Riding the rails of cable TV never looked so promising.
Juno Online (Nasdaq: JWEB) shares rose nearly 25 percent this morning after the company became the first Internet service provider to announce a deal to board the Time Warner (NYSE: AOL) system. First stop: Columbus, Ohio, where Juno and Time Warner will run a pilot program.
The announcement means Juno also will be the first Internet provider to land a spot on Time Warner and AT&T (NYSE: T) systems. AT&T last month announced a test program in Boulder, Colo., where the company will offer as many as 10 choices (including Juno) for a cable ISP.
I suppose Juno gets a slight edge over rivals by being the first, not to mention the only company that offers access in every category: free, dial-up, wireless and at least two types of broadband. But that situation won't be unique for very long.
Anyway, being a first mover doesn't always help and being a latecomer doesn't always hurt. America Online (NYSE: AOL) built itself into the world's largest ISP despite a history of following rather than trailblazing.
The very fact that Juno is present on so many platforms reinforces an earlier conviction of mine. I've never believed a cable system operator ought to open its lines to every Tom-and-Dick ISP, because there are broadband alternatives.
Baby Bells are rolling out DSL. Hughes Electronics (NYSE: GMH) offers DirecPC. On the wireless side, Teligent (Nasdaq: TGNT) and Winstar Communications (Nasdaq: WCII) sell high-speed data transmission to businesses, and Metricom (Nasdaq: MCOM) is building its Ricochet network.
You could criticize some or all of these offerings on points of technology, availability or pricing, but you could also do the same for cable 'Net access. Nobody is flawless, but at least there are plenty of imperfect rivals. More are on the way, such as Craig McCaw's Teledesic satellite project.
That hasn't stopped government regulators from pushing "open access" on cable systems, especially the Big Two of AT&T and Time Warner. Ma Bell and Time Warner together control cable access to more than half of the U.S. cable audience.
No doubt The Walt Disney Co. (NYSE: DIS) and other groups pushing for the divestiture of the cable operation won't be satisfied with mere pilot programs. But once you've opened the tap, it won't be closed again. And when other service providers are present, you no longer have to worry about Internet content limits. As for television programming, Time Warner was never going to monopolize TV content because economics would prevent it. Few people will buy a cable service that doesn't carry popular channels.
And that's why all the fears about the AOL-Time Warner merger are baseless. Limiting content isn't just bad service, but bad business. An AOL-Time Warner might feature its own media, but so what? Microsoft features MSN on the Windows desktop, but AOL won the traditional ISP war. And if Disney's content or Juno's ISP is better, people will flock there.
You can also turn that argument around. People are juicing Juno shares today, but we're not talking about an unbeatable edge or high barrier of entry. In the not-too-distant future, Juno will be face the same kind of competition on cable lines as it now faces on telephone wires.
That doesn't mean Juno doesn't necessarily deserve a higher price. It just shouldn't be merely for a Time Warner ride.
The anything-but-Intel crowd never passes up a chance to criticize Rambus' memory chip technology as overpriced and overrated. Kumar doesn't quite go that far, but he does note that Intel's decision to roll out SDRAM chipsets for the Pentium 4 could keep RDRAM confined to a narrow segment of PC buyers. Intel also is thinking about chipsets for a competing technology, double data rate SDRAM, which proponents have argued is almost if not as fast as RDRAM.
"Development of 200MHz DDR chipset for P4 will be the nail in the coffin for RDRAM," write Kumar and associate Paul Mansky.
Rambus does get DDR royalties from at least two manufacturers, but the revenue from DDR will be lower than from RDRAM, Kumar says.
The Piper Jaffray report comes on the same day that Rambus unveiled a new speed milestone. Shares of Rambus gained more than 5 percent following the announcement of 1+ GHz DRAM.
But Kumar points out that few applications need all that RDRAM provides.
"Intel is, above all, a pragmatic company," the Piper Jaffray analysts write. "Many people at Intel still believe that RDRAM is a technically superior solution. But Intel is not willing to crucify Pentium 4 for the sake of RDRAM. ... Without Intel's staunch backing, Rambus runs the risk of becoming a niche solution.">