Internet Firms Show Many Faces of Convergence

This month’s merger between @Home Corp. and Internet portal Excite Inc., both in Redwood City, CA, creates a new company to compete against America Online Inc., Dulles, VA. Unlike AOL, though, the new [email protected] is connected through high-speed cable modems that are much faster than the average modem in use today.

The higher bandwidth means there is a greater possibility to send DRTV spots on demand to viewers who are seeking more information about a product before making a direct purchase. Convergence means that viewers can respond immediately to advertisements, but instead of picking up the phone, they may point and click their way through a transaction.

Right now, there are two separate camps in the convergence arena. One group of companies connects personal computers through high bandwidth cable TV connections, the other group connects the television through narrowband lines.

[email protected] and its rival Roadrunner, Reston, VA, deliver the Internet to a personal computer through a cable modem that is spliced at the point where the television cable enters the home. This connection provides the personal computer with high-speed Internet access and the possibility to watch better quality video.

Set-top boxes marketed by Web TV, the Interactive Channel, Wink Communications and others access the Internet through the traditional narrow band telephone lines that standard modems use.

“Internet on the television is a market space that a lot of people are interested in,” said Joe Laszlo, an analyst for Jupiter Communications. “Many Internet users want to have high-speed access to the Web, but when pressed for reasons they do not have a compelling reason why they should outlay the necessary money to get a cable modem.”

High bandwidth connections, where available, are more expensive. [email protected] and Roadrunner cost up to $49.95 a month, plus the expense of installation of a modem. The modem costs between $99 and $175.

Set-top boxes for TV access to the Internet cost about $199. The monthly fee for Web TV is $4.95. However the quality of the material is not as good on television as it is on the computer.

“Computer monitors have higher resolution than televisions and because some set-top boxes are limited in their access, not all pages are available and many things can’t be downloaded to the box,” Laszlo said.

The two types of companies do not see themselves in competition with each other. [email protected] and Roadrunner are competing for cable companies to partner with.

“We are not in competition with cable modems,” said Peter Mondics, vice president of sales and marketing for Worldgate Communications, Bensalem, PA. “They are broadband and we are narrow band – it’s two entirely separate things.”

[email protected] shares many of the same cable companies with Web television providers, such as Cablevision.

“Since our merger with Excite, we are now working with narrowband, but we are not putting it on the television,” said Kasey Zacher, manager of client services for [email protected] “Essentially everyone is still competing with America Online because they have all the eyeballs.”

WebTV and Its Rivals

As [email protected] and Roadrunner lead the race for cable broadband, Web TV has the biggest lead in delivering an Internet connection to the television. Other companies such as Worldgate, Interactive Channel and Wink Communications recently completed testing their products and are trying to catch up to Web TV, which has 800,000 users in the United States, Canada and Japan. It reportedly plans to enter Australia later this year.

These services allow limited access to the Web. They also do not have high-speed connections and the content is largely supplied by third parties, such as Bravo or Lifetime channels. [email protected] and Roadrunner supply their content and also rely on third-party content providers.

“The broadband providers are not without their limitations,” said Laszlo. “They are restricted to the amount of video they can stream by their technology and by their contracts with cable companies who are worried that anybody will be able to broadcast material over the Web. There is only so much video content the Internet backbone can handle.”

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