Network Computer backers hope carriers pick up tab >BY Chris Bucholtz, West Coast Bureau Chief

Backers of the Network Computer last week proposed a business model similar to that used for cellular telephones in which carriers would provide the terminals free to their customers and recoup their revenues through user fees.

At an event in San Francisco announcing the endorsement of a set of standards for the NC, Marc Andreessen, Netscape founder and vice president of technology, said the terminals "may be free to the users because of subsidies from the telecommunications companies."

"They could be offered for nothing or near nothing, just like cellular phones are today," Andreessen said. "The NC could end up being a major driver for innovation in the future for the carriers."

Andreessen's statement echoed an earlier speech by Lawrence J. Ellison, chief executive officer of Oracle Corp., which espoused the view that the carriers would play an integral role in funding the deployment of the NC. The terminal is a simplified computer intended primarily for accessing the Internet and simple applications like e-mail and word processing (see story on page 30).

But as of yet, neither Oracle nor Netscape could give any names of carriers interested in purchasing and distributing the NC, and no carriers have yet moved to adopt the cellular model for the terminals.

"We've talked to all the companies involved, and we obviously have some interest in the development of the Network Computer devices," said Tom Esvlin, vice president of AT&T WorldNet Service. "It's too soon to say whether we would use the cellular model and subsidize user acquisition [of the terminals]. It's an interesting idea, but it's too soon to say."

Pacific Bell, Ameritech and BellSouth had similar responses, saying they would monitor the progress of the NC's development before embarking on any program to subsidize the terminals.

The event last week announced the endorsement of NC Reference Profile 1, a set of standards intended to give manufacturers guidelines to build NC devices and allow terminals from different vendors to communicate. At the event, staged by Oracle, Netscape, IBM, Apple Computer Inc. and Sun Microsystems Inc., the companies also announced the support of nearly 70 other software and electronics manufacturers.

One manufacturer, Acorn Computer Group, demonstrated an NC terminal called the Netsurfer that could be available as early as September. Other companies, including IBM, plan to have NC terminals on the market by the end of 1996.

Despite this, some analysts question the NC's potential and are doubtful of the cellular business model's viability with the computers.

"The carriers subsidizing the NC is about as likely to happen as the IRS declaring a tax holiday," said Martin Reynolds, an analyst with Dataquest, San Jose. "Not only does it not make financial sense, but the lack of any local storage in the NC means that there will be a lot more time spent moving data over the public networks, and this is a time when carriers are trying to find ways to use their networks more efficiently."

"If the NC were to be distributed through the telephone companies, they would in effect be encouraging people to nail down their lines," said David Coursey, editor of the computer industry newsletter "PC Letter." "That, and having to quickly learn to manage a new technology, is just what the carriers need."

The cultural differences between the NC's backers and the carriers could be the biggest obstacle to any agreement between the two camps, said Rona Shuchat, manager of the mass market telecommunications program for International Data Corp., Framingham, Mass.

"The Bells have been used to an 18- to 24-month product cycle, while the technology companies move much faster," she said. "That's where the culture of the [RHCs] is a negating factor. They need to pick up speed to improve their customer care services and upgrade their back office facilities as it stands, and they'd have to tack the NC on top of that. I can't see them doing it."