Are Telcos Eyeing PointCast for DSL? - Multichannel

Are Telcos Eyeing PointCast for DSL?

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Regional telephone companies and PointCast Inc., a
developer of "push" technology, are not commenting on published reports that the
telcos want to buy a stake in the company as a way to develop content for their high-speed
Internet offerings.

Bell Atlantic Corp., BellSouth Corp., GTE Corp. and U S
West are all said to be interested in Sunnyvale, Calif.-based PointCast for their own
digital-subscriber-line services. PointCast uses push technology to deliver customized
news and information content via the Internet directly to subscribers' personal
computers.

If a deal is reached, PointCast could position itself as
the main content provider for the telcos' DSL offerings, in direct competition with
cable-based high-speed Internet services such as @Home Network and Road Runner.

All of the companies involved cited their respective
policies of not responding to rumors or speculation.

Rumors about PointCast have been circulating since July,
when the company withdrew its plans for a $52 million initial public offering of stock in
order to "commence discussions with a strategic partner," according to Stephanie
Gnibus, a spokeswoman for PointCast.

While Gnibus declined to address the telco rumors, she did
confirm that the company has been in discussions with a strategic partner, as yet unnamed,
and that an announcement could be forthcoming in the next few months.

"These are long processes," Gnibus said.
"Like any deal, there are lots of things to be worked out. But there are no
announcements that we plan to make in the immediate future."

Although PointCast is being closemouthed for now, several
analysts believe that a deal between it and a telephone-service provider makes a lot of
sense.

"PointCast is, in a sense, middleware," said
William Deatherage, a media analyst with Bear Stearns & Co. in New York. "They
access content and then broadcast it. I don't wrap PointCast into the content arena.
To the extent that they are broadcasting, then it is logically an extension of the
connection that the phone companies are already providing. I think this is something that
the phone companies are studying."

Deatherage, who claimed no knowledge of a pending deal,
also believes that push technology would fit in well with asymmetrical DSL.

Push "plays to the strength of ADSL," Deatherage
said. "It's always on, it's a high-speed connection and it's not tying
up the network facility as it would in a dial-up situation. There's no shared
distributed plant and no congestion problems."

Although push technology has not lived up to its earlier
expectations, it has improved, said Abhishek Gami, a new-media analyst with William Blair
& Co. in Chicago. Gami said past problems -- including lengthy download times and high
memory usage -- have essentially been solved. And push technology has evolved
significantly, especially in the realm of data applications.

"If you have a [Microsoft Corp.] Excel spreadsheet,
and one of the inputs is the stock price of Microsoft, you can use a push application for
the one cell that has the Microsoft price," Gami said. "That way, [the price] is
constantly updated. That's just a tiny example of how push technology can be
used."

Matt Wolfrom, a spokesman for @Home, said any deal that
would bring additional content to ADSL offerings would be good for the industry. However,
he doesn't believe that such an agreement would pose a competitive threat to @Home.

"No matter who they do a deal with, we would love to
have a DSL rollout," Wolfrom said. "That is built into our business model. We
feel that cable modems deliver the most cost-effective product to consumers. Increasing
the awareness of what broadband really is can only help us."

Wolfrom added that having a strong portal is essential to a
successful broadband offering. And even though @Home already has one, he was skeptical
about PointCast's ability to provide a robust high-speed Internet portal based on its
current "push" technology.

"PointCast content is not going to add up to too
much," he said. "The push environment has not won over a lot of folks."

Despite some technological advantages, ADSL deployment has
lagged considerably behind that of cable modems. And perhaps the biggest hurdles that the
technology has to overcome are high prices and limited availability.

While high-speed Internet services from cable companies are
normally priced in the $40-per-month range, ADSL offerings typically cost between $60 and
$100 per month.

ADSL is also hampered by distance restraints: Customers
need to be located within 14,000 feet of a central office that has the proper switching
technology.

But the real proof is in the numbers. Through the third
quarter of 1998, @Home had reported about 210,000 subscribers and Road Runner 160,000.
Subscriber levels for ADSL service, which only began deployment last year, are
considerably lower.

Sandy Colony, a spokeswoman for Road Runner, did not
believe that any alliance between the telcos and PointCast would put her company's
service at a disadvantage.

"The cable industry has had the historical advantage
of being an industry with creative, entertaining and dynamic content," Colony said.
"[Telcos'] realization that they need to get into the [content] arena reinforces
that. Anyone who would be comparing the two distribution systems and service offerings
would look at the whole picture: We're still faster, we're still cheaper and
we're certainly more available."

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