AT&T Enters Set Top Fray

AT&T Broadband is joining the cable
Internet set-top box race with the initial purchase of one million digital
boxes from Phillips
Electronics
and rollout of its digital value package.

The broadband Internet arm of AT&T made the announcement
Tuesday to compete with America Online,
Inc.’s
AOLTV
in what appears to be a brewing set-top war.

AT&T hopes to snare some of its16 million analog and digital television
customers through its cable Internet partner [email protected] .

Doug Seserman, AT&T Broadband senior vice president of marketing, said the
set top service brings convergent technology to the home.

“The new digital value package strategy not only simplifies our marketing
operations, but it sets the stage for AT&T Broadband to deliver
increasingly excellent customer value on a wide array of AT&T products and
services,” Seserman said. “The ability to deliver a consistent menu of
digital cable products nationwide advances AT&T Broadband’s plan to offer
our customers one-stop-shopping for a wide variety of services including
video programming, high-speed cable Internet access, as well as local
telephone service.”

Set top boxes are seen as the next frontier in convergent technology. Not
only does it marry the abilities of digital cable television and the
Internet, it makes cable voice over IP a reality, as companies in the near
future will be able to provide voice communications over a coaxial cable line.

In June, AOL launched AOLTV set top service to markets in
Phoenix, Sacramento, CA, and Baltimore, MD, and expect to rollout
nationwide service to its 23 million subscribers in time for the Christmas
shopping season. The service will be married through the Road Runner cable Internet access,
pending Federal Communications Commission
approval of the AOL-Time Warner
merger.

The only clear winner in the set top war so far is Philips , which like the American government at the outset of World War
II, is selling to both sides. By the end of summer, the set tops will also
be available for sale at Circuit
City
stores nationwide for under $250.

Rob van Oostenbrugge, Philips Digital Networks chief executive officer,
said the Internet appliance gives AT&T broadband users a valuable tool.

“Philips is excited to be working with AT&T Broadband to create an open and
competitive environment,” Oostenbrugge said. “World-class suppliers now
have a clear entry point upon which to develop innovative new
technologies. The ultimate beneficiaries of this alliance will be AT&T
Broadband customers, who will soon be able to purchase digital cable
set-tops just as they do other consumer electronics products, allowing them
to select the services that best suit their interests and needs.”

Philip’s TriMedia proprietary TriMedia processor gives customers real-time
streaming media, e-commerce and gaming as well as video-on-demand and
personal video recording using an internal hard disk drive. Future plans
include developing speech recognition devices, wireless speakers and voice
and data communications.

Joyce Putscher, Cahner In-Stat
consumer and converging markets and technologies group director, said in
her report, “Line-Powered
Internet Appliances: The New Frontier for ‘Boxes’ & ICs”
, the need
for Internet appliances will increas

e by factor of 15 by 2004.

“Internet terminals are a familiar form for those with previous knowledge
of PCs who will be interested in these types of products for additional use
in the family room kitchen,” Putscher said. “Those who are not PC savvy
will also be enticed by these products in that they are simple, have
low-maintenance of ownership and are not as expensive as PCs.”

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