The Internet Express

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The Independent Online
Nynex and Bell Atlantic, two of the US "Baby Bells", announce their merger. MFS, the new-style US telecoms company, buys the Internet service provider UUNet. BT buys into Italian telecoms and television. Yahoo, makers of a popular Internet "search engine", goes public, raising funds for an aggressive expansion strategy. Then, just yesterday, US software giant Oracle unveils an alliance of computer and telecoms companies. The goal? To provide customers with access to software and services on the Internet using a $500 "dumb" terminal rather than an expensive PC. And all that in the space of just a few weeks.

Company after company in the media and communications sectors is laying bets about the likely outcome of this, the latest stage in the information revolution. Eager to take advantage of the huge growth in communications - the Internet, business networks, video conferencing, and the like - players ranging from big telephone operators such as BT in the UK and AT&T in the US to the middle-ranking but far sexier newcomers such as Netscape, Yahoo and UUNet are forging alliances and wooing new customers. And nowhere is the jockeying and positioning as fevered as in the US.

The logic behind acquisitions, alliances and new product launches differs case by case. For example, last month's $2bn acquisition by MFS of UUNet, which owns the Unipalm Internet service provider in Europe, gives the combined group crucial access to the two basic building blocks of Internet service: UUNet's Internet software, specifically designed for business users, and MFS's fibre optic phone connections to businesses in big US centres. Together, the two companies plan to bid aggressively for clients who want secure, reliable communications networks that work both internally and externally, linking staff, customers and suppliers.

Even the traditional phone companies in the US have hopped aboard the Internet express. MCI, the number two long distance phone operator after AT&T, this month launched its MCI One concept, offering single billing for a range of communications services, including paging, cellular phones, standard phone service and the Internet.

Without a doubt, the growing interest in computer-assisted networking is helping to drive media markets. The old distinctions between mass media and communications - or between content and carriage - are fading. In the UK and the US, among other markets, you can get your phone service from a cable operator. Soon, your phone company will be able to offer a range of broadcasting services piped down digital phone lines or over broadband ISDN connections.

Last week, the European newspaper announced it would make an electronic version available over ISDN lines for the same price as newsagents charge for the real thing - with the added benefit of video, radio and voice clips.

As techniques improve, you will be able to get more than just voice, data and simple video images. Compression technology is already allowing reasonably clear video signals to be broadcast over existing telephone lines. For customers equipped with ISDN or with access to fibre-optic links, the signal is of near-broadcast quality, allowing films and TV programmes to be transmitted on demand.

As in some other sectors - digital TV comes to mind - the US appears to be two to three years ahead of the UK when it comes to the emergence of new communications networks. One statistic sums up the situation: there are already 11 million US users of the World Wide Web, the publicly accessible "network of networks" on the Internet; in the UK, the figure is closer to 600,000.

But there is no doubt the UK will do some catching up, fuelled by business applications above all. As the US experience has shown, computer networking holds huge attractions for an array of companies. Along with new ways of doing business, the Internet offers a new way of advertising products - as the explosion of "Web sites" attests. (These are the locations on the Web designed by corporations and individuals to sell a service, provide information or solicit contacts.)

So which of the many competitors are going to emerge as winners? In the US, the large telcos have a distinct advantage. Slow off the mark, AT&T, MCI, Sprint and the Baby Bells are now all eager to dominate the new communications markets, and have the critical mass, the customer base and the money to do it. They also have the billing systems that will finally allow providers of Internet services to charge end-users, thereby generating profits (something no one is managing to do just now).

In the UK, BT is clearly going to be a big player, as will the cable operators, who have been building out advanced broadband networks across the country. Their cause will be helped by the deregulation of European telecommunications, promised for 1998.

Whatever the outcome, the British consumer is going to be spoilt for choice. For a few pounds a month, users can already gain access to the Internet. Once state-of-the-art networks are in place at an affordable price, Internet use will jump exponentially.

Business networking will be the first battleground, as the wave of mergers and alliances on both sides of the Atlantic already attest. Within a few years, the mass market will be the prime target. The Internet explosion will look very much like the personal computer revolution of the 1980s, as the small, merry band of cybersurfers in the UK is joined by the less technologically gifted.