Both America Online and Microsoft believe--probably correctly--that they can continue to grow and keep their shareholders happy only if they can convince large numbers of Americans to adopt and pay for broadband internet connections.
Unfortunately, as of yet neither has a clue as to how to make this happen...
Posted by DeLong at September 18, 2002 04:07 PM | TrackbackBusinessWeek Online:For AOL and MSN, It's Broadband 1.0: ...Ask the world's largest Internet service providers, AOL Time Warner (AOL ) and Microsoft (MSFT ), how their broadband strategies are shaping up, and they sound like a couple of Presidential candidates: Both companies talk a big game about the future, but try to get some specifics and they're hard to pin down. The reality, it seems, is that neither one has fully figured out its broadband master plan. AOL wants to create "the best consumer experience available in the high-speed Internet world," says AOL Broadband President Lisa Hook. "And if we can do that, the distribution economics will work themselves out."
Microsoft says pretty much the same. "We believe that most consumers on the Internet will take advantage of broadband, and we'll be there selling the best software and services available," promises Bob Visse, director of Microsoft's MSN consumer Internet service. Until now, the big broadband push by AOL and Microsoft hasn't had much to do with broadband at all. Rather, it has been a mad dash to sign marketing deals with phone companies and cable giants to secure access to their millions of customers. The compelling broadband tools and content are planned for later. First comes the formation of the national broadband network -- then comes figuring out what will make customers want to use it.
In fact, AOL and Microsoft are just now doing market research into the behavior of broadband's early adopters. They're trying to identify the types of software capabilities and programming that will really catch on in the high-speed Internet world. There's talk of crystal-clear Net radio and digital-photo-swapping services from AOL. Microsoft may put forward similar offerings, plus software that allows people to seamlessly transfer files from a wireless device to a PC and back again. The earliest versions of these fledgling broadband services will be available in AOL's next software upgrade, 8.0, due this fall, and in Microsoft's MSN 8, a package of tools and features that Microsoft believes Internet users will pay a small premium for next year.
That's a start, but "I don't see a clear strategy from either one of them at this point," says Ron Sege, CEO of Ellacoya Networks, a New Hampshire company thats sells software and other technology to broadband providers. Thus far, AOL has about 3 million broadband customers, either through a Time Warner Cable service called Roadrunner or as part of a patchwork of broadband services offered by AOL in other markets. Microsoft hasn't disclosed the size of its broadband clientele, but Visse says MSN isn't far behind AOL, and he boldly claims that within six months Microsoft will have more high-speed Internet subscribers than any other company...
I don't have figures to back it up, but my guess is that the one major fdriving force behind widespreas broadband adoption went out the window(s) when Napster was taken off the wires. Despite the occasional claim that more people than ever are sharing music, I don't think Napster has been replaced, and there is not a lot else that provides compelling reasons for non-enthusiasts to shell out the money for broadband access.
Downloadable content and broadband access are obvious complements. There seems to be a real conflict of interest here between the cable/phone companies (who want lots of stuff available for people to download and don't care if it's free) and the "content providers" who want people to have to pay for everything they download. AOL and Microsoft have their fingers in many pies but seem, on balance, to be in the content provider camp.
My guess is that Microsoft and AOL may end up promoting free telephone (or something similar) over the Internet -- because they aren't phone companies -- while the phone companies want free music and video content -- because they aren't content providers.
But maybe I have my corporate ownership and partnership chains mixed up. Who knows.
Posted by: Tom Slee on September 19, 2002 06:54 AMI'm afraid you're wrong, the disappearance of Napster didn't destroy broadband. There are still plenty of gnutella-style spin-offs for the choosing.
As for uses of broadband in general, there is some serious info available in the continuing series of Pew Internet and American Life Project (www.pewinternet.org) reports, especially the report entitled the Broadband Difference. Here they suggest:
"There are three major ways in which broadband users distinguish themselves from their dial-up counterparts. For high-speed home users,broadband lets them use the Internet to:
• become creators and managers of online content;
• satisfy a wide range of queries for information, and;
• engage in multiple Internet activities on a daily basis."
Particularly interesting is the creating content part:
"Four in ten broadband users (39%) have at one time or another created content for the Internet by doing such things as creating Web sites, posting their thoughts or other information to existing Web sites, and creating online diaries. Some 16% of broadband users create some kind of content for the Web on a typical day online. A
similar number (43%) share files with others (17% on an average day do this) and also display or develop photos online (43% have done this, 14% do it on a typical day)."
In fact it seems the spread of broadband is changing patterns of media access away from traditional media, eg:
"46% of broadband users get news online on any given day. In fact, broadband users are more likely to get news online than read a newspaper on an average day (40% do that)."
Even more to the point:
• 37% say their Internet use has decreased the time they spend watching television;
• 31% say their Internet use has decreased the time they spend shopping in stores;
• 18% say their Internet use has decreased their time reading newspapers;
• 13% say their Internet use has decreased the time they spend in traffic.
All in all not much here for Microsoft or AOL other than providing you with the latest version of the Windows OS (if you don't use Linux that is) or selling the ADSL or cable connection.
But get this. TV is going seriously down in the higher education groups, while the killer app may in fact be......blogging (to judge by the quantity of users who are posting material.
Posted by: Edward Hugh on September 19, 2002 09:49 AM