The two leading cable data service providers are putting a new generation of broadband content tools to use in aggressive growth strategies that represent clashing views of cable's future.
With some 1.5 million cable subscribers between them, Excite@Home Inc. and Road Runner are pulling out all the stops to capitalize on their advanced infrastructures to deliver eye-popping content and ads that outstrip anything other providers can offer. But while both entities are using a combination of high-speed backbones and high-speed access links to support the end-to-end functionalities that make superior content possible, they have different ideas about how to use that content to the maximum benefit of investors, including their respective owners in cable.
Excite@Home officials make clear they'll use their reach into cable, DSL (digital subscriber line) and other broadband access markets to build the largest possible advertising base for their own and affiliated suppliers' content. Road Runner officials say there are no plans to deliver Road Runner content to anybody but cable affiliate subscribers.
"We have a very different approach to the market from that of Excite@Home," says Stephen Van Beaver, senior vice president of operations at Road Runner. "We don't see any reason to change."
Van Beaver's confidence is rooted in Time Warner's and its allies' belief that they can create cable-exclusive content that will prove the difference against DSL and other providers who can only offer Web-based broadband content.
Building a large advertising revenue base is important, he says, but subscription revenues are the major piece of Road Runner revenues and will remain so for a long time to come.
Excite@Home Network Inc.'s perspective says the best way to win in the exploding Internet broadband content and advertising market is to play as many bases as possible.
"Our goal is to try and build a unified broadband experience (for @Home and Excite customers)," says Excite@Home CTO Milo Medin.
This means that customers with high-speed access capabilities will be able to get to much the same content through the Excite broadband portal that they can access via @Home. "You may see caches (files stored on local servers) with localized content in the @Home experience that's not available through Excite, but otherwise, it will be fairly integrated," Medin says.
Now that both entities have upgraded their infrastructures with nationwide interconnections of regional high-speed fiber rings supporting centrally managed intelligent architectures, they're in a position unlike any other provider to exploit new creative tools to the maximum extent possible. In fact, where Road Runner is concerned, the infrastructure improvements will also be felt on the distribution side of every affiliate network as a result of an affiliate-wide decision to deploy DOCSIS (Data-Over-Cable Service Interface Specification) modems in all Road Run-ner systems next year.
Starting in January, affiliate systems who are using proprietary modem systems will begin adding second channels supporting delivery of services to customers who buy or lease modems built to the DOCSIS standard, Van Beaver says. "We expect DOCSIS modems to be available in all our affiliate systems by June," he adds.
Already, with innovations in content implemented over the past few months, "The level of user experience has improved significantly," Van Beaver says. "We're now at version 2.0 of Road Runner, and that's a big jump from version 1.0.
Karl Rogers, vice president of programming at Road Runner, says a lot of what's being done stems from the close relationship Road Runner has established with major media suppliers. "We now have relationships with over 90 program suppliers, a lot of whom are cable TV networks," he says.
"In the past eight to 10 months, we've transitioned the customer experience to one that is more of a rich-media, CD-ROM-like experience."
For example, Nickelodeon has built a "true CD-ROM experience for kids" using graphic landscapes to pull the users into story-telling experiences, says Rebecca Paoletti, director of programming for Road Runner. She points to "high, high video" quality in the service developed for Road Runner by Fox Sports, and to full-length music videos, 3-D game and chat environments and the highly sophisticated use of interactive media by the networks operated by Rainbow Media Holdings Inc. as other examples of the content transformation underway at Road Runner.
The service is also poised to introduce voice chat, e-mail and other voice applications in the first quarter of next year, Paoletti says. "Voice is going to be an important part of the Road Runner experience," she notes.
One of the hottest new applications entering the Web space is 3D graphics, which is something Road Runner has been building for broadband applications through much of the past year in partnership with Worlds Inc., one of the pioneers in 3D applications on the Web. Road Runner customers now have access to 3D virtual environments developed especially for the service, as well as to other Worlds' environments where software used in accessing the sites is downloaded directly to users, rather than requiring them to install the software from CD-ROMs.
At Worlds' sites, users who have created their own avatar identities from a library of characteristics in the software program can "meet" each other and enter chat sessions or explore music offerings and purchase merchandise associated with the site, says Steven Greenberg, a consultant to Worlds. The company's broadband-enhanced site is adding video clips and richer graphics, and has implemented "shared-state capabilities" that allow participants in an interactive game or other session to pick up and manipulate objects, he adds.
Road Runner, by making Worlds a channel on its site, gives Worlds much greater exposure than it would have as a standalone provider of broadband-enhanced content, Greenberg says. This is a portal strength that Road Runner has begun to exploit on a wide scale as part of its sponsorship and advertising initiatives.
"We're finding the sponsorship concept gives us a great way to leverage the best of what's out there and to add a measure of added value (to) Road Runner," says Bob Benya, vice president of Road Runner's Power Media Services unit, which spearheads the advertising and e-commerce efforts of the venture.
The media development tools now available for broadband content make it possible to move away from the traditional Web-page paradigm where HTML (Hypertext Markup Language) defines how everything from text to video clips to banner ads is tied together, Benya notes. "We're combining all the elements and playing them dynamically to fit each user experience," he says.
A key feature of Road Runner V.2 is the new "Power Window" advertising box that features animation and rich graphic messages, often with one-click connections to video segments. "It's almost a precursor to Road Runner TV," Benya says.
Rather than operating in a rectangular window using the traditional Web-page techniques of HTML, the Power Window is square, with advertisements running on a rotating basis. Some Power Window ads come with built-in browsers that keep the user at the home site as the window expands to something on the order of half-screen size to run the user-driven applications, Benya says, describing this as the approach Road Runner prefers that its advertisers take. A second way the window is used is to link the user to an advertiser's page that has been co-branded with Road Runner and is hosted on the Road Runner network.
"The Power Window can also link the user to the advertiser's home site, but that's our least used and least recommended application," Benya says.
Just as the new creative tools support development of compelling content, they support creation of a new kind of advertising which has become the driving force behind surging attention to broadband content development among media developers of every description. The potential of this technology to push Web ad revenues into major-league competition against broadcast and print is the driving force behind the Excite@Home approach to delivering content.
Excite@Home officials say the new ExciteXtreme.com broadband portal will guide high-speed users, no matter what platform they're on, to much of the same broadband content and rich-media advertising that is @Home's hallmark. And, they add, the company will use the @Home cable-oriented backbone network as well as caching facilities in regional data centers to ensure these users have a superior broadband experience through ExciteXtreme.
"Everybody is going to have a last-mile solution of some kind, but not everyone is going to have an end-to-end managed broadband infrastructure," Medin says.
Along with expanding the data rate over the trunk lines, Excite@Home is implementing Cisco Systems, Inc.'s Dynamic Packet Technology in routers to directly insert packets into the fiber in OC-12 (622 Mbps) Sonet configuration, enabling 50-millisecond protection switching over the fiber rings, Medin says. "This allows us to do a level of protection against traffic disruption that we've never had before," he adds.
Servers in the regional data centers are also a key point of attack in the expansion agenda, Medin notes. "We have terabytes of server capacity currently installed, and we're going to need tons more within the next year," he says.
Excite@Home is also working with its server supplier, Sun Microsystems Inc., to develop better means of protecting against failures. Where today, the servers employ a simple A/B switch to connect to backup CPUs (central processing units), Excite@Home wants to go to "n-way" clusters where four, five or six servers are interconnected to provide backup to each other instantaneously, Medin says.
All of this will provide Excite@Home an opportunity to deliver broadband content, no matter what its source, to DSL and cable customers alike at higher levels of quality than they could get elsewhere, officials say. That, in turn, will draw people through the Excite portal on the DSL side as a more reliable source of broadband content than can be found going through other portals.
None of this means that Excite@Home is laying any less stress on nurturing growth in its cable base than before, notes Adam Grosser, president for subscriber networks for Excite@Home. In fact, he says, the company is instituting several new plans aimed at pushing subscriber growth faster in cable.
"We're focused on enhancing customer experiences through a series of initiatives, including ways of moving the market to self-installation and faster growth,"Grosser says. "We expect to see 15 to 20 percent of our new customers performing self installation in 2000, and are planning on hitting 80 percent in 2001."
Excite@Home is promoting self-installation via several measures, including introduction of an online service registration capability and release of a self-installing version of its client software, @Home 1.7.
The new software adds two new plug-ins, the VeonPlayer and MetaStream, to support improved video and multimedia performance over the service and provides a "reset tool" or software agent that automatically resolves common problems experienced by users.
Further boosting the self-installation process, technically unsophisticated users who have recent vintage PCs that come with Universal Serial Bus ports can automatically configure USB-compatible modems and complete the online authorization process themselves, Medin says. "We do USB installs better than anybody else," he adds.
Excite@Home also thinks it has come up with a winning plan for overcoming another bottleneck to installation, which is the need to add cable outlets to connect PCs and other appliances to the network. Medin says the company is about to announce an affiliation with a provider of wireless home LAN technology, where it would purchase such LAN systems in volume to bring costs down, allowing the cable affiliate to offer the LAN at a low price or as part of the service package.
"Seventy-five to 80 percent of the rooms people have their PCs in don't have cable outlets, which means operators have to send out an installer to make the connection," Medin says. "If we can offer this option to the cable operator at the price of a truck roll, we might go a long way toward speeding up the pace of service penetration."
"We'd like to have this option in the marketplace by the third quarter," Medin adds, noting that he wants a system that operates at least at 10 Mbps and preferably at higher data rates. "We're looking at proprietary systems and at systems that are designed to the (IEEE) 802.11 standard.
The 802.11 systems presently are spec'd to operate at 2 Mbps, but there is a second version coming out next year that will operate at 10 Mbps, notes Wendy Lee, a marketing executive at Cisco. Cisco recently participated in a demonstration of home LAN technology with Excite@Home and Sharewave Inc., a supplier of a proprietary system.
"We believe 802.11 will be the first wave into the home," Lee says. "It's rapidly getting to the level where it will be available on a mass market basis."
Clearly, with about a million subscribers now taking its cable service in North America, the Excite@Home management team believes it has devised a cable growth strategy that will keep it in the lead among providers of high-speed data services, in or out of cable. Whether it maintains that lead will depend a lot on Road Runner's success at creating content so hot that people have to have it, no matter what else is going on in broadband content.
Supplying such content is a tall order, and it's one that underscores cable's risk in depending too heavily on proprietary content, especially as Web-based broadband content moves to the TV set, as it inevitably will. "We're doing a lot of work with Road Runner, but we don't necessarily see things the way some people in cable do," says Dan Miller, founder and CEO of On2.com Inc., a supplier of compression and streaming technology.
On2 and a number of competitors are touting new versions of their streaming systems that deliver VHS-quality full-screen video at speeds in the hundreds of kilobits per second. On2, for example, was running full-screen, very high-quality, fast-action motion picture segments at 300 kbps in a recent demonstration that brought signals in over an ADSL link from an ISP that was not benefiting from any special backbone connection.
"If you look at what we can do under these circumstances at 300 kbps, you have to realize that it's only a matter of time before people have access to amazing content over DSL lines connected to set-top boxes," Miller says. "Cable can't afford not to let its subscribers have access to that content as well.
Indeed, when it comes to delivering Web-based broadband content, the television set could well be as large, if not a larger factor than the PC in driving penetration into the mass market. Barriers to getting DSL delivered into the TV sets will soon vanish with delivery of DSL set-tops to retail shelves next year, Miller notes.
"Does the cable operator provide a box that doesn't get you access to all that content the DSL box owner can get?," Miller asks. "I don't think so."
As if to underscore the point, at the same event where On2 demonstrated its technology, namely, the Streaming Media West conference in San Jose last month, another purveyor was showing the world's first instance of a full-length feature film, video-on-demand service offered over the Web. The provider, MeTV.com, was using the same DSL links to deliver a 375 kbps full-screen VOD service that offers 1,500 titles to users on demand.
"We're just getting started, but we've already registered 20,000 users," says Jeffrey Pescatello, president and CEO of MeTV. Finding backbone support to ensure delivery of first-class service is not a problem, he adds, noting that his company has distribution contracts with several providers of high-speed backbone feeds via satellite and terrestrial links to ISP points of presence.
"Once I have the contract with the backbone distribution supplier, I don't have to worry whether there's a special arrangement with the local ISP," Pescatello says. "When you type in our URL, the system automatically takes you to the cache site of whichever of our backbone suppliers is closest to the ISP POP (point of presence).
Nor is getting the signal to the TV much of a problem. MeTV has just filed for a patent on a device which it will soon offer for about $100 to consumers who want to watch MeTV movies on TV sets. The little box, measuring a couple of inches on all sides, plugs into the A/V inputs on the backs of most recent vintage TVs and transcodes the IP to NTSC. The signal is delivered from an online-connected PC to the box at the TV via a wireless link operating in the unlicensed band at 5.4 GHz.
"We can go over cable data modems or DSL, and we bypass the set-top," Pescatello says. "So this is something anybody with a high-speed link can get."