The week in review: Qwest seeks to become telecom giant

With its $55 billion hostile bid for US West and Frontier, Qwest risks its high-flying Wall Street position to enter the top ranks of the telecom player.

6 min read
With its $55 billion hostile bid for US West and Frontier Communications, Qwest Communications International risked its high-flying Wall Street position to enter the top ranks of the telecom players.

Qwest aims to become a competitor to companies such as AT&T and MCI WorldCom, which are increasingly offering packages of local, long distance, and data services. As a retail and wholesale long distance company, Qwest can't yet compete in the same business markets.

Pros and cons
If Qwest trumps Global Crossing in its bid for US West and Frontier, the firm will gain a valuable revenue stream worth more than $15 billion and get access to US West's local customers. But combining US West's local network with its broadband network will turn Qwest into a mainstream telecom company that the market will judge daily on its performance rather than on its broadband promises.

Qwest's bid--and Global Crossing's before it--underscores the desire of these telco newcomers to piece together the few remaining independent networks into world-class companies before the snowballing pace of telecommunications consolidation makes this impossible.

Open access on trial
AT&T said it is seeking an expedited appeal of a recent federal court ruling in Portland, Oregon, that could force it to open its cable Internet networks to outside ISPs.

Federal Communications Commission chairman William Kennard predicted chaos and stymied growth for the Internet if local authorities are allowed to regulate broadband services. Kennard slammed the court's decisions over the deployment of broadband services that would give regulatory authority to local municipalities.

The latest in Net law
Lawmakers had their hands full with a number of Internet issues. The House passed an amendment to the Juvenile Justice Bill to require schools and libraries to install technology to screen out material "harmful" to minors as a condition of receiving a federal Net access subsidy, known as the e-rate. School Net filtering bills are nothing new, but the recent carnage at the nation's high schools has intensified concern about minors' online habits.

The Senate Judiciary Committee voted 16-1 to ban sports and casino gambling over the Internet. Under the measure, businesses that offer gambling over the Internet would face $20,000 in fines, and their executives could be imprisoned for up to four years.

The Federal Trade Commission is knee-deep in a rule-making process to implement the Children's Online Privacy Protection Act passed by Congress last October to require commercial Net sites to get mom or dad's permission before soliciting personally identifiable information from preteens.

Many people have become concerned about protecting their privacy online. For example, a group of consumer advocates plans to demand that federal regulators block the proposed $1 billion merger of Internet advertiser DoubleClick and market researcher Abacus Direct, criticizing the deal as an assault on personal privacy.

In a highly public political slap, the nonprofit organization in charge of the Net's technical underpinnings accused domain name registrar Network Solutions of souring efforts to create competition in the lucrative domain name registration market. Esther Dyson, the Internet Corporation for Assigned Names and Numbers' interim chair, led the attack in response to a letter from Ralph Nader's Consumer Project on Technology, which questioned ICANN's authority and tactics.

Hardware happenings
Cynical videophiles and home-theater buffs burned once too often by prematurely obsolete technology played a direct role in bringing Divx down, observers said. Divx, a pay-per-view variation of DVD introduced late last year by Circuit City, ceased operations.

Sources said Dell is launching an online auction site, the latest indication that the days of PC manufacturers profiting only from hardware sales are quickly becoming a faint memory. Dell will announce the auction site next month as part of a larger push to offer a variety of services to all computer owners, even owners of non-Dell PCs.

A two-month delay to Intel's "Coppermine" Pentium III chip could mean that AMD will take the performance crown for desktop processors. The delay to Coppermine--a high-performance version of the Pentium III--means that the Intel chip will not appear until November.

Microsoft misfires
Microsoft's Windows 98 Second Edition was released to fix known bugs in the Windows 98 operating system, but it appears it may cause problems of its own. The SE update already has been revealed to include at least one bug, albeit a rather minor one.

In addition, AOL's Netscape Communications division and Microsoft moved to plug a half-dozen newly discovered security holes that concerned their browsers' implementations of JavaScript.

Microsoft revised its Web site--including its Windows Update page--to encourage public feedback on the Justice Department's antitrust case, in an apparent effort to help sway opinion in its direction.

Meanwhile, analysts wondered whether Microsoft's Steve Ballmer--approaching his first anniversary as president of the software giant--is the right executive to lead the company through one of its most important evolutions as the computing industry changes over the next few years.

Net music makes noise
Diamond Multimedia won an important federal appeals court ruling that paves the way for MP3 device makers to continue shipping products despite opposition from the recording industry. A court ruled that Diamond Multimedia Systems' Rio PMP300 player does not fall within the "digital recording device" definition used in the Audio Home Recording Act.

At the MP3 Summit in San Diego, California, Net music aficionados and music industry execs discussed Net music's evolution.

Liquid Audio disclosed a three-year agreement with EMI Recorded Music, scoring a point in the new race for music technology players to sign deals with the "Big Five" record labels. The three-year-old company also described its plans for a $36 million initial public offering.

In addition, music downloading site Tunes.com filed to raise $46 million through an initial public offering.

Media movers
Sources said Time Warner is getting more serious about taking its Internet assets public, and CNN is playing a major role in the process. In recent weeks a team of CNN executives, including vice chairman Steve Korn, have approached some investment banks for advice about a possible public offering of Time Warner holdings, including CNN, sources said.

Time Warner also tapped chief financial officer Richard Bressler to head its expansion on the Internet.

Microsoft cofounder Paul Allen's Vulcan Ventures took a $100 million minority stake in Oxygen Media, marking the latest investment in the flourishing for-women-only programming space.

In an effort to extend its reach to an older Internet audience, television network CBS announced it will acquire a 30 percent stake in ThirdAge Media with an investment valued at $54 million. CBS, known for its programming aimed at an older audience, hopes ThirdAge will offer a strong complement, providing information and community services to baby boomers.

On the software side
Bouncing back from a rough third quarter, Oracle reported fiscal fourth-quarter earnings that beat diminished expectations, while revenue climbed 22 percent from the same time a year ago.

Oracle's shining financial results buoyed the company's stock but left some Wall Street analysts unconvinced that other enterprise software makers will fare as well in the wake of Y2K.

Also of note
Unisys said it will acquire PulsePoint Communications...Compaq expects to report a second-quarter loss...Sun's "write once, run anywhere" Java technology will appear in 3Com's handheld PalmPilots...Iomega will cut 450 jobs as it closes two California plants...USWeb/CKS founder Joe Firmage launched a consultancy for Internet start-ups...Franklin's Rex handheld device seems to have faded from prominence...AOL said its ICQ conversion process is on track, and the company continues to confront competition from free ISPs in Europe...Deja.com filed to go public...Sprint readied its ION, or Integrated On-Demand Network for voice and data, for the consumer market...Start-up Akami said it can reduce Internet traffic jams...Furniture retailing online is heating up...A study said more women are heading online to shop...Starbucks launched a magazine called Joe.