Just two years ago the IT and communications industry had a rush of enthusiasm over what seemed to be the beginning of a significant re-alignment of the communications and broadcasting / entertainment industries.
The catalyst was the dramatic announcement in October 1993 of a merger between Bell Atlantic (one of the seven regional Bell operating companies created at the splitting up of AT&T) and the US' largest Cable Network Operator, Tele-Communications Inc. (TCI). The deal would have been the biggest ever, with a paper value variously estimated between US$ 20 and 30 billion.
Although the relationship eventually foundered through a combination of pre-wedding nerves by the partners and a change in the uniform rate cable companies in the US are allowed by regulation to charge their customers (which marked down TCI's value), it nevertheless triggered a wide variety of similar deals and provided a news peg on which the media could hang stories on the imminent development of a wired society. As far as the public was concerned the message was clear - the old industry demarcation lines would be reworked by new, interactive technologies, most notably Video-On-Demand. A newly interactive media sector would develop to change all our working lives and leisure pursuits.
This reaction was understandable. Only a year earlier, US Vice President, Al Gore, had set the scene with talk of an 'Information Superhighway'. And the Bell Atlantic/TCI deal looked like an appropriate business response to a new political agenda for information technology.
In fact, it was the existing US competitive and regulatory conditions that gave the move its logic. The alliance would have provided cash for the further development of TCI's network, and given Bell Atlantic, through that network, the means of offering telecoms services outside its own region. The ability of the partners to develop advanced interactive services across a single network was a long-term strategic consideration rather than an immediate payoff, but considering the regulatory hurdles the partnership would need to clear, it did them no harm to tie the move to the 'Information Superhighway' agenda. In these circumstances the Bell Atlantic/TCI announcement seemed to be a dramatic confirmation of what many industry 'gurus' had been saying for some time: that the steady migration from analogue to digital technologies across all the 'information' industries - broadcasting, content (films and TV production, publishing, information services), and telecommunications - would eventually allow players in one market to move into the others.
If this happened it was clear that major threats and opportunities would present themselves. An obvious proactive response for cable TV and telecommunications companies was to merge or acquire players in the opposite camp as the industries converged.
And the Bell Atlantic/TCI deal provided support for this theory with the only sort of evidence that business takes really seriously - other companies spending money. The sheer number of dollars involved was accepted as proof of the validity of its business logic.
As a result, coverage by the general and business media world-wide was extensive -and public expectations have been high ever since.
Two years later, TELECOM 95 will demonstrate the likely impact of interactive technologies and the time scales within which they will be deployed.
At TELECOM 95 the new interactive applications are still very much on the agenda, although there is now a change of emphasis. Telecoms operators and infrastructure vendors are now talking of developing long-term capabilities, rather than rushing (or not rushing) into entertainment services. Their strategy is to coherently build high-speed, digital capabilities into their networks and deploy a variety of media (copper, fibre, radio) to deliver these to domestic and business customers as opportunities emerge. The talk is of 'Full Services Networks'.
But there is still a huge amount of money in entertainment. The illustration below shows how household spending breaks down in the US, and with it, perhaps, some of the more optimistic scenarios which indicate that there are still major opportunities for telecoms operators in the entertainment market. A number of similar studies have shown that other countries show a similar pattern.
Telecoms operators around the world expect to face more competition in basic services over the next decade. Where this happens it will be increasingly difficult for operators to maintain profits on conventional 'bit-carrying' - connecting one voice or data terminal to another across the network, and charging for the amount of data that flows between them.
Developing their networks so that they can offer new services which add value and can be 'differentiated' from competitive offerings is the key to future growth. And the new network technologies must also help them to cut the costs of running the network.
The telecoms operators are harbouring big ambitions in a fast changing world. And political and technological change is forcing the pace of convergence.
The conventional political wisdom is that deregulation, introducing competition and privatizing where there's public sector involvement, will make the organizations concerned more competitive and more responsive to customer needs. Deregulation can also awaken them to the possibilities of expanding their business activities and building new markets.
And as technologies increasingly use the same components - and, more importantly, can be made to communicate with each other - what were once separate businesses start to look more alike. Most notably, telecoms networks, with their current mix of analogue and digital infrastructure, are on the way to becoming high-speed digital networks capable of delivering all data types - voice, data, and video - on one general-purpose infrastructure.
At present operators tend to install and manage different 'overlay' networks to support each type of application. The introduction of ATM (Asynchronous Transfer Mode), the ITU endorsed standard designed to make the best use of high-speed fibre-based transmission, is key here.
ATM is essentially a way of switching data across the network by packing it into fixed length cells, instead of setting up complete end-to-end circuits of a fixed bandwidth. This allows voice, data and video (which all have different travelling requirements) to be mixed together.
ATM will be essential in the core network to support video applications. It could even be the method by which video is delivered right into the home.
Similar dynamics are at play in cable networks. Cable operators are also installing fibre, for both greater manageability and greater capacity to deliver more channels. Fibre to the curb, with coaxial cable into customers' premises, is currently the favoured architecture for new cable networks. This approach makes it easy for cable operators to deliver telephony services - where regulations allow.
These developments are shifting the emphasis and focus in the delivery of video to the home, and enabling technologies such as picture compression and near Video-on-Demand are changing the way the marketplace looks at true Video-on-Demand.
Video-on-Demand was originally thought to be the 'killer' application, able to justify operators' investment in broadband interactive networks.
Now most are convinced that investment can only be justified by a range of applications. The reason? Opinion research and customer trials indicate that VOD will undershoot the hopes held for it. It is currently presented as a service which will enable consumers to 'dial' their own movies or specialist programmes, but is only seen by them as incrementally more attractive than renting a video or selecting a TV programme, especially as the number of TV channels is also growing. Studies indicate that interactive information and entertainment services will not only have to fight for market share with alternatives, like books, broadcast TV, high tech theme parks and so on, but they will also be competing for a relatively inflexible share of consumer spend.
It is now estimated that VOD would take 5-10 years to break even - and this is a long time in the telecommunication industry, where 2-3 years is usually sufficient for the cost of a telephone line installation to be recovered. Evidently, technological capabilities do not alone a market make.
But even if it's not the killer application in the home, there will be numerous areas in which VOD can still assert itself:
But it is not just the public perception of VOD that has changed. Enabling technologies and the applications that really put the silicon to work have also transformed the way in which pictures can be brought into the home.
Five years ago, fibre optics was the mainspring in the development of the telecommunications network. Huge increases in the raw speed of services were thought necessary to deliver video applications - so increasing the amounts of fibre in both the core and access network was clearly the way forward.
And although fibre optics are still key in the development of the network, it is arguably the application of silicon processing power, with its ever-improving price/performance ratio, that has wrought the biggest changes.
Putting processors to work in the telecoms network has enabled operators to squirt the digital equivalent of over 1000 telephone conversations down a single copper-based telephone line. This is done by using both compression on the picture and advanced modulation techniques.
Uncompressed, high-resolution video is coded at 45-135 Mbps. To give some idea of the magnitude of this bandwidth requirement, a standard telephone conversation requires network bandwidth of 64 Kbps - which is between 1000 and 2000 times less bandwidth than is needed for raw digital video.
But picture compression can be deployed at either end of the process to cut the bandwidth requirement to manageable proportions. This compression use a combination of tricks - such as dividing the screen into blocks and only sending those ones which change between frames; or sending information on every second frame and allowing the receiving decoder to calculate the composition of the intermediate frames by comparing those coming before and after it. Together, these picture compression techniques, known as MPEG (Moving Picture Experts Group ) and MPEG 2, are able to reduce the bandwidth requirement from 45-135 Mbps down to as little as 2 to 4 Mbps.
Until relatively recently, the computer power necessary to decode a heavily compressed picture would have been prohibitively expensive. But commodity processor power has enabled IT vendors to create 'set-top boxes' to decode the pictures for as little as US$ 400, a price which is likely to fall even further.
MPEG will impact the whole communications and entertainment industry. It was originally developed as a compression algorithm for digital storage media - and in particular for the CD-ROM. But it will also have a major impact on direct satellite broadcasting services, as it multiplies the number of channels which can be beamed to earth or distributed across cable networks.
Because compression produces a relatively manageable volume of video data, it may be stored on specialized computers called video servers (courtesy of processor power again).
The video server is able to generate multiple streams of compressed picture which it sends across the network. Because the video data is stored on a random access basis (rather than serially, as on a magnetic tape) it is possible for each viewer to interact directly with the server via the signalling channel, using an advanced remote control unit, and in effect ordering a private broadcast.
But even 2 Mbps per second is too demanding for the conventional local loop (the final copper circuit to the home).
Here, silicon has again been put to work, to produce the Asymmetrical Digital Subscriber Loop (ADSL). This uses advanced modulation coding schemes to drive standard lines.
Because it's trying to squeeze the most it can from unshielded copper, and because it is envisaged that the applications will require most of the data to come 'downstream' to the home, ADSL has to allow an 'upstream' signalling channel while enabling a large (1.5 Mbps and higher) downstream channel. There are two main competing modulation schemes at present: CAP (Carrierless Amplitude and Phase) and DMT (Discrete Multi-Tone).
And finally there is near Video-on-Demand. Here, several broadcast channels are dedicated to a single movie or programme, but are broadcast at overlapping intervals. A 100 minute movie might be broadcast over 10 channels, giving a maximum 10 minute waiting time before the film starts, and allowing the viewer to 'fast-forward' or 'rewind' in 10 minute hops.
But in direct, and increasing, competition with all these forms of video service to the home, is the WorldWide Web.
The WorldWide Web is an application analogous to the 'graphical interface' on the PC. It brings the Internet away from the realms of the purely scientific and technical user and into the open arms of the mass market.
Over the past two years, the runaway success of the WorldWide Web has shifted the centre of gravity in the field, and it is now considered as a major force.
The Web now looks almost certain to be an important element in the general-purpose interactive, multimedia services that telecoms, media and entertainment organizations are so keen on delivering to homes in the developed world.
Telecoms operators are expected to eventually dominate the all-important Internet Access function, an area currently claimed by default by specialist companies.
ABOUT THE WORLDWIDE WEB
The WorldWide Web is essentially a way of making documents available on 'Web servers' under a simple, common, standard on nodes all across the Internet. Gone are the arcane commands necessary to navigate between resources - the Web is set up in a way to allow users to 'browse' with a graphically-based interface providing a familiar 'point and click' environment.
The crux of the whole system is the ability of words or phrases within a document to act as links to other documents. There is no hierarchy to provide a context for material; instead the participants themselves develop documents containing lists of other documents.
In other words the navigation structure is designed to evolve organically as needs and imagination allow. The embedded tags define a Unified Resource Locator (URL), which is essentially an address locating a single document somewhere on the Web - to the user a link-word or phrase appears as a highlighted string on the screen.
Invented by a British researcher, Tim Berners-Lee, the Web is based around the concept of generalized mark-up, already well-established as SGML (Standard Generalized Markup Language). SGML text files are embedded with tags which define the content in a 'generic' way - independently of the 'procedural' instructions required, for instance, within a word-processing document to specify type size, design or exact position. SGML documents are then able to be stored and accessed in a structured way defined by their content, and are portable between platforms and applications.
The Web's HyperText Markup Language (HTML) shares the basic principles of SGML text, within which documents may be tagged in a hierarchy of headings, and other tags may be used to give emphasis within the text body.
Using Video-on-Demand or the WorldWide Web to deliver one-dimensional movies or simple Internet access is just a starting point.
For the future it is possible to imagine a whole range of network-based applications which could make use of interactive data to deliver services which are highly tuned to the needs of individual users.
And in spite of the known problems with any potential Global Information Infrastructure (or even with today's Internet) - which range from the difficulties of assuring security, confidentiality, and authors' copyright while still being able to guarantee individual users' freedom, to being able to provide sufficient bandwidth and handle the sheer volume of information required - there is nonetheless enormous potential for using the network.
The network of networks can be broadly used, commercially, in the following areas:
This is often nominated as the area most ripe for exploitation. Because of the interactive nature of the new media, an interactive shopper could select items from the screen, fill out a form and, of course, view the goods from different angles. For purchases with a high emotional involvement, such as cars, it would be possible to provide a wealth of detail, ranging from testimonials from other drivers, to promotional footage, independent reviews and so on.
It has even been suggested that clothes shopping could involve the electronic retailer storing three-dimensional data models of each regular shopper. Clothes could thus be virtually 'tried on' before buying, with the results first being viewed by the user / buyer.
If catalogue shopping is a popular option currently, then interactive-based shopping might well be tomorrow's winner.
Finally, the interactive capabilities of the system can be used to present material in context, and to take advantage of knowledge that is geographically remote from where it is needed. All forms of interactive media show great promise in the educational and medical fields.
This is particularly true where there are geographical limitations, or where expertise is highly focused in one particular region or area.
There has never been so much potential for the distribution of specialized knowledge. And an increasing number of applications are being made available that allow that potential to be translated into reality.
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