Netscape: We’re in media, not browser business now

By Reshma Kapadia

NEW YORK, June 6 (Reuters) – AOL Time Warner Inc (NYSE:AOL – news) is remaking its pioneering Netscape software business into an Internet media hub brimming with Time Warner artists and publications, aimed at office workers and Web purists not already using AOL services. ADVERTISEMENT

“The browser is a crown jewel. However, six months from now, you won’t consider Netscape to be a browser company,” Netscape President Jim Bankoff told Reuters in an interview, referring to its early role in creating the first popular tool for surfing the Web.

The shift recognises the overwhelming dominance of the Internet Explorer (IE) browser produced by arch-rival Microsoft Corp (NasdaqNM:MSFT – news), and frees AOL to focus on new media markets now taking shape on computers, phones and television.

The revved-up Netscape media strategy signals that AOL Time Warner is stepping up the integration of its varied business units following the completion of AOL’s $106.2 billion purchase of Time Warner Inc in January.

Netscape, which plans to embark on a brand advertising campaign later this year, wants to act as a hub for the wide array of core Time Warner media properties — such as Fortune and Time magazines and the 24-hour cable news network CNN.

So far about 18 Time Warner publication and programming sites, including CNNfn financial news and CNN.com, have been embedded in the toolbar that runs along the top of the Netscape media site.

NETSCAPE SOFTWARE TO ACT AS COMPONENTS FOR MEDIA SERVICES

Netscape is by no means a rejection of its software legacy, as components of its browser technology will continue to power new features of Netscape’s media services aimed at office workers, small businesses and sophisticated Web users.

“We have all been waiting to see if they stake the crown on the technology, on the name, or on the parent and it become more of an extension of a grander thing,” said Lydia Loizides, analyst at Internet research firm Jupiter Media Metrix.

“It’s not going to be Netscape, but rather Netscape.com,” Loizides said.

AOL Time Warner’s retreat from creating distinct Netscape browsing software figures in the on-again, off-again talks the company is holding with Microsoft to renegotiate its licence to embed the Internet Explorer in its AOL service.

The talks, which broke down last week but are said to have since resumed, would extend a five-year AOL-Microsoft browser deal that expired in January of this year, among other topics.

But in an industry that does not know how to stand still, the rivalry has shifted to instant-messaging services that incorporate browser-like Web surfing features with the capacity to swap messages rapidly among friends and colleagues.

Microsoft is incorporating an instant-message service it calls Windows Messenger into the next version of its operating system software known as Windows XP that offers audio and video conferencing, file transfers and text messaging. This change means customers of alternative instant messaging and Web browsers would have to go to extra effort to use such systems.

The expired Microsoft pact had allowed AOL’s software to feature on the desktops of many Windows PCs, helping fuel the growth of AOL services. AOL still relies on Internet Explorer as the built-in browser for its now 29 million subscribers.

Bankoff said Netscape’s strategy will not be altered regardless of which way the talks with Microsoft are resolved.

He confirmed that AOL has been testing “Komodo” software, which would let AOL and CompuServe Internet services support multiple Web browsers, including Netscape, as well as perform various other functions.

Netscape is also trying to increase the reach of its technology platform and has struck recent deals for its browser to be used in Sony Corp’s PlayStation 2 and direct computer seller Gateway Inc’s (NYSE:GTW – news) Touchpad.

“We are finding demand for more than the Internet browser in the marketplace,” Bankoff said, contrasting Netscape’s partnering moves to what he considers Microsoft’s winner-take-all model. “You will see more pacts like the one struck with PlayStation.”

NETSCAPE, THE ALTERNATIVE MEDIA BRAND IN THE AOL STABLE

The historic transformation of Netscape into media property has been underway since AOL bought Netscape in 1999 and Time Warner in 2000 to form the world’s largest media company, with interests ranging from music to film and across the Internet.

Netscape.com’s base of registered users has grown 37 percent to more than 40 million worldwide from 15 million in February 2000, the company said.

The Netscape target user typically surfs the Web at work, often on high-speed connections, and resists the packaged online experience AOL creates to draw mainstream audiences who find wide-open Web surfing confusing or overly complex.

“We call them the ‘a la carte’ crowd. (Netscape users) have a perceived interest in finding their own things,” Bankoff said.

Bruce Kasrel, a Forrester Research analyst who had yet to be briefed on the new Netscape plans, said ahead of the announcement last week that Netscape needed to pursue a hybrid media and software akin to that of Microsoft’s MSN Explorer.

MSN allows users to custom design the mix of Web searching, news updates, communication features and other services using Internet Explorer technology. Similarly, he predicted AOL Time Warner would fold Netscape software into its media properties.

The media hub strategy gives Netscape a chance to sell advertising across its many properties — something AOL Time Warner is well known for doing — and to test the waters for subscriptions rather than just free services, Loizides said.

“Because they are repositioning themselves, they are a bit freer to experiment than Yahoo! or other services,” she added. “Things they could test include subscriptions services” for unique Time Warner programming or special Web software.

The formula of using Netscape to create a central Internet meeting place for Time Warner magazine readers and broadcast viewers echoes in certain respects the push by Time Warner in the first half of the 1990s to draw users to a single site. That site, known as Pathfinder, failed to keep Time Warner readers within the site and eventually closed.

Netscape can tap an unprecedented wealth of exclusive media content ranging from music pop star Madonna to the hit crime-family drama “The Sopranos” now running on U.S. cable television, Loizides said.

Wednesday February 28 03:00 PM EST

Can a peer-to-peer phone network fly? By John Borland CNET News.com

The latest market eyed for peer-to-peer technology is an already beleaguered industry: the phone companies.

A group of high-profile Internet telephony evangelists is building a new service that combines a little of Napster onto an old Internet phone idea in the pursuit of free voice calls. The Free World Dialup project, for now being run under the auspices of consulting and trade show company Pulver.com, aims to create a peer-to-peer network allowing people on different sides of the country to borrow each other’s phone lines over the Net, making any call a local call.

Already in early trials using equipment from Cisco Systems, the project is scheduled to launch initial tests with ordinary callers in late March or early April, using kits that will cost consumers $150.

While serious technical and real-world adoption hurdles remain ahead, the project does mark a new step forward for the peer-to-peer networking model. Where most consumer applications previously have focused on sharing or swapping digitized content such as music or videos, Free World Dialup instead shares communications networks.

That potentially raises a dangerous concept for telephone companies already struggling with falling profits and tectonic shifts in networking technology: If they lose the traffic cop’s role directing voice and data traffic on their networks, they could find themselves with even more pressure on their bottom lines. That alone is enough to draw interest to what company CEO Thomas Anglero calls a first “proof of concept.”

But analysts say no matter how compelling a technology model, Anglero and partner Jeff Pulver are walking into a mine field.

“The logistics of this are absolutely nightmarish,” said Forrester Research analyst Bruce Kasrel after hearing a description of the model. “If the carriers were involved, this might have a chance of working…But this is not something you can do behind the carriers’ back.”

Half Napster, half party line Advocates of routing telephone calls over the Net have been touting their services for years as a way to make end runs around phone companies’ charges, but have gained only limited public traction. Large companies from AT&T on down have taken initial steps toward adopting the technology, but start-up ventures, such as PhoneFree.com, that offer free service have recently begun adding fees, and even Microsoft’s free service has begun limiting use.

The Net-based phone ventures have suffered from a few problems, analysts say. The quality of the connections still is generally comparable to a cell phone at best and can be much worse. Nor do many people want to buy special equipment or learn new software programs just to save a few cents per minute on their phone bills, analysts say.

Despite the slow progress, some pressure still exists in Washington, D.C., to tax Net phone calls the same way as ordinary phone calls, a move that will likely grow stronger if the movement starts posing a more serious competitive threat to the carriers.

The Free World Dialup plans start where other attempts to make Net end runs around carrier toll charges have left off.

The system is built on a network of participants who have broadband Net connections around the world. Each participant hooks up a Net router and a Cisco “gateway” that converts analog telephone signals into Internet-style traffic to their telephone. This kit will initially cost $150 but will likely come down as more people sign up for the service, Anglero said.

When someone in San Francisco wants to call a friend in New York, for example, she would dial her phone just as she ordinarily would. But the call would be routed through the Net to someone else hosting the service in New York, whose equipment would then complete the call to the nearby friend as a local call, free of charge.

“This is really a community that will be working together to make this work,” Anglero said.

In theory, this could be an elegant way of avoiding long-distance charges. In practice, it’s likely to have considerable headaches, analysts say.

Since the system requires that participants allow other people to use their local phone lines, conflicts could arise when the person who actually owns the phone line wants to pick up the phone for a call. Anglero says they’re working on that problem, and are now adding a transitional fix that simply notifies the caller that the connection is about to be broken by the owner of the phone line they’re using.

The limited nature of the network adds in some uncertainty, moreover. A caller might find a network node to borrow in New York, but then find that the system is useless when trying to call Seattle or Paris, because nobody in those cities has signed up for the service.

Nor is the “early adopter” audience who still dominates the broadband subscriber rolls necessarily the right target for this type of service, some analysts note.

“Broadband penetration limits a lot of what kind of customer they can target,” said Aurica Yen, an analyst with the Yankee Group. “These early adopters generally don’t care about saving a few cents on a phone call.”

Sign of things to come? But beyond the Free World Dialup’s immediate proposition to consumers, the service may well point the way to new models of building communications networks. Already technologists are talking about adopting the peer-to-peer model made famous by Napster and Gnutella to new tasks such as content distribution on the Web, a business now led by Akamai Technologies.

Some analysts said Pulver’s communications infrastructure-sharing model could be picked up by carriers that wanted to offer special deals to customers, while looking for ways to route calls beyond their own networks. Local phone companies or competing DSL providers could offer this type of service to compete with long-distance companies, for example.

Analysts warn that as long as it requires consumers to change their calling patterns even a little, it’s not likely to gain much ground, however. The ubiquity and efficiency of a basic phone call is something consumers aren’t willing to give up.

“The Internet telephony community has been trying ideas like this for years, a real power to the people thing,” Kasrel said. “But the whole thing of ‘lets change the way people use the regular telephone’ hasn’t happened at all.”