Google Gets the Message

Analysts say the broadband access providers like the telcos and the cable operators realize that they need to offer more than just the high-speed connections.

"For Verizon it has to be more than creating customized home pages. Getting broadband isn't enough anymore," says Sistla, referring to features like photo-sharing and streaming video. "You have to layer in services on top of it."

And forging agreements with telcos gives outfits like Yahoo! something they don't have. "Yahoo! needs to build relationships with service providers who are not immediately competing for the same advertising dollars," says Sistla.

Internet giants like AOL and Microsoft already understand how to play the feature game and are working to get a foot into the calling market.

In April, AOL unveiled $30 monthly phone service for broadband customers, revamping its previous VoIP platform. Not to be outdone, Microsoft's MSN unit introduced a multimedia instant messaging service with free Internet calling.

"Google isn't going to sit quietly," says Sistla. Given the reports about Google's acquisition of network capacity and video ambitions, Sistla says he wouldn't be surprised if "suddenly they could become the big player in video streaming."

"Google is different from Yahoo!, which competes in an established market. Google is trying to build a new business, based on a new culture," says Sistla. "But each will have their own challenges."

>To order reprints of this article, click here: Reprints