Broadband Week Direct - Daily News 9/15/00

Today's report from Web Editor Susan Rush

• Image Is Everything
• Qwest: More Speed At The Same Price
• Microsoft Entices Subscribers
• It's All About Market Selection
• Broadband Briefs
• Next Week in Broadband

Image is Everything

If a tree falls in the forest and no one is around to hear it, does it still make a noise? This age old question can be applied to AT&T's efforts to go digital, with a few tweaks - If AT&T invests $100 billion to buy and upgrade cable-television lines to offer broadband services, and customers don't know about it, will its stock ever rebound? AT&T is beginning to clue in and is about to start shouting into living rooms, "We're no longer just long distance, we're broadband." The company is investing $50 million in a new "Boundless" ad campaign to reposition itself as a broadband service powerhouse.

The ads will morph AT&T's blue globe corporate logo into new shapes as a representation of the company's evolution from dial-up phone service to high-speed digital services. In one commercial, entitled 'Vroom' the animated logo idles like a motorcycle engine, while the announcer booms, "AT&T's broadband technology can carry your company's voice, video and data around the world at speeds over two billion bits per second. Buckle up."

Company Chairman C. Michael Armstrong has invested billions in the transformation of the company, and investors are growing impatient for it to pay off. Stock woes have plagued the company -- its stock is down 47 percent from its 52-week high of $61 -- and officials are hoping this campaign will be the shot in the arm the company has been searching for.

The television campaign will debut during the opening ceremonies of the 2000 Summer Olympic Games, and will be supported by a series of print advertisements.

Qwest: More Speed At The Same Price

Qwest Communications doubles the downstream speed of its DSL service without imposing a rate hike on subscribers. Residential and business customers will have access to downstream speeds of 640 Kbps, enabling customers to receive near full-motion video rates.

Qwest's always-on service is available for $29.95 a month, but the company also offers an on-demand service for $19.95. By the end of the year, Qwest expects to be offering its DSL services in 14 states, covering 72 markets.

Microsoft Entices Subscribers

Software giant Microsoft offers "free" WebTV equipment to spark consumer interest in its interactive television service. Consumers who sign up for three years of Microsoft's MSN Internet service, receive a rebate check for a WebTV set-top box and required components. After the rebate, the hardware is free. WebTV service is available for $21.95 or $24.95 a month. The promotion runs through the end of September.

Microsoft has about 1 million interactive TV subscribers to date, but can't seem to boost its numbers much higher. The promotion comes at a time when competition from AOLTV and TiVo is threatening. Another reason for the subscriber push is Microsoft must make good on licensing agreements, such as the one recently signed with Philips Electronics to include its enhanced TV software in Philips' set-top boxes next year.

The interactive television market has been a rough road for Microsoft. The company was dealt a blow earlier this week when United Pan-Europe Communications tabbed Liberate Technologies' software to deliver digital interactive TV services to its Vienna network. Liberate secured the deal after Microsoft, a company in which UPC holds an 8 percent share, failed to deliver its interactive TV platform in a timely fashion.

It's All About Market Selection

The ground is fertile for competitive voice, video and data providers to enter the broadband market, but newcomers must act fast, secure funding and choose their markets wisely, according to a new market report from The Yankee Group.

Called "overbuilders" by those in the cable industry, these competitive broadband communications providers are popping up in markets across the United States, boasting fiber optic networks capable of high-speed Internet, video and voice service. They are entering at a time when consumer demand is high, the technology is cheaper to deploy and better able to handle multiple services, but the reality is that the majority of markets will only be able to support one incumbent and one competitor. "Market selection is absolutely key to success," says The Yankee Group's Meredith Rosenberg.

The "Broadband Communications Providers: The Next Generation of Overbuilders" report found that consumer demand for high-speed Internet services is high, and potential customers are attracted by the simplicity of the "one bill" for multiple services. Since incumbents have focused on their top markets yielding low overall availability, the door is open for overbuilders. One factor giving new competitors a leg up is the relatively bad customer service record among incumbents, particularly cable companies. A Yankee Group survey of 900 customers in select U.S. cities found some 39 percent of cable customers were dissatisfied with their service. A further 66 percent said they were open to competition, and that number leaps to 85 percent among high-speed Internet users.

The report concludes that these newcomers are a "real and growing threat in the market" and are worth watching.

Broadband Briefs:

Covad Communications acquires a 70 percent stake in Spanish telecommunications carrier Loop Telecom. The deal gives Covad an established presence in Spain's high-speed communications market.
The Federal Communications Commission issues digital cable television labels. Regulators adopted three labels: "Digital Cable Ready 1," is a set that simply connects to a cable system and gets either a digital or traditional analog signal; "Digital Cable Ready 2," is a set that connects with a set-top box that supports interactive and other advanced services; and "Digital Cable Ready 3," is a set that connects directly to a cable system and supports advanced services without a set-top box.
The FCC also postponed discussions on mandating open access to cable systems for Internet services for two weeks. Commissioner Gloria Tristani originally requested the Notice of Inquiry be delayed until after the FCC completes its review of the America Online - Time Warner merger, but agreed to a compromise since the Commission will not rule on the merger until mid-October.
Jato Communications expands DSL service to Cincinnati market. To attract subscribers the company is providing an introductory offer that includes free equipment, installation and 5 e-mail boxes for a limited time.
StreamSearch will distribute Internet entertainment provider sputnik7's array of interactive audio and video content over its Web site. sputnik7's portfolio consists of independent music, exclusive short films and Japanese anime.
r)Star Broadband Networks wins an exclusive contract to deliver its satellite-based broadband Internet services to tenants in 24 of Crown American Reality Trust's malls.
Sunrise Telecom unveils its integrated solution to qualify, troubleshoot and diagnose VoDSL service. The verification system enables technicians to place and receive calls directly from the DSL line to verify connection failures and diagnose ATM layer quality of service measurements.

Next Week in Broadband

Conferences/Panel Discussions:

Sept. 21: SkyFORUM. New York Marriott Marquis, New York, N.Y.; www.sbca.org

Sept. 20-21: Broadband Cable Technology & Finance. Le Parker Meridien Hotel, New York N.Y.; www.kagan.com

Sept. 23: Deborah Lathen, Chief of the FCC's Cable Services Bureau will moderate a telecommunications panel, "New Careers in the New Economy," at the Harvard Law School, Cambridge, MA.; www.fcc.gov

IPOs:

Week of Sept. 18: Inrange Technologies Corp. (INRG). IPO managed by Salomon Smith Barney, 7.7 million shares being offered at $12-14 a share.

Sept. 19: Avantgo (AVGO). IPO managed by Credit Suisse First Boston, 5.5 million shares being offered at $9-11 a share.

Upcoming Events:

Sept. 24-26: NetWorld+Interop 2000 Atlanta. Georgia World Congress Center, Atlanta, Georgia; www.key3media.com/interop/atlanta2000

Sept. 27-28: Private Equity Investing In Broadband & Wireless. Westin Copley Place, Boston, Mass.; www.ibforum.com