America Online Inc. and other Web-oriented entities are
preparing an assault on cable's high-speed-data turf that could have consequences for
the TV-programming side, as well.
AOL's multipronged broadband strategy came into
sharper focus last week with its hiring of cable-data veteran Mario Vecchi as vice
president of broadband development, a new position. Further, AOL said it had begun
shipping a new type of video-enabling software with its version 4.0 software.
The company is readying its patented disc blitz, sending
more than 1 million CD-ROMs this fall and offering the upgrade via free downloads and
"We are absolutely committed to expansion of our
subscriber base through the offering of broadband service," Vecchi said. "Our
goal is to have the largest possible footprint in order to make broadband service
available to all of our customers at the lowest possible cost."
To accomplish this, AOL will continue to enhance its
national data-backbone infrastructure and "partner with other key players in the
broadband industry," Vecchi added.
He warned to expect "some pretty interesting
developments" along these lines shortly.
AOL has moved prominently into cable's sights over the
past few weeks as a result of its efforts to persuade the Federal Communications
Commission to force cable companies to open their high-speed-data channels to all
providers on a common-carrier basis.
But while most cable operators dismissed the regulatory
initiative as a fatally flawed nonstarter, it was clear that AOL's broadband-access
strategy was bound to impact the industry, with or without a victory in Washington, D.C.
"Anybody who uses our high-speed Internet offering can
go anywhere that they want to go," MediaOne Group spokesman Steve Lang said.
AOL subscribers, by using high-speed cable access,
don't have to pay the transport segment of AOL's monthly service charge, he
noted, which means that they can get AOL for $9.95 per month on top of paying the cable
service charge, which is as low as $29.95 in some MediaOne markets.
This means that the worst-case scenario for AOL where cable
is concerned is that its subscribers must pay for both the cable service and AOL (at the
discounted rate) in order to gain access to a growing body of AOL content that will be
enhanced for broadband.
"From an AOL perspective, I look at the infrastructure
that Road Runner and @Home Network have built as very valuable for AOL to work with,"
As Vecchi noted, AOL is also preparing to offer services
via DSL (digital-subscriber-line) technology over telco lines, and the company is looking
at wireless-access technology, as well, he added.
"I don't think that AOL is interested in trying
to play one side off against the other," Vecchi said.
A key to making use of all of these access routes for
providing something better than faster downloads of standard AOL fare is the new video
technology that AOL is putting in play with the shipment of its 4.0 software.
Supplied by RealNetworks Inc., this video-streaming
"player" allows subscribers to receive multimedia content at frame and
resolution rates that are optimized for the bandwidth of their access lines, which, in
cable's case, allows video to approach VCR quality.
As previously reported, AOL is just one of a legion of
content suppliers that are lining up to pipe high-quality video and audio feeds through
broadband links, offering cable data and other high-speed subscribers access to much
richer versions of content than dial-up customers can obtain.
The latest version of the RealNetworks video system, dubbed
"G2," allows content suppliers to create a single file of synchronized mixtures
of text, graphics, video and audio that will "stream" to each end-user at the
highest rate that the user's access line will support.
"We see a lot of value in video, including as a means
of getting people who are visiting our Web site to watch our television programming,"
said Jeff Craig, vice president of interactive technology at Discovery Networks U.S.,
which has begun using G2.
"We're not focusing on developing content for
broadband at this point, but this technology allows us to leverage off content developed
for narrowband access, because it provides a better experience of that content for people
with broadband access," Craig added.
The online arms of programming entities like Discovery,
ABC, ESPN, NBC, Fox and many others are using G2 to support delivery of enriched
short-form video content. Other entities, such as Broadcast.com Inc., are building their
business on long-form programming, where the opening of cable, DSL and satellite-data
conduits represents a major opportunity for growth.
"As long as cable companies allow their customers onto
the Internet, I can deliver full-motion video to those users," said Mark Cuban,
president of Broadcast.com, which delivers classic movies, college-football games and
myriad other programming from a cluster of about 800 servers in Dallas.
AOL, through its AOL Studios, has been ramping up for the
delivery of enhanced content to exploit the growing base of broadband users, which now
totals more than 300,000 cable customers, according to recent industry counts from Paul
Kagan Associates Inc. and other sources.
The company is also preparing to bring its data-over-TV
capability to market on the strength of its recent acquisition of NetChannel, an early
competitor to Microsoft Corp.'s WebTV Networks
"We can't talk about our plans with NetChannel at
this point," an AOL spokeswoman said, "but we're getting close to doing
While cable-data subscribers can access AOL and other
Internet-service providers that offer video, the cable industry has shown little interest
so far in giving subscribers options to choose outside providers as their first point of
contact when going online via cable.
"If AOL wants to have their gateway pop on screen, let
them buy or build a network to deliver high-speed access to customers," said Michael
Luftman, vice president of public affairs at Time Warner Cable.
But there are signs that some cable entities are giving
thought to ways in which they might exploit the market opportunities that come with a
multiplicity of options -- especially as customers begin to have such choices over
broadband access from the DSL side.
@Home, for example, doesn't forswear such
possibilities, said spokesman Matt Wolfrom.
"Would it make sense to unbundle the cable loop?
No," Wolfrom said. "But we would be open to working with an AOL or other
entities where they would become a channel on our service."