Turning Broadband Into a Commodity
FIVE QUESTIONS
for JEFFREY SKILLING
-- By JULIE DUNN
Enron, the Houston-based utility and
energy giant, last week announced
a 20-year agreement with Blockbuster to
deliver movies on demand into homes, as
a digitized video stream over fiber optic
lines, including the thousands of miles
installed by Enron itself.
Enron faces tough competition from the
current pay-per-view offerings by
companies like AT&T and Time Warner.
But Enron executives say the
pay-per-view market is limited by
inflexible show times and the inability to
pause, stop or rewind.
Beginning this fall, Enron and
Blockbuster, a unit of Viacom, expect to
offer about 500 movies to homes with
high-speed digital subscriber lines, or
DSLs, and there are plans to expand to
7,000 movies and other entertainment.
Enron's president and chief operating
officer, Jeffrey Skilling, has helped guide
the company as it has applied skills
learned in marketing natural gas to the
sale of electricity and, more recently, Internet bandwidth. He was
interviewed by phone from Enron's headquarters in Houston. Following
are excerpts.
Q. What areas will receive movies first and what will be the price?
A. We're going to look at where there are already good DSL
connections in place, look at Blockbuster's systems, and try to find a
match. We expect to focus first on major metropolitan areas.
They'll probably cost around $5. Blockbuster is going to be doing the
work to figure out exact prices. It's essentially going to be an online
VCR:; you can control playback, rewind. You'll view the movies the
same way as the videotape that you rented from a Blockbuster store.
And once the mechanics are in place to stream video, any video signal
can be streamed across the equipment: concerts, video games, anything.
Q. What if consumers would rather receive their movies over cable?
A. We're the long-haul component of the network; we're really agnostic
about the last-mile solution. We're the Interstate; once you get off, there
are all sorts of local routes, like cable, that you can take.
I see a very yin-and-yang relationship between cable and DSL It's a nice
fit.
Q. Are there enough miles of fiber optic lines in place, with broad
enough coverage, to make your plans practical?
A. 14,000 miles. All of North America. Europe will be completed within
the next month. The Pacific Rim early next year.
In addition, we're also installing very sophisticated switching stations into
other fiber networks. We will be able to distribute across any fiber to
anywhere in the world.
We've invested $600 million to date, but we're just starting a very
aggressive program. Enron will be investing at least $600 million a year to
build this network.
Q. Will sales and trading of Internet bandwidth ever become as
smooth as for other commodities?
A. We're working with a number of players to develop standards. Once
you have standards, you can start to define a commodity. You'll have set
qualities, specs, a standard unit.
We expect to see a market for bandwidth much like electricity and gas.
We're already transacting in it; we've made 75 standardized bandwidth
transactions.
This market is really starting to take off.
Q. It's estimated that 4 percent of American households currently
have DSL capabilities. Most of your market so far has been
corporate. How profitable has that been, and where do you see the
market for household service heading?
A. We're really just in the process of installing, and it's mostly geared
toward entertainment, video streaming. Once you have entertainment
products coming over broadband, I would expect explosive growth of
DSL interconnections in the future.
Up to this point, profits have been modest. But you can imagine all the
applications that are coming down the pipeline right now -- with the click
of your mouse, having a person on your screen and actually interacting
with them. Virtually no Web sites have this right now. I think one day all
existing Web sites will have video.
The problem with the current Internet infrastructure is that it's a rocky
road. You really need to have this fiber network installed. That's what
we're trying to do.
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