As part of the deal, the three companies are taking a $45 million stake in Digital Island.

The new infrastructure will allow Digital Island to provide up to 7.5 million simultaneous streams of broadcast-scale streaming media.

The scope of the endeavor, similar to standard TV, is larger than any previously announced streaming network, and is expected to accelerate the market opportunity for entertainment and other companies, such as financial services and publishing firms, using rich media for Web-based customer transactions.

"This relationship is creating a win-win solution in deploying a streaming network capable of delivering 7.5 million simultaneous streams. Digital Island is poised to take advantage of the rapidly growing streaming market," said Greg Howard, principal analyst of the High-Tech Resource Consulting Group LLC.

The infrastructure expansion over the next two years is intended to greatly increase the streaming and transactional capacity of Digital Island's e-Business Delivery Network, which offers an integrated suite of hosting, network, content delivery and application services for companies engaged in interactive e-Business.

In addition to the equity stake, Compaq Financial Services (CFS) will provide $50 million in equipment lease financing to Digital Island, to expedite their worldwide deployment of Compaq servers. This financing support will continue as Digital Island expands into more than 25 countries in North America, Europe and Asia. CFS will also extend up to $50 million in lease financing to qualified Digital Island customers.

Digital Island has standardized on Intel architecture-based Compaq ProLiant servers as its scalable global platform for Microsoft Windows Media Services running on Windows 2000. Digital Island has committed to deploy up to 8,000 Intel architecture-based Compaq servers worldwide, including the new ProLiant DL360 servers built on Intel's Pentium III processor. Digital Island has committed to deploy these servers in its e-Business Delivery Network, integrating regional data-center hosting with network-edge computing that locates streaming content close to the end user.

Digital Island's expanded streaming media infrastructure will support Windows Media which provides the capacity for up to 9,000 concurrent streams on a single server. The network will be powered by Windows 2000 Server.

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"The Internet is all about interactivity and e-Business is about the end-user experience," said Ruann F. Ernst, Chairman and CEO of Digital Island. "Users want the most compelling interactions, which means rich media must be a part of the experience. This powerhouse combination of Compaq, Intel and Microsoft working with Digital Island will remove the barriers to using rich media to reach broadcast-scale audiences with full transactional capabilities - adding an entirely new dimension to e-Business around the world."

Will Poole, vice president of Microsoft's digital media division, said the partnership will move streaming media into "prime time."

"The customer demand is here and growing. Windows Media Services running on Windows 2000 has the proven reliability and scalability to meet the demand, and this announcement is an important step toward ensuring the network capacity will be in place for streaming media to reach its full potential for business and entertainment."