NBC Internet Inc has announced a broadband alliance with internet service provider Telocity Inc. NBCi’s Snap and Telocity are at work on a co-branded nationwide service to be launched in early 2000. As proof of its good faith, NBCi is leading a $70.5m round of investment in Telocity, backed by NBC, GE Equity and ValueVision International Inc. Under terms of the deal, the investors will share a 19.5% stake in Telocity. What Telocity gets in return is not exactly a cash bonanza – more of a web banner ad barter deal. The $70.5m breaks down into $37.5m worth of cash and $33m worth of NBCi and NBC online and TV promotional services. That media space is earmarked for promoting the Snap/Telocity service.
Not that Telocity is putting all of its eggs in the NBC basket. In a separate announcement, the ISP noted that Bessemer Holdings LP and Soros Private Equity Partners LLC have led a round of private funding that, including the NBC money, comes to $127.5m. The funding provides Telocity with the resources and expertise to put us on track to execute our growth and service strategy on a national scale, explained CEO Patti Hart. Right now Telocity is up and running only in Chicago and in the Southeastern USA. That said, its credentials are reasonably impressive. The company was co-founded by Peter Olsen, whose last startup, Octel Communications, was sold to Lucent Technologies Inc in 1997 for a cool $1.8bn.
NBC would love to see Olsen repeat that feat. This alliance demonstrates the power of the NBC family to get behind an emerging technology and offer it through NBCi, our primary consumer internet initiative, explained Marty Yudkovitz, president of NBC Interactive Media. NBC’s tradition of providing the highest-quality video experiences will now extend into the broadband arena, as the new Snap and Telocity service begins to make broadband a reality in homes across the country. In other words, this deal is NBC’s play for a piece of the mass market broadband access pie. It comes not a moment too soon. Microsoft Corp and America Online Inc show every sign of wanting to keep consumer broadband as far as possible to themselves.
