Thread: Stay tuned for broadband on TV
By Owen Thomas
Red Herring Online
March 1, 1999
NEW YORK -- Computer users may be howling for fast access to the Net, but the companies bringing broadband Internet access to the home are already looking past the PC.
At the Jupiter Consumer Online Forum Monday, Network Computer (NCI) announced a deal with US West (USW) to combine data, enhanced TV, and phone service to customers, using a set-top box to come out later this year; @Home Network CEO Tom Jermoluk touted his company's partnership with Tele-Communications (TCI) to provide Net-enabled digital cable; and Steve Perlman, president of Microsoft's (MSFT) WebTV Networks unit, talked up a recently formed partnership with satellite broadcaster EchoStar (DISH).
While these digital TV offerings differ slightly in their features, all share the same mission: getting broadband Internet service out to the masses who are unlikely to buy PCs.
TALKING TO YOUR TV
NCI, an Oracle (ORCL) subsidiary, announced that it would provide software to operate a US West-branded Internet access service. Running in conjunction with a TV signal from cable, antenna, or satellite systems, the service would offer a TV programming guide and other enhancements, access to Web sites and email, and, more notably, telephone service.
Robin Tidwell, a US West product developer, said that the system was in testing now, would enter into trials in US West-served cities like Denver, Minneapolis, or Phoenix this summer, and would be widely deployed by the end of the year.
The service allows US West to market its Internet access and high-speed digital subscriber lines (DSL) to families without PCs in their local service area in the northwestern United States. Unlike other offerings, US West's product would simply use local phone lines to turn customers' TVs into a giant speakerphone; while US West officials didn't comment specifically on plans for videoconferencing, the set-top box has hook-ups for digital camcorders.
The deal is a big win for NCI, with US West its first telco customer in the U.S. Under new leadership by former Sybase chief Mitchell Kertzmann, the company has inked deals with European cable providers, but is still looking to sign up its first U.S. cable customer.
DEATH OF BROADCAST, FILM AT 11
Meanwhile, WebTV's Mr. Perlman touted his latest product, due out this spring: a set-top box with an unusually large hard drive, capable of recording signals from EchoStar's satellite broadcast network. Take note of this everyone should watch this very closely. Since I own a record store I very keen eyes to this development. I have been saying for years there will come time when we will have a memory device, be it solid state or optical or magnetic based, that we will be able to down load and keep all the movies, musics, books, and pictures that want for later use. This baby from MSFT will be looked at as the for runner of what I have outlined above.
"That 8.9-gigabyte hard drive allows us to record about eight hours of digital video," said Mr. Perlman. That, and the deal with EchoStar, changes everything, he argues, as consumers will be able to view television programs and video selected from a vast array of channels and Internet servers at times of their choosing.
"Years from now, it's going to be looked at as a watershed event. You'll have virtual channels. Prime time is what you make it."
WebTV has competition from startups like Replay Networks and TiVo, both of which make surprisingly similar set-top boxes that record and play back TV signals from large hard drives. Mr. Perlman gave a nod in their direction: "What Replay and TiVo are doing is great, but we think that you need something with more interactivity."
DIGGING A CHANNEL
While WebTV and US West look to phone lines and satellites to reach consumers, @Home is staying the course on its cable-modem strategy. As cable operators upgrade their systems, however, it's looking beyond PCs for growth, according to CEO Tom Jermoluk.
"One of the nice things for us is that plant upgrades let us offer a variety of services, from digital TV to telephony to digital data," said Mr. Jermoluk. "And when I bring someone to our service, they may not have been a cable customer." While 98 percent of U.S. homes have cable wiring installed, penetration of cable systems has stalled in recent years at just over 60 percent of U.S. households.
@Home's goal is both to grow from cable's customer base and expand cable systems' reach: "It's absolutely our policy to have us pull cable and cable pull us."
Mr. Jermoluk admits that his company's growth will be constrained by cable's upgrade path for the next five years, but noted that cable operators were upgrading about 10 million homes a year for digital services.
"Broadband is going as fast as it can," he said. "This is not a trivial task."
In the meantime, he added, "You do things like Excite so you can give them a seamless broadband experience they can access at work." @Home recently announced plans to merge with Internet portal Excite (XCIT).
But @Home still needs to find an interim access strategy. Before Mr. Jermoluk's keynote, Jupiter Communications researcher Mark Mooradian predicted that in 2002, 78 percent of Internet users would still rely on slow modem links. One possibility for @Home will be to fold in the operations of WorldNet, an Internet service provider operated by AT&T (T) -- which itself is in the middle of acquiring @Home's majority shareholder, cable operator TCI.
THE TROJAN HORSE
As they outlined their product plans, the assembled executives were not hiding their agendas.
"What looks like a thin client today could be the first step to a home server," You see that word HOME SERVER this should be wake call to the consumer PC industry, if you all have been following my post this is what I said the role of the home PC will become, way back during steve and hpeace timesaid NCI chief Mitchell Kertzmann. In other words, a set-top box connected at high speeds to the Internet could run not just a television set, but a variety of home appliances and communication devices. This is where Bill Joys' Jini comes from SUNW
Mr. Jermoluk said one goal of his company's merger with Excite was to get its hands on Excite subsidiary MatchLogic, which offers technology for tracking user behavior both on Web sites and on cable systems.
"For us, it's all about being able to follow the clickstream up and down" as well as provide precise targeting for advertisers, he said.
And according to Mr. Perlman, WebTV's early products were a bit of a technological ruse.
"We kind of pulled a fast one when we first launched this thing," he said. "We took content that had been prepared for the PC and repurposed it for the TV."
"The Internet is a means to an end," Mr. Perlman added.
And that end -- true interactive television -- has been a long time coming.
"This dream goes back almost 30 years to experiments by newspapers and telecom companies in Europe to deliver videotext to the television set," said Gary Arlen, president of research firm Arlen Communications.
Companies chasing after convergence -- the confluence of PCs and consumer electronics -- will continue to flock to new platforms like the television, he said: "They've covered all their bases. This is about getting ready for whatever the consumer wants."
If the consumer wants interactive television, the industry may finally be ready in 1999. This is the year of Broadband, it's an inflection point
Greg
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