Yesterday, I provided the first five New Year's revelations -- some outside-the-box events that could affect technology stocks next year. Here are the rest.

    6. Digital subscriber-line technology comes of age, and cable doesn't quite scale. Cable modems promise 20-megabit connections, but realistically provide speeds under one megabit. Here in the Bay area, the San Francisco Chronicle reports some users get connections that clock in under 28.8 kilobits per second, which makes them hardly worth the hassle. And apparently, cable modems are a pain to install and keep installed, involving lots of expensive customer support. In line with my revelation No. 5 yesterday about scalability, I'm beginning to doubt whether cable modems can achieve scalability. The telcos have decided to delay the rollout of DSL until the splitter-less DSL modem is real and shippable. That sounds like sometime in 1999, and DSL could come of age. Its 1-megabit connection pales to the cable's 20 meg, but average speeds may be comparable. DSL may first come from the CLECs (competitive local-exchange carriers, a.k.a. the new guys) then face competition from the ILECs (incumbent local-exchange carriers -- a.k.a. the fat, dumb and happy existing phone companies). 7. Microsoft gets censured. It is not a high crime or misdemeanor to try to beat your competition. Oh sure, some sleazy business practices were exposed, but it is best to get America on track again by hitting Microsoft (MSFT) - Get Report with a censure and a hefty fine and move on. If Microsoft gets impeached and convicted, on whom would we rely for technology leadership -- AOL (AOL) ? I quiver at the thought. 8. Multimedia browsers push the browser battle into the background. All kidding about Microsoft aside, the browser battle is becoming irrelevant. It is 1994 technology, and in 1999 a new platform will emerge, enabling integrated audio, video and animation instead of just blue text to click on. Go look at G2 from RealNetworks (RNWK) - Get Report (which we hold), or some of the new stuff coming out of Macromedia (MACR) for a glimpse of the future. 9. Rates, currency and money supply settle into a deterministic trend. Is it inflation or deflation? Is the dollar going up or down? Is the long bond heading toward 4% or 6%? You could have said "yes" to all these questions, which remain unanswered since everything is flopping around even in the final days of 1998. Investors benefited as continued overcapacity in every industry except online retailing kept capital flowing into stocks and bonds vs. new factories. I suggest that in 1999, we will know quite definitively the direction of rates, currency and money supply, and this determinism will help settle global markets. This doesn't mean all stocks will go up -- perhaps quite the opposite. But at least investors will be able to make informed decisions -- instead of questioning the direction of the dollar in figuring out Coke's (KO) - Get Report earnings. Zero inflation or even deflation is here to stay. The dollar will continue its ascent vs. the yen, which will, in a perverse way, get Japanese rates up and U.S. rates down. Money supply will continue to grow as the Fed finally admits it is running the global economy, not just the U.S. economy. Reread, if you will, the first piece I wrote for TSC about deflation. It will help provide conviction in continued growth in tech companies earnings though this type of period. 10. AOL's subscriber growth rolls over. According to my favorite demographer, the world will finally run out of teenage girls in 1999 to sign up for AOL. OK, that is totally unfair, but I do get a sense that high churn will begin again at AOL as:
  1. The training classes for real Web surfing are completed and their users consider direct Internet accounts.
  2. AOL's commitments for page views to sponsors become so overwhelming that AOL users get absolutely inundated with ads. This brings productivity to a halt, forcing mass cancellations in order to get the economy to grow again, which means that AOL's ad commitments are spread over a smaller user base, who get even more ads, forcing mass ... you get my point.

Coming Attraction

: Right after New Year's, I hope to unveil a model for forecasting fourth-quarter 1998 revenue for 32 Internet companies. The model is based on my recent

column on marketing efficiency, and includes valuation inputs on what fourth-quarter revenue is expected to be.

Andy Kessler is a partner at Velocity Capital who runs a technology and communications fund out of Palo Alto, Calif. This column is not meant as a solicitation for transactions; it is instead meant to provide insight into the methods of venture capital, technology and investing. At the time of publication, Kessler's firm held a position in RealNetworks, though positions can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Kessler appreciates your

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