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Net convergence: Try and try again

CNET's Ben Heskett explains why the advent of the Web as a mass medium has provided hope that somehow an entertainment-telecommunications combination may actually work--whether it's the Web on TV, or video on the Web, or something as yet unknown. But is the dream ever going to become reality?

Where have I heard this before?

Yahoo recently disclosed a deal to provide high-speed Net access using the digital subscriber lines of Baby Bell SBC Communications, an arrangement that would have Yahoo serving as the Internet-content conduit to attract more consumers to SBC's service. Yahoo claims it will be the first of many such deals as it battles Microsoft and AOL Time Warner for supremacy on the Net. Evidently the Excite@Home debacle, the first attempt at such a combination in the Net age, was--as Monty Python once said--"only a flesh wound."

The entertainment world has long flirted with the telecommunications industry, with generally disastrous results. Interactive television has been a pipe dream for at least two decades, and other experiments have largely failed. But the advent of the Web as a mass medium has given new hope to convergence dreamers, and there is more evidence that somehow, somewhere, a combination may actually work--whether it's the Web on TV, or video on the Web, or a combination on some new gadget.

AOL's merger with Time Warner further legitimized the concept, though that unique matchup will not likely be duplicated. So, given the messes made by other upstarts, and formidable foes such as AOL, why is no one gun-shy about Net content and high-speed access combinations?

What with trail of carnage strewn from Excite@Home's shiny new headquarters along highway 101 in Redwood City, Calif. to a bankruptcy court in San Francisco, one would assume the industry would think twice before diving into more deals. It's like Safeway investing $1 billion in food-distribution centers the day after Webvan disappears.

Competitive fires cannot be easily doused, it seems, even in moments when it appears technology innovation is pretty low on the list of important topics for consumers--as now, in our post-Sept. 11 world.

The race is on
Yahoo is fighting to recharge its growth and become a "third way" for users on the Net to access all sorts of information. Baby Bells such as SBC have long wanted to update themselves for the Net age. With the demise of competitive local exchange carriers (CLECs), an SBC can more confidently tiptoe into Net content with millions of dial-up and high-speed users in tow, knowing it has a stranglehold on its market.

AOL is the most likely to succeed at a combination of the Net and entertainment because it has the largest stable of Net users and the biggest library of entertainment and content with which to attract the typical consumer. Microsoft may slink around for a few years, as it usually does when it gets into a business it does not understand, before it finally discovers something that works and exploits it with an army of fresh minds and huge hoards of cash.

But does Yahoo really need this kind of headache?

Its arrangement with SBC sounds strikingly similar to Excite@Home's dizzying pacts with cable operators, the sort of deal that lets a content provider take a cut of an operator's monthly fee in exchange for use of its content and presence to attract consumers. That was such a good business that Excite@Home's cable partners want to build their own networks and do it themselves, cutting out the middleman and leaving AT&T holding the bag.

Technology pundits have long predicted that despite the dot-com bloodbath, more astute and conservative businesses will spring up on the Net to take the place of so many soon-to-be-forgotten train wrecks, such as Webvan or eToys. Call it a more mature approach to business on the Net.

Maybe Yahoo and SBC are of the mind that there are good deals, bad deals and then there's Excite@Home. But if Yahoo starts buying online greeting card sites for $800 million to create interest among consumers, you'll know this idea has gone sour.