Taking the PC out of the data comm loop
Remember that classic scene in Moonstruck where Cher gives Nicholas Cage a swift high-five upside the face and yells, "Snap out of it!"?
Consider yourself slapped and duly instructed.
For the past year or so, as many in the industry have paced the floor, wrung their hands and consumed mountains of Zantec to calm roiling stomachs churning with cable modem distress, it seems everyone's attention has been focused on the personal computer as the only on-ramp to the information superhighway and new revenues.
Rub your stinging cheek, turn off your computer and head for the family room. There are some new, economically deployable technologies that could bring data communication off-ramps into millions of homes through a very familiar device. It's called a television.
And if that weren't enough of a sock to the chops, guess what? These new technologies, in all likelihood, will breathe life back into a concept pundits, both in and out of the industry, have been trying to bury with heaps of scorn this past year. It's called interactive television.
Consider yourself slapped and duly instructed...again!PCs are dandy, but...
The cable modem fever that's swept the industry for the past year or so has infected many, but not all. One of the cool and collected is Brian Dougherty, president of Wink Communications (http://www.wink.com). While he's certainly no high-tech Luddite, Dougherty has very definite views on the limitations of PC penetration.
"I'll tell you," explains Dougherty, "at least with the operators I've talked to, I have yet to get a good explanation of why they're so excited about cable modems. Market research shows only a third of U.S. homes have PCs. And that's actually any PCs, including old XTs, Commodore 64s and Apple IIs. And of the one-third that actually have PCs, only a small number of them are leading-edge PCs capable of doing a good job of Internet web surfing. In fact, market research on the number of home PCs that are connected to any kind of on-line service is actually only around 10 percent."
Dougherty continues his lesson in PC math. Ten percent of 33 percent, that translates to roughly 3 percent of the total home market. Then, if you overlay cable's approximate 60 to 65 percent penetration of U.S. homes, the number goes even lower. He gives the benefit of the doubt and rounds it to five percent of the market and poses a logical question: "Of that five percent of your customers, how many will really do so much Internet surfing from home that they're willing to pay the money, etc.?"
He and others like him are the first to acknowledge there's a viable PC market, in homes and businesses, that cable modems will be able to tap into. Yet, it's still limited. That's because PC costs and their perceived complexity, at least for the two-thirds of the population that doesn't have a PC, are big, big road blocks for any significant gains in PC penetration in the foreseeable future.
Dougherty's view of the near-term future (18–24 months) is not that much different from other cutting-edge developers. "I just think a bigger industry is coming," he states. "And just as the PC industry, by contrast, makes the mini computer/mainframe industry seem small or less important, I think information or interactive enabled televisions and telephones are going to be an even bigger and more dramatic marketing opportunity."
Enter the new technologies and "the-TV-as-computer" concept that could bring the great unconnected masses into the information age.Keeping it simple
The new technologies are focusing their energies on the consumer mass market with one overriding thought, simplicity. User-friendly to a fault, they employ different, albeit complimentary, strategies to achieve the same goal, connecting the PC-challenged consumer. In fact, these new, relatively low-cost technologies have the capability of not only opening up new revenue streams relatively fast, but containing, if not reducing, in-house operating costs as well.
If Dougherty and his cohorts have anything to say about it, the disparaging term "boob tube" may become antiquated soon. Founded by the management of Geoworks, a manufacturer of operating systems for personal digital assistants (PDAs), Wink introduced its proprietary authoring software which delivers interactive programming over existing networks last year.
Wink technology capitalizes on the vertical blanking interval (VBI) and an incredibly compact software design to create its ICAP (Interactive Communicating Applications Protocol), a platform-, transport- and user-interface-independent protocol. Easily integrated in either analog or digital systems, the technology includes the Wink Engine, the software component that can be installed in set-tops, televisions, VCRs, cellular phones, etc., to decode the applications and return the ICAP response packets.
Wink's licensee list is impressive. General Instrument will ship its Wink-enabled CFT-2200 early this fall and will adopt it for its digital set-tops at a reported one-time royalty fee of less than $5 per box. Scientific-Atlanta will use it in its 8600x and other products, as will Pioneer in boxes available in 1997. A consortium of 53 companies, including Nippon Telegraph and Telephone and leading TV manufacturers Matsushita, Sony, Toshiba, Pioneer, NEC and Mitusbishi, are gearing up for an ambitious, nation-wide Wink-based interactive launch in Japan this fall as well.
While Wink provides the interactive enabling technology that works behind the scenes, other licensees develop Wink-compliant applications for their own uses. CNN, Time Warner Cable, HBO and The Weather Channel have already signed up to use Wink technology.
Another Wink-compatible application developer is CableSoft Corp. (http://www.cablesoft.com) based in Burlington, Mass. Its suite of local content applications — LocalWorks, ClassiFinder and Yellow Pages — are attracting lots of interest from operators who are looking to deploy on-demand information services that generate revenues.
"It resonates very quickly," says Bruce Jones, president and CEO at CableSoft, "and obviously the ability to bring up the commercial revenues behind it is also very appealing. There's no boot up. There's no search. There's no downloading files at so many kilobits a second. It's there with just a few clicks. The real win for everybody here is if people will use it and get used to the fact that they can get this additional content out of their television."
Jones reports trials of its applications are slated to start sometime this month. He says headend gear costs, which includes the server, software, licenses and data insertion equipment, and is independent of system size, run "somewhere between $80,000 and $100,000."Surfing the Net...on TV?
He sees operators, depending on the market and any cooperative deals struck with local newspapers (ClassiFinder) or telephone companies (Yellow Pages), could generate anywhere from $10 to $30 a month from subscribers for such services. That's on top of any ad revenuee from either service, or possible sponsorship revenues generated with the community information service.
Up to now, conventional wisdom held the Internet and television were mutually exclusive. That was based primarily on the fact that the resolution characteristics of NTSC video did horrible things to images and text designed for higher-resolution computer monitors. A growing number of companies, including WorldGate Communications, Diba Inc. and WebTV Networks Inc., have developed ground-breaking software and patent-pending technology that's all but destroyed that Berlin-like wall between the two media.
WorldGate's (http://www.tvol.com) TV On-Line (TVOL) service is headed up by the renowned former GI exec, Hal Krisbergh. His appearance, along with a working demo of the TVOL service, at this year's NCTA show (in S-A's booth, no less), created quite a stir. Drawing big crowds, including an entourage led by Time Warner's Gerald Levin, the TVOL demo put the industry on notice that the Internet was no longer a PC-dominated media or revenue stream.
TVOL's computing intelligence is based in the headend, and it uses eight VBI lines to send content to analog set-tops. Viewers can surf the Net with their remote controls or communicate via e-mail and visit chat rooms and newsgroups using a $25 wireless keyboard. Its recently announced Channel Hyperlinking capability will allow TV viewers one-button access to Internet options (web sites, e-mail, chat rooms, etc.) shown during TV shows and advertisements.
The service, estimated to cost cable subscribers $4.95 per month for five hours of Internet access, claims downstream speeds of up to 100 kilobits per second and upstream speeds of up to 20 Kbps using a modified form of the impulse pay-per-view (IPPV) circuits used in most advanced analog set-tops. Company officials say field tests this fall are "still on track," with test partners to be announced this month. While product is expected by early 1997, major announcements could be made at this year's Western Show (Dec. 10–13).Information appliances
According to Joe Gillach, chief operating officer at Diba Inc. (http://www.diba.com), the signs are everywhere and cable companies and other broadband communications providers have a clear choice to make soon. Gillach recounts a conversation he had with an acquaintance at a major financial software company whose stock is continuing to perform badly. While the ubiquitous software is enormously popular, the basic problem, says Gillach, is that the company's product "is gated by the growth of more PCs." Because PC sales are slowing down, what should the company do?
"The answer is very clear," says Gillach. "You have to start putting your applications on platforms and devices that average people can buy. And that's what it's all about. There's this huge battle taking place between consumer electronics companies and PC companies about who is going to bring the other 65 percent (of the population) into the information age. And if I were a cable company today, I'd be looking at these consumer electronics companies and saying, 'Okay, what are the devices you're going to bring into the consumer home that I can be the pipeline to?'"
Funny they should ask, but that's exactly what Diba wants to do with its family of Interactive Digital Electronic Appliances (IDEAs). Diba's founders and staff, most of whom came out of Oracle's New Media Division, have developed a broad technology platform which allows consumer electronics and appliance manufacturers to deliver relatively inexpensive IDEAs to market.
The company has identified 40 or so different information appliances that could be developed for a wide variety of consumer applications. Three have been announced publicly to prime the creative pump of potential licensees. The Internet IDEA is a World Wide Web browsing appliance that can be developed as a stand-alone product or incorporated into televisions. In fact, Diba recently announced an agreement with Zenith Electronics to incorporate their technology into its high-end NetVision television line. Diba has also proposed a Mail IDEA which is a low-cost communications appliance that combines electronic mail with a standard phone. The Kitchen IDEA provides consumers with electronic recipes and nutritional information.
Gillach says other consumer electronics agreements are imminent, including one with a large Korean-based manufacturer and with two Japanese manufacturers who are "doing what I would call broad categories of communication-like terminals." For cable companies looking to exploit their pipeline into American homes, branded information appliances could be a way to go.
Gillach reports a huge interest from a variety of telcos. In fact, it's been reported that Cable & Wireless PLC is very interested in both the Mail and Internet IDEAs, which are cheap enough to be "given" to customers who would then pay a monthly fee.
Electronic yellow page directories, for home and offices, could provide added revenues from data and advertising bases that could be updated continuously over phone lines, instead of just once a year. This device could also allow consumers to search for products and services "out of region," thereby generating more long distance or toll call revenue for the phone company as well.
Another IDEA is relatively inexpensive ($500 or so), single-purpose or limited-task computing devices. "The keyboard," says Gillach, "would be customized for a specific application or work process. You could get an order for 10,000 devices customized for customer service types, and the keys would reflect the specific functions or fields they would be entering data into.
"And, because you're only supporting one application, the processing power, the memory and all the extra stuff you need can be much lower. Also, training costs go down, I think they estimate something like 90 percent. So, the training becomes a non-issue, and technical support becomes much easier as well."WebTV debut
One of the newest entrants in the "TV-as-computer" market is WebTV (http://www.webtv.net), the creative brainchild of three former Apple multimedia alumni. With more than 30 patents pending on their standards-compliant system, WebTV co-founder Bruce Leak, chief operating officer and executive vp of engineering, says it's more than ground-breaking technology.
"We're all technology folks," says Leak. "But the technology is not what we're selling to the customer. What we're selling is a turnkey, easy experience. It's centered around your living room. It works well there. You can use your television remote control, you can lean back in your chair and use one thumb to browse the web the same way you surf the television."
The technology has obviously paid off. The graphics and text are amazingly clear. So much so, that the company recently announced licensing agreements with both Sony Electronics Inc. and Philips Consumer Electronics Co. who are expected to announce products targeted for consumer sales this coming Christmas, estimated in the $300 price range.
Leak says the technology, which could be easily incorporated in set-tops and adapted to cable modems, will be supported by their own Internet access service which will offer unlimited access at competitive prices (projected in the $20 per month range), along with a wide range of user-friendly features and services.
WebTV's founding trio has lofty and laudable consumer goals. "We're ashamed of the price of $300," says Leak. "But, we also were unwilling to miss this Christmas. We feel this Christmas is critical to establishing this product category. And so if it has to be $300, it has to be $300. I believe early adopters will take that burden. But long run, it's not going to be a mass product unless it's $149 max.
"Our motivation is that we are the service. We're not selling a cheap box they can take home, and if they don't ever use it again, we're happy because they bought it. We've got to keep them happy. We've got to keep them coming back and feeling good about it. It's a full-spectrum solution."
Leak reports that full-spectrum approach also includes cable, noting they're moving forward on discussions with set-top manufacturers. "We've gotten a lot of interest from them," says Leak. " As we move our price point down to very cheap, clearly the cable box manufacturers might like that. There are also options for integration of what they do and what we do. There's a lot of overlap and a lot of things we can do inside a cable box that they haven't got dedicated hardware to do now, that we can do with our incredibly high-performance processor and some of our graphics hardware that they like. So, it's attractive from a lot of directions."
These recent advances in technology are especially attractive to cable operators looking to tap new revenue streams without busting the bank. It's amazing what can happen in a year's time. Suddenly, TV viewers may have an inexpensive route to the information superhighway and cable operators could help pave the way.