog of artists when Microsoft launches its Windows Media Technologies 4.0 this summer. More broadly, the duo will jointly promote software, music, and video products on the Web.

IBM chief executive Louis Gerstner said the world's largest computer maker gets $20 billion, or about a quarter of its annual revenue, from electronic business.

Nintendo will incorporate IBM PowerPC processors in its next generation of game consoles, due in the fall of 2000. That's bad news for MIPS Technologies, as seventy-five percent of its revenue, and most of its growth, comes from royalties from the chips used inside the current Nintendo 64 game consoles.

Next step
Waiting on antitrust approval, executives from Lucent Technologies and Ascend Communications are working on a strategy to implement their $22 billion merger. Broadband access devices and the corporate networking market are hot topics.

The Motley Fool's nearest competitors, and CBS MarketWatch, respectively quadrupled and tripled in their first days of trading, but the business and investment site plans to stay the course as a privately held company in an increasingly crowded field. Some analysts question why this well-aged service is not striking while the Internet IPO iron is hot.

Though some companies are dissatisfied with their IT outsourcing agreements, it's typically too costly and cumbersome to switch to a new provider, according to new research. Only 20 percent of the corporations surveyed over the past six months said they have considered not renewing agreements.

All gone
A little-understood predicament--with far-reaching consequences--is confronting Internet Corporation for Assigned Names and Numbers, the new nonprofit corporation in charge of the Net's administration. Some in the technical community fear that the rapid pace of innovation one day may cause the Net to run out of Internet Protocol (IP) numbers, the scheme that underlies the better-known domain name system.

Shrugging off another White House veto threat, the House of Representatives passed a bill to shield companies and their top executives against lawsuits stemming from the Y2K problem. The next day, proponents tried to restart a similar bill stalled in the Senate. The two are somewhat dissimilar, the House measure going further in offering protections, and the Clinton administration opposes both as favoring business at the expense of consumers.

A top Senate telecommunications lawmaker issued a scathing indictment of federal regulators' merger review process, demanding that the system be changed as soon as possible. Senate Commerce committee chairman John McCain's (R-Arizona) letter to Federal Communications Commission chairman William Kennard targeted regulators' recent hearings on the pending merger between SBC Communications and Ameritech.

Fearing that the Net could give terrorists easy access to chemical manufacturers' "worst-case" accident scenarios, the Clinton administration offered its solution to the debate: disseminate the reports on paper.

Also of note
PointCast agreed to be acquired by Internet entrepreneur Bill Gross's Idealab, ending a long effort to find itself a buyer ? NBC will merge several of its Internet assets with, an e-commerce direct marketer, and, a joint venture between NBC and CNET, to create NBC Internet ? Compaq vice president John Rando became the fourth relatively high-profile executive to resign in the wake of the forced resignation of Eckhard Pfeiffer ... A federal appeals court ruled that Microsoft must offer stock plan participation to thousands of temporary employees ? @Home will incorporate Microsoft's Windows NT operating system into @Home's network and also help market @Home's service ? Computer and office product superstore OfficeMax is eschewing low-cost PCs as a way to boost earnings ? Rise Technology is struggling to release the first clone of a Pentium II-class chip in the second half of the year, amid a ravaging price war ? ISPs would be required to offer content-filtering software under a measure unanimously approved by the Senate.