Future TV, more Hong Kong...............................
ERIC LAI
Ricky Rand says it matter-of-factly. "There was never any time when we thought there were any other real players. We knew it was just us and IMS."
The main man behind FutureTV, a local start-up firm which has waited nearly two years for the chance to bid for the licence to offer video-on-demand in Hong Kong, Mr Rand appears neither deluded nor foolish.
Yet the 37-year-old British-born electrical engineer is unabashedly confident when he talks about challenging Hongkong Telecom IMS' $10 billion juggernaut known as iTV.
Partners and advertisers will flock to FutureTV "because we'll have the best product on the market", he says.
Mr Rand also predicts that the typical family subscribing to FutureTV will spend $600 to $700 per month on movies, shopping and Internet access which, coupled with additional advertising revenues, will let FutureTV reap back its initial investment within 20 months.
Based in Tsuen Wan, FutureTV is headed by Mr Rand and his partner, Tommy Lam. They met 15 years ago when Mr Rand was a visiting engineer from Acorn Computer and Mr Lam was overseeing production at motherboard maker Wong's Electronics.
Mr Rand eventually moved to Hong Kong, where he helped create a successful on-line financial service called the Stock Market Channel. Boasting one of the first direct links to the Hong Kong stock exchange, the channel was aimed at stockbrokers who needed instant access to financial information. Mr Lam helped manufacture the proprietary terminals for the channel.
A few years ago, Mr Rand sold his stake in the channel to a subsidiary of Reuters. "I got a bit of cash, which meant I didn't have earn my crust," he says. Flush with money, but not sure exactly what to do, he toyed with setting up a firm to make high-end audio equipment. Instead, he hatched FutureTV, and recruited Mr Lam to join him.
The company's plans smack both of hubris and practicality. Mr Rand says he has an ingenious way to bypass Hongkong Telecom's broadband fibre-optic network, called cable relay system (CRS). Telecom plans to charge companies a minimum of $500 per month per customer to use CRS.
The secret, say Mr Rand and Mr Lam, is a proprietary system developed by FutureTV which uses conventional - and cheaper - data lines rather than CRS' broadband network.
Called the "mesh", the system relies on placing video servers around the territory near subscribers, rather than centralising them in one location. These video caches can store hundreds of hours of movies, Web pages and other content.
The video caches help offload customer requests from FutureTV's main servers. For instance, when a customer in Stanley chooses a movie, he will download it from the nearest FutureTV video cache rather than from servers farther away.
This helps solve the problem typically beguiling would-be VOD providers. To transmit a movie digitally in VOD requires at least 1.5 megabits per second of bandwidth - or more than 50 times faster than a typical 28.8 kilobits per second modem connection. That is compressed to the MPeg-1 industry standard, which Mr Rand says "looks like a pretty typical VHS tape" and boasts CD-quality sound.
If all of its customers throughout the SAR downloaded movies from FutureTV's main video servers, the amount of bandwidth required would be in the thousands of megabits per second. It would stretch throughout Hong Kong and would be incredibly expensive.
In FutureTV's system, the caches are close to the customer. That means the leased data lines are shorter, require less bandwidth, and are consequently much cheaper. "We reduce the cost by reducing the amount of network bandwidth that we need to buy from the telecoms," Mr Rand says.
But what if the customer wants to watch a more obscure film not stored on his local cache? In that case, the caches must download the movies from FutureTV's main bank of video servers before sending them on to the customer, who may have to wait an extra five seconds or so, Mr Rand says.
These customers with "minority interests" are more expensive to serve, he says. But FutureTV will charge the same price per movie, nevertheless.
Movies broadcast on FutureTV will be "scrambled" to prevent viewers from taping movies. In addition, each movie will be encoded with an invisible digital "watermark" which can identify the original viewer.
According to its proposal submitted to the Government more than a month ago, FutureTV will spend $1.4 billion over two years to set up its VOD service. To keep costs down, it developed almost all of its technology in-house. That includes a one-gigabit network switch costing only hundreds of US dollars to manufacture, and the video server hardware. For the set-top box which will go on top of customers' televisions, FutureTV is relying on a sister company in Cambridge, England.
Unlike other underpowered set-top boxes, FutureTV's box will have a fast 233 or 300 MHz StrongArm chip, a 16 MB network interface and six-channel surround-sound audio. For Internet users, there is a 115 kbps serial port. The total cost is $4,000 per box, though prices will drop when the company begins manufacturing in earnest. "Our box may cost more than others, but I'm putting my future into it," he says.
On the content side, FutureTV is firmly pragmatic. While iTV has been locking up content providers into exclusive contracts by paying reportedly hefty up-front licensing fees, Mr Rand says that FutureTV will not pay licences to companies.
Instead, it wants to share revenue - and risk - with its content partners. While companies are not guaranteed any revenue, the upside is that movie distributors, for example, could maximise their profits, Mr Rand says.
Partners will be able to check FutureTV's records to verify how many times their movies, or other content, have been viewed or used.
FutureTV has had many discussions with potential partners, though none are confirmed as of mid-October, Mr Rand says. But he is confident that by launch time, FutureTV will be able to boast more than the 200 hours of movie programming iTV says it will when it launches in a few months.
As Mr Rand puts it: "If IMS signs up Wellcome, we'll go for Park 'N Shop. If IMS signs up one company in a single area, there are still 10,000 companies left."
Advertising also will be a key revenue source, Mr Rand says. FutureTV will monitor subscribers' viewing habits and purchases so advertisers can target customers directly.
These ads might run at the bottom of the TV screen during a movie, for example. FutureTV users will get a discount if they choose to watch a movie with advertising. The cost will be only a little higher to have the ads turned off while watching a movie.
"We get money if he views [the ad], we get money if he buys," Mr Lam says.
FutureTV also wants to offer Internet access, possibly through a partnership with a local ISP. Users would be able to use both their PC or television, with the set-top box acting as a modem in both cases. The set-top box will provide 2 mbps of total bandwidth, equally split between downstream to the user and upstream to FutureTV.
Subscribers will be able to send e-mail or surf the Web on their TV through built-in software. For PC users, there will be a bottleneck - the 115 kbps serial port connecting the set-top box to the PC. To help speed up surfing, Mr Rand envisions setting up caches to store popular Web pages for quicker access.
With this combination of services, Mr Rand thinks FutureTV could win 80,000 subscribers within two years of launch. Rather than tackle iTV head-on, FutureTV would first offer service in areas likely to be ignored initially by IMS, such as Aberdeen, Repulse Bay and Stanley. As he wryly notes: "Why should I have the competition?" |
