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PC of future mimics network computer

The PC of the future will be less a PC than it will be an extension of the Internet.

The writing is on the wall, according to analysts and PC company executives.

The performance and utility of a personal computer will be defined less by faster Intel processors and new Microsoft software and increasingly by connection speeds and Internet services and software. In effect, the personal computer will co-opt the network computer concept.

Two stalwarts of the PC world, Dell Computer and Compaq, are moving quickly in this direction and, in a way, are implementing the vision of Sun Microsystems and Oracle, which both embraced network-centric computing models long before many of the mainstream PC makers did.

At Comdex last week, Compaq launched a massive Internet-PC product and service strategy for the home and small-office market, a segment where most connections are still based on sluggish dial-up speeds. The No. 1 PC manufacturer unveiled low-cost consumer PCs that were notable not for their traditional PC hardware, but rather for their Internet connection technology and services--making them, in a sense, glorified network computers (NCs).

The new Compaq Presarios will be offered with a smorgasbord of high-speed Internet connection hardware and services. Users will have options for Satellite, DSL (digital subscriber line), or cable modems, while services will be provided by Net and telecommunications industry giants such as Road Runner, @Home Network, Ameritech, Bell Atlantic, BellSouth, Hughes Network Systems, GTE, and Sprint.

Dell followed up quickly with an announcement that that it is shipping PCs with high-speed digital modems from Cisco Systems in conjunction with service from telecommunications giant US West.

Though these are logical moves in the age of the Internet, they run counter to the long-standing concept of a PC as a stand-alone "mainframe on your desk" with all the power and speed one would ever need inside the box.

Net connection vs. chip speed
Apple Computer's iMac was really the first high-profile consumer computer to accentuate the Internet connection, adding the prefix "i" to the Mac and designing the box so setting up a Net connection is as easy as possible.

As this trend continues, Net connection speeds may begin to eclipse chip speeds as the most crucial hardware benchmark for a computer.

"As people spend more time on the Internet, the power of the [PC] itself has less and less to do with the usefulness and productivity of the system. Vendors like Dell and Compaq know this," said Kevin Hause, an analyst with market researcher International Data Corporation (IDC).

Indeed, at many large corporations, where PCs are hooked up to a fast T1 line, it has already become, in essence, an extension of the Net in many cases. "This is the NC, round two," said Sean Kaldor, a consumer device analyst at IDC.

Carl Everett, senior vice president in charge of personal systems at Dell, put it another way. "Moore's law is still true. But you have to get your priorities straight...Fast [modem speed] has caught fast MIPS [chip speed]" in importance, he noted, describing the observed doubling of processor speeds about every 18 months but suggesting faster connection speeds are becoming more important.

Another way to look at it is that people will simply feel that their PC is fast or slow depending on the Net connection. "People will connect to the Net, get a fast connection, and then surmise that they have a fast PC," said David J. Eiswert, a consultant at the Strategis Group.

But the bottom line for Compaq and Dell is that they need a compelling reason to drive PC sales in the future, and the mantra of "more processing power" is beginning to lose some of its punch. "I don't need a faster PC to download [from the Internet]," said Kaldor. "Does it more and more resemble an NC? Yes."

Rod Shrock, in charge of the consumer products group at Compaq, said consumers get interested quickly in high-speed access once the price is right. "Once you get below $50 [per month for high-speed modem service], 70 percent of PC users express a strong interest," he said.

Kaldor believes PC companies also want to tap into new revenue streams. "This is more margin dollars, a chance to get into services...maybe they get a cut on service fees," he said.

Direct sales further the cause
Compaq will offer its new Internet PCs directly, not through distributors as it has done traditionally--another sign of sea changes at the PC Goliath and in the PC industry in general. Dell, as always, will sell its new Net-centric Dimension line of PCs directly.

The obvious benefit is that the PC can be configured over the phone or over the Net just the way the user wants it--whether it be with a DSL modem, cable modem, or satellite connection.

But the direct model also allows Compaq and Dell to address one of the biggest sticking points of high-speed home Internet access: Service is still patchy nationwide. So, as Dell's Everett explains it, "We get their area code, phone number, street address," and then Dell determines through the local telecommunications company in the customer's area what kind of service is available.

For example, whether it's low-speed or high-speed DSL service--or maybe it's not available at all. In the latter case, Compaq says it can offer an alternative such as satellite or tell the customer to be patient and use the standard 56-kbps dial-up connection until service is offered in that area, according to Compaq's Schrock.

Strategis Group's Eiswert points to other intrinsic hurdles. "Today's Internet has architectural speed limitations...a weak link anywhere along the network will slow the source of transmission regardless of the modem or technology." To be sure, glitches in high-speed modem access will undoubtedly be perennial problems for service vendors as these nascent services slowly mature.

Kaldor also points to potential problems with cable modem service since connection speeds can drop off quickly if many people in a local area access the service simultaneously.

IDC's Hause agrees that it won't be smooth sailing in every case. "The problem is that there are still issues beyond the control of PC companies, not the least of which is service availability. Also, once services do begin to roll out, and other vendors begin to offer the same services and relationships, competitive advantage diminishes," he said.

Other industry sources point to the inevitable problems that will arise out of the sometimes incongruous couplings of computer manufacturers and telecommunications companies. One source at a computer maker wondered whether the two sides can get along and whether the deals they sign are truly implementable in some cases.

Also, both PC executives and analysts are quick to point out that the same old reasons for buying a new PC won't go away: power users, game junkies, and professionals in certain fields will still want the latest and greatest graphics chips, hard drives, and Intel processors in their PCs.

Dell's Everett also emphasizes that Windows 2000, the next version of Windows software due in 1999, will require more processing power.

Nevertheless, as the Internet ineluctably continues to grow in importance, PC makers will follow, touting the latest and greatest Internet connection schemes, while some of the more traditional reasons for buying a PC may slowly get drowned out amidst the din of Internet-based marketing.

Intel is an investor in CNET: The Computer Network, publisher of News.com.