Broadband Week Direct

Today's report from Web Editor Susan Rush

• EU Says Yes; U.S. Says What About AT&T?
• Lucent Falls Below Expectations
• See It, Touch It, Buy It
• Motorola Has Something To Sing About
• MEMS: Switch The Light Fantastic
• Broadband Briefs

EU Says Yes; U.S. Says What About AT&T?

Severed ties with German media group Bertelsmann wins America Online European approval for its bid to buy Time Warner. "The proposed undertakings [with Bertelsmann] will prevent AOL from having access to Europe's leading source of music publishing rights, thereby eliminating the risk of dominance in the emerging markets for online delivery of music over the Internet and software-based music players," says a European Commission spokesperson about granting approval for the merger.

"We are very pleased with today's approval of our merger by the European Commission, it is another important step forward in the approval process," said AOL and TW in a joint statement. Both companies remain upbeat about U.S. regulators giving their blessing for the union as well. The companies hope to close the deal this fall, but U.S. approval still stands in the way.

And now that the duo has cleared the European hurdle, it must get ready to do battle in the United States. Online music distribution was a major issue in Europe, but the scope is a bit wider in the States. The Walt Disney Co., along with many other competitors and consumer advocate groups, have been urging federal regulators to review the deal closely, and include conditions on broadband access and content discrimination. Another sticky point is Time Warner's connection to AT&T. Last month, Utah Senator Orrin Hatch sent a letter to the Federal Trade Commission voicing concerns about the "anti-competitive impact of AT&T's stake in Time Warner Entertainment after AOL completes its purchase of Time Warner." AT&T reported yesterday that it doubts it will be able to meet the FCC's May 2001 deadline of disposing its interest in TWE.

Both the FCC and FTC are reviewing the AOL-TW merger and are expected to issue a ruling later this month, or at least soon thereafter.

Lucent Falls Below Expectations

Lower than expected optical systems revenues, bad debt and anticipated decline in circuit switching sales leaves Lucent Technologies falling below analysts expectations again. The networking giant expects pro forma earnings per share from continuing operations for the quarter, which ended September 30, 2000, to be in the range of 17 cents to 18 cents per share compared to 24 cents for the same period a year ago.

Rumors are circulating that Richard McGinn, Lucent's chairman and chief executive, may be forced to step down as a result of its poor performance in recent months. Lucent would not comment on the buzz.

Optical networking systems revenues, including optical fiber, slipped 5 percent and revenue from its switching systems business fell 13 percent during the quarter. The company does expect to report pro forma revenues from continuing operations in the range of $9.3 billion to $9.4 billion for the quarter, a 14 percent to 15 percent increase over the prior year period.

"It is clear Lucent must undergo a major retooling, but the problems are clearly fixable," McGinn said during a conference call. But Lucent has undergone plenty of retooling already: It spun off its Enterprise Networks Group, offloaded longtime CEO and executive vice president of service provider networks Pat Russo and vowed to slim down and refocus.

"The problem is Lucent has been making acquisitions, but it's not apparent that they are integrating any of them into the company," says analyst Jane Zweig of Hershel Shosteck and Associates. "They come across as unfocused." Following the announcement, Lucent shares plummeted 29.68 percent today to 22.06 as of 12:25 p.m. EST.

See It, Touch It, Buy It

Sometimes customers come to you and sometimes, to sell products, you have to go to your customers. AT&T Broadband is doing just that with its new retail pact with electronic retailer Best Buy Co., Inc. The alliance enables AT&T to set up interactive kiosks at Best Buy locations around the United States to educate customers about its products and sell them. At the onset, AT&T Digital Cable service as well as high-speed cable Internet service will be available for purchase.

"We want to be where our customers are. [Retail stores are] a place where we can demonstrate a product and a customer can see it, touch it and buy it," says Tracy Baumgartner, an AT&T Broadband spokesperson.

Products will be available in Best Buy stores later this year and into next year in major AT&T Broadband markets, including Boston, Atlanta, Dallas and San Francisco. AT&T has not announced which market will roll out products in stories first.

Motorola Has Something To Sing About

Strong broadband equipment and computer chip sales help propel Motorola to a 66 percent profit increase during the third-quarter. Profit from operations during the quarter for the telecommunications and semiconductor company raised to $598 million, or 26 cents a share, compared with $361 million, or 16 cents a share, in Q3 1999.

In the broadband communications sector, Motorola saw a 47 percent jump in sales to $917 million and a 41 percent increase in orders to $941 million, compared to a year ago. During the quarter, Motorola shipped its 10 millionth interactive digital cable set-top terminal and its one millionth DOCSIS cable modem. Under a comprehensive video, voice and data agreement signed with AT&T Broadband, Motorola will provide the majority of AT&T's advanced interactive digital set-top terminals through 2003. AT&T also agreed to purchase 700,000 Motorola cable modems and selected Motorola as an initial provider of Voice over IP technology.

MEMS: Switch The Light Fantastic

"Micro-Electro-Mechanical Systems (MEMS) is a relatively new technology that is rapidly changing how we live, work and play [in the world of broadband]," according to a new report from research firm Cahners In-Stat, a sister company to Broadband Week. MEMS switches, which negate the need for signal conversion and enable high rates of data throughput, will help boost the roll out of MEMS in future all-optical networks. The MEMS market is expected to grow to a $7 billion industry by 2004, a $5 billion increase over sales figures for 1999.

The "MEMS and Optical Networks: Switching the Light Fantastic" report provides an overview of MEMS, discusses the demand for an optical network, the role of switches, where MEMS switching fits in, what hurdles must still be overcome and forecasts market potential through 2004.

Broadband Briefs:

Leo Hindery Jr. steps down as chief executive of Global Crossing Ltd., Thomas Casey is his named replacement. Hindery leaves the company after less than a year on the job. He will exit the company following the sale of the Web-hosting unit is complete.
Sprint rolls out its consumer broadband services in additional markets. Under the Sprint ION name, the company is now offering services in 12 major U.S. markets, ranging from stand-alone high-speed Internet access to integrated high-speed access with multiple phone lines, local calling and long-distance service over a single connection to the home.
More than one in five U.K homes have access to digital TV, according to a survey from Oftel. The telecommunications watchdog found that 5.25 million homes have digital television, a 10 percent increase for the quarter.
CLEC Birch Telecom will use SBC Communications' Project Pronto network platform to deliver high-speed Internet access to select Kansas City customers.
Nortel Networks unveils its Core IP network solution to be used in high-speed, third-generation wireless networks. The system is designed to consolidate delivery of voice, video and data from multiple access technologies onto a single network.
Packet-switched network telephony service provider DataVON reports growth in revenue-generating traffic over its network for Q3 2000. Traffic totaled 460.5 million minutes, compared to 286 million minutes during the same quarter a year ago.
Akamai Technologies inks a deal with NetRadio Corp. as its exclusive provider of streaming technology to deliver NetRadio's live music content over the Web.
Askey Computer Corp. introduces a plug-and-play modem, the ALE070 USB ADSL modem. The modem, with its integrated universal serial bus, is based on GlobeSpan's Titanium ADSL chip set and does not require an external power supply.
Flarion Technologies wins an experimental trial license from the FCC to test its wireless broadband access Internet system in the 700 MHz radio frequency band. The multi-year grant covers the portion of the UHF 700 MHz band that the Commission plans to auction off in 2001.