America Online's $4.2 billion acquisition of Netscape and
its co-lateral $500 million deal with Sun Microsystems changes the landscape of the
computer-communications business. It's not about potential broadband deals or the
Microsoft antitrust case. And, of course, it's not about Web browsers or AOL's entry into
the business-software market.
This is about AOL's ascendance to the top rungs of the
communications world -- even after selling off its network to MCI WorldCom earlier this
year in another three-way deal involving CompuServe. The Netscape deal actually brings a
business resource that positions AOL for an expanded alliance with WorldCom.
AOL chairman Steve Case sits on WorldCom's board, so a
dealmaking route is handy. (Geography helps, too: WorldCom is building a major Washington,
D.C.-area facility across the street from AOL's headquarters in suburban Virginia.)
MCI WorldCom recently unveiled its nationwide
digital-subscriber-line agenda, and an AOL/Netscape software package could offer
value-added content and services for that high-speed platform, competing with cable.
The cable industry glories that it has snared AT&T to
use @Work cable-modem service for telecommuting (a nice in-the-family deal for AT&T's
pending TCI acquisition).
The aggressive marketers at MCI WorldCom will surely create
similar packages using their own high-speed facilities (albeit slower than cable modems).
AOL's brand and built-in marketing connections could strengthen those campaigns.
The new Sun relationship with AOL also raises fascinating
prospects. All but forgotten is Sun's purchase two years ago of a Silicon Valley start-up
called Diba Systems, which was developing consumer-information appliances. Although
seemingly subsumed into Sun's Java agenda, the info-appliance concept -- set-top box,
smart phone, portable device -- remains high on Sun's horizon. The Java-in-the-set-top-box
deal that Sun cut with TCI early this year is just one example of where that interest
could be directed.
Depending on the future maneuvers in the AOL-Sun
relationship, that alliance could bring AOL through a backdoor into the set-top business,
working with cable and/or against it.
Netscape's Navigator browser is almost irrelevant in this
deal. There are other ways to maneuver through cyberspace, broadband or narrowband. The
browser itself may be an artifact from this short epoch in Web gestation; future versions
of display/presentation/search facilities will become even more important in the broadband
arena. And now, AOL has a high-visibility stepping stone into that world.
The computer + software + electronics environment is
becoming critical to cable's direction. It was more evident than ever at last week's
Western Cable Show: Internet and computer firms are escalating their courtship of the
cable industry. It's been going on for more than five years, but the frenzy is now taking
on even greater urgency.
The competitive entry of companies such as AOL -- which
could be both friend and foe in broadband services -- raises the stakes even further.
Understanding these emerging scenarios is critical.
Yet -- as was apparent at last month's Cable Modem Retail
Forum -- these disparate businesses (cable, computers, retailing) often don't speak the
same lingo, let alone share philosophies and near-term objectives. Learning the language
-- and the players and the technology -- of computer communications will be vital not just
for cable's broadband agenda.
This AOL-Netscape-Sun deal reminds us -- as does this
holiday season's $2.3 billion e-commerce spree -- that customers and companies are moving
to cyberspace, with or without cable.
Cable operators should sign up for ZDTV just to see what's
going on in the computer and Internet space. It's overwhelming.
Some in the nerd patrol sneer that video-centric cable
executives just don't care about the Internet or the computer's infiltration into daily
lives. It's easy to counter by pointing out the billions of dollars that all major MSOs
have committed to Internet and data systems. Moreover, the personal attention of Malone,
Roberts, Levin, Jones and their peers also acknowledges that "they get it."
But you don't have to plumb very deeply into the ranks to
encounter the clueless. Some executives may be at that awkward age -- too old to have been
imbued with PCs when they were in school, but too young to have kids who live and breathe
computers today. So they ignore it.
They don't see the overwhelming impact of computing and the
Internet, except as a tool for spreadsheets or secretarial word processing. (The MBAs
amongst them, of course, know the value of a good PowerPoint presentation.) The lack of PC
awareness manifests itself in many other ways in the cable industry. Invitations to
business events rarely carry an e-mail response option (yes, it's so impersonal, but for
meetings, it's the most convenient).
Contrast that with computer and technology events, which
don't offer any alternative except an e-mail RSVP.
The NCTA's woebegone exhibitor guide at its annual
convention doesn't list a URL or e-mail contact as a way to reach exhibitors, although the
NCTA has and publishes that information in its periodic "Industry Statistics"
booklet. At least the Western Show organizers include some Web information.
For the hordes who haven't noticed the stampede to the
Internet, the mainstreaming of geekdom or the URL flaming at holiday parties, the
AOL-Netscape-Sun deal is a powerful reminder.
Top-rung players are getting bigger, and they are pursuing
their multiple media agendas -- whether or not cable notices.
I-Way Patrol columnist Gary Arlen doesn't need no stinkin'
letter opener when he hears, "You've got mail."