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Will AT&T buy a portal?

The telco makes a tremendous move in the Net space with the proposed TCI merger, and observers wonder whether buying a portal firm is next.

It isn't hard to figure out what AT&T wants: a lot of loyal customers.

Although it is understood that the Internet continues to play an important role in the telco giant's strategy, the strategy itself--especially in light of the news of today's proposed acquisition of Tele-Communications Incorporated--is not entirely clear.

With all its ups and downs in the Net space--which culminated with today's announcement--observers have wondered whether the telco's next step will be buying a portal for itself.

In spite of AT&T's size and resources, it has floundered on the Internet, as have many telcos. Like old media companies that have struggled to dominate the online medium, AT&T has had difficulty translating its successes offline onto the Net.

A case in point: its Internet access service WorldNet has not taken off to the degree executives have wanted.

So in the last few months, AT&T has been busy trying to make inroads on the Net in other ways. It formed partnerships with three leading portal sites, Excite, Lycos, and Infoseek, in which users will be given access via AT&T WorldNet with a home page branded by one of the search engines.

Earlier this month, the company announced that it will be setting up a system that lets customers pay their bills over the Net.

And just last week, AT&T reportedly offered to buy America Online, the world's largest online service.

Now, with the AT&T-TCI merger, AT&T potentially could offer customers a full complement of communications services, including telephone, high-speed cable access (TCI has a controlling stake in cable access firm @Home), and Internet service.

But offering service is only the beginning. AT&T still faces fierce competition in at least some of those categories; it needs to find a way not only to attract customers, but also to keep them.

And that's where a play for an Internet portal--the hottest commodity on the Net these days--could arise.

"It seems like the whole point here is to provide a package of integrated services to the consumer that could include, but is not limited to, local long distance, broadband access, cable, and satellite service," said Mark Mooradian, an analyst with Jupiter Communications.

But is AT&T looking to purchase a portal?

"AT&T needs to maintain a one-to-one customer relationship as best as possible. If they can engender that relationship with a portal relationship--which certainly does afford them a wholesale consumer relationship--then yes," added Jupiter senior analyst Regina Joseph.

A portal of its own could provide AT&T with customer loyalty by giving people community and an email address. But it also could be a vehicle to allow AT&T to get more information about customers, such as their buying and spending habits.

On the other hand, a company such as AT&T may not really see the value in the flip side of the business that portals are promising: e-commerce, said Kate Delhagen, an analyst with Forrester Research. "Their goal is to provide services that they can bill customers for on a monthly basis," she said. "We don't think they're interested in [an e-commerce and advertising] revenue model at all."

However, AT&T won't balk at the revenues it stands to gain from properties it will acquire with TCI, such as SonicNet, a popular online music news and information site.