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Friday, 31 March, 2000, 14:56 GMT 15:56 UK
Broadband drives global mergers

The AOL-Time Warner merger created a global empire
On the global stage, broadband is a major driving force behind the growing round of mergers and acquisitions among TMT (technology-media-telecom) companies.

Only this can explain the extraordinary recent acquisition of Hongkong Telecom - the dominant operator in the region - by Pacific Century Cyber Works, an internet start-up less than a year old with little in the way of revenues and no track record.

This service will rock America.

Stuart Collingwood
Enhanced TV expert
Globalisation means that telecoms companies will have to have not only the means to deliver services but content to offer as well if they are to thrive.

This is why the internet service provider America Online has acquired the media giant Time Warner.

AOL offers Time Warner a huge market for its products while Time Warner gives AOL a vast range of content to offer its subscribers.

New age

The days when services were delivered via specific devices - TV, radio, telephone - are almost gone.

An age is dawning when multimedia services will be available via a range of devices, such as PCs, mobile phones and digital TVs.

That is why corporate giants like AOL have also formed alliances with major companies in other sectors, such as mobile phone makers Nokia and Ericsson.

It is not difficult to see the advantages: current rates of growth suggest that one in two Europeans will own a mobile phone by the end of 2000, and the trend is echoed in many parts of the world.

In a similar vein, Forrester Research has predicted that 18 million internet users in the US will be connected via broadband by 2003.

American pie

Microsoft, too, seems to have a finger in just about every pie, recently announcing a link-up with telecoms operators BT and AT&T to develop software for mobile phones.

The synergies are the same whether you are in India or Islington.

Kieron Kilbride
Media analyst
AOL says it will launch AOL TV this summer, through its relationship with global satellite broadcaster DirecTV.

Stuart Collingwood of enhanced TV software makers Liberate Technologies says: "This service will rock America" - pointing out that AOL has some 21 million customers.

And given the fact that DirecTV is owned by the world's biggest car manufacturer, General Motors, it becomes clear that there is almost no limit to the cross-over opportunities being exploited by multinational companies.

Cable enabled

With so much happening on so many fronts, the big companies cannot afford to put all their eggs in one basket.

AOL's alter ego Time Warner is active in developing cable services, competing with such big players as AT&T and Comcast.

In the US, cable has been hampered by the fact that its networks are generally old and in need of upgrading for broadband. Stuart Collingwood says this has been estimated to cost between 15bn and $30bn.

As a result of this need for expensive investment, and the fact that US mobile phone services have been held back by incompatible systems, the rest of the world has had a chance to keep up with, or even overtake, the US.

Digital satellite systems are very advanced in Europe, and most of the major European cable operators are developing broadband services.

In Japan, there has been huge development of wireless technology, with mobile phones used for all kinds of internet-based services. In Asia and Australasia, widespread broadband services are also in the offing.

Baiting the hook

This global pattern of expansion is throwing the focus in the industry on to how to get, and keep, sufficient numbers of customers to be profitable, with the prospect that the rewards for success will be huge.

Which brings us back to the necessity of providing content as well as the means of delivering broadband services.

Kieron Kilbride of independent media research specialists Kagan says: "The synergies are the same whether you are in India or Islington."

He says we have already got to the point where service providers around the world are often owned by the same parent companies and will therefore be operating to similar business models.

The benefits to be gained from getting a given brand into as many areas of the market as possible will be huge, he says, and companies with a clear strategy now will steal a lead on their competitors.

The right mix

Stuart Collingwood says broadband content "must be compelling". Only then will it be posible to win and keep customers in a vast market where those customers are constantly exposed to offers tempting them away.

He says the key is to bring the best of the internet and TV together and personalise it by adding a community angle.

For example, providing a constantly open line of communication with family and friends via the TV or PC through which someone watching a football match might message a friend with "What a goal" moments after it is scored.

Or someone watching a holiday programme might send a message saying "Let's go in July" and attaching the details downloaded from the programme provider.

One thing is for sure - no one yet knows exactly where this technology is going to take us. But corporate heavyweights all around the world are agreed that it is the future.

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