A total turn-on

The internet revolution has only just begun, finds Peter Koenig. Now the race is on to weave TVs and mobiles into the web
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Tall, elegant, speaking with the formidable precision of someone possessing a PhD in Materials Science, Craig Barrett stood at a podium in London's Royal Lancaster Hotel last week, a study in complexity.

Personally, Barrett is an American gentleman of the Eisenhower school. Before joining Intel, the US microprocessor manufacturer, he taught engineering at Stanford University from 1957 to 1964, and there is still a professorial air about him. Simultaneously, Barrett comes across as ferociously competitive, a worthy heir as the company's chief executive to founder Andy Grove, the Hungarian refugee who coined the American corporate adage, "Only the paranoid survive".

Professionally, Barrett dresses up one of the world's oldest sales pitches in the garb of futurology. Buy now or pay later. Join the internet revolution or be damned. "Chips will be to the 21st century what oil was to the 20th," Barrett says.

Europeans may wonder if the internet revolution is for real. Speaking at a Wall Street Journal conference on convergent technologies, Barrett said it was at an "inflexion point" - a point at which the pace of technological change materially speeds up. "It's happening even faster than we thought," he said, sounding like a cross between an expert and an extra in a sci- fi film.

Barrett went on to paint a picture of a billion computers linked up to each other over the next few years, generating $1,000bn (pounds 640bn) in revenue through e-commerce. He described a business universe transformed by infinitely available data. "When the competition is only a mouse click away, companies need to put greater emphasis on the customer relationship."

Barrett caught his audience at a reflective moment. The internet entered mass consciousness here seven months ago - with Dixons' launch of the internet service provider, Freeserve. Two weeks ago Freeserve indicated its intention to float itself as a public company in London and New York.

Last week, in a speech arguing for light regulation of the internet, DTI minister Michael Wills previewed the Government's e-commerce bill, to be tabled in Parliament next month - the culmination of a process begun when Peter Mandelson visited Silicon Valley last year and asked: "Where are our Bill Gates? Our Microsofts?"

In between there has been a blizzard of news - managed in part by the PR departments of US technology companies - trumpeting the internet revolution. The news boils down to this:

n The PC was a productivity tool in the 1980s.

n It evolved into a communications tool in the 1990s.

n With an increasingly sophisticated telecoms network underpinning it, the internet will now jump from being PC-based to being grounded in a range of devices, from the PC to the television to the mobile phone.

Using experimental mach- ines, Barrett gave a demonstration of the internet in 2002. It was a ubiquitous network of computers and portable devices responding to the human voice, like Hal, the computer in Kubrick's 2001: A Space Odyssey.

"Soon there will be no such thing as internet companies," Barrett said. "All companies will be internet companies."

Understanding this world requires a degree of cynicism, Barrett conceded. How do you make money from the internet? "Internet companies take their high stock market valuations - their virtual assets - to buy real assets," joked Ray Lane, president of Oracle. "That's happening," Barrett noted. "The bidding war between Qwest and Global Crossing for US West is partly about that."

More fundamentally, understanding the internet requires a grasp of how to adopt the technology, how to organise to sell in cyberspace, and how to push forward the technology making it all possible.

Currently, America's blue-chip companies are in the grip of something approaching mania as they revise their business models to take account of the internet. This process is being led by technology companies like Intel itself. "We took our first internet order last July," Barrett said. "By November we were taking $1bn a month in internet orders."

The US media are cheering on companies embracing the internet. A recent Business Week cover story - headlined "Internet Anxiety" and sub-titled "old-line companies rush to a new business model" - cited case after case of a traditional company clicking on to the net.

Two weeks ago at the Paris Air Show, conversation in the pavilion of General Electric of America veered between the crash of a Sukhoi jet and the embrace of the internet by GE boss Jack Welch. "The supertanker is going to change course on a dime," one employee said.

UK companies seeking to play the same game need to bring their IT specialists out from the back office and integrate them into all levels of decision- making, Barrett feels. Meanwhile, while companies use the net to cut costs, Barrett sees on the other side of the balance sheet massive sales increases via the net. He forecasts that e-commerce revenues in West Europe will rise from $19bn this year to $223bn within three years.

This revenue will come as European versions of US search engine companies such as Netscape, portal companies like Yahoo!, and on-line retailers like amazon.com fill cyberspace.

In the UK, Freeserve has challenged the established American internet service provider AOL. Banks and supermarkets are challenging Freeserve by offering access to the internet as promotional tools.

UK start-up companies like TownPagesNet.com are seeking to challenge US portal companies - companies organising vast amounts of cyberdata.

TownPages aims to produce and deliver an interactive service based on online listings - films, jobs, property, local gigs - for every location in the country. Last month TownPages launched an initial public offering in the US for $20m.

Technology, however, remains at the core of the internet revolution. It is technology that has put Bill Gates on course to become the world's first trillionaire. It is on the technological front that the US has dominated so far.

Barrett says, however, that the jump of the internet from the PC to other devices opens up the technology game. The race in the coming months will focus on plugging the net into cellphones. In Vodafone - which last week received the approval of the US Federal Communications Commission for taking control of the US telecoms licences of its new acquisition, AirTouch Communications - the UK can boast the world's number one cellphone operator.

"In this area," Psion chairman David Potter said at the same conference, "Europe has a competitive advantage." This, he said, stems from Europe agreeing to a common standard for the radio frequencies by which mobile phones connect. Psion, Finnish mobile phone maker Nokia, and Swedish electronics company Ericsson have formed Symbian, a software company that poses a serious challenge to Microsoft as it seeks to transfer its software expertise from the PC to portable devices.

Asked if the US would not surpass European mobile phone companies plugging their devices into the internet, Nokia chairman Jorma Ollila was sceptical. "These things don't happen in six months. That's not how it works," he said. "We're building on 30 to 40 years of accumulated knowledge."

David McKenzie, the Scots head of a unit at IBM in Europe focusing on cutting-edge internet technology, suggested more business opportunities for European software companies. The more accessible the internet becomes at the front end, he said, the more complex the software required at the back end.

In an interview after the conference Barrett downplayed the rivalry between US and European technology firms. But he remained his complex self. He offered a welcoming hand to European companies climbing aboard the internet revolution.

He said he was meeting the Chancellor, Gordon Brown - as a friend of the Government. Asked for his assessment of the chances of Europe catching up with the US on the internet revolution, however, he smiled and said: "I don't think so."

No chance? "I don't think so."