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Can AOL beat MS and the cable pack to Web TV?

The trick may be that the new AOL TV service can be deployed fast, and soon

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Yesterday's AOL TV announcement involved a quantity of smoke and mirrors. Apparently the move takes AOL into space, delivers on the company's long-telegraphed plan to meld the Web and interactive TV, and - more or less as an incidental - shuts the door on Microsoft, but in reality these are places AOL is heading towards. It hasn't quite arrived yet. The key aspect of the announcement is the Hughes/DIRECTV connection. That provides satellite TV programming to the set-top boxes Philips is building, and with the aid of NCI's software those boxes will also be able to browse the Web. Compare and contrast with the Microsoft position. The Gates/McCaw Telesdesic project is intended to provide broadband satellite data communications, but the satellite network doesn't exist yet. Microsoft is trying to get CE boxes into the interactive TV market, but it's uphill work, and there's no real deployment yet. Microsoft also owns WebTV, which uses a similar two pipe system to meld TV and Web, but WebTV's performance so far has been less than stellar. Against this, the AOL announcement looks like a leapfrog, but it's maybe less of one than you might think. DIRECTV is a US satellite TV operation which claims 7 million customers, and while that's not bad, AOL (and indeed, DIRECTV) are going to want a lot more than that, in more countries than that. The combination of Web and TV also isn't quite as combined as might initially appear. Broadband data will not be sent from satellite initially, and the set-top boxes will just use phone lines for two way communications. The Web side of the boxes might help DIRECTV sales climb faster, and AOL branding and marketing might carve open a whole new market, but the deal isn't necessarily a sure-fire winner. On the debit side, note that AOL TV boils down to pretty much what every cable TV outfit is going to be doing soon, and you might reckon that AOL has been forced to go with satellite because it hasn't managed to score deals with cable TV companies. On the other hand, many cable TV companies appear slow/functionally brain-dead when it comes to data. If AOL moves fast, it could get the drop on them, and by virtue of the power of the brand force them to co-operate. Even failing that, a satellite-only route may be feasible. Largely speaking, the technology AOL is using already works, so can be rolled out quickly. Deals with existing satellite operations (rather than next generation 'coming soon' networks) should be fairly easy to strike, if the technology can be demonstrated to be effective. And as the broadband satellite networks come into service, AOL should be able to start leveraging its way in there too. One example of these, Skybridge, is particularly worth watching for an AOL connection. Skybridge is Alcatel-backed, and is intended to cover similar ground to Teledesic. Alcatel meanwhile has been mentioned as a possible screenphone partner for AOL, so here we have the next possible alliance. But mightn't the rise of land-based broadband networks nip AOL's schemes in the bud? It's possible, but it's also possible to get too excited about speed of deployment here. The cable companies and telcos are to a great extent still putting the infrastructure in, and are at best in pilot with any planned interactive services. They're currently far more active in buying and selling one another than actually going live, so there's a gap in the market. It will narrow, certainly, but it's still wide enough for AOL to squeeze through. ®

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