It doesn’t seem to be ‘just another consortium’

Although more announcements are expected momentarily, to date, the members of First Cities are Apple Computer, Bell Communications Research (Bellcore), Corning, Bieber-Taki Associates, Eastman Kodak, Kaleida Labs, MCC, North American Philips, Southwestern Bell Technology Resources, Sutter Bay Associates, Tandem Computer and US West. The most recent addition to First Cities is COMSAT Video Enterprises. President Charlie Lyons calls the company “the most advanced on-demand video company in the world.”

It’s an impressive group, not only because of what each member brings as a company, but also because of the wide experience and expertise of the people involved. Of all the member groups, only two — Philips and US West — didn’t discuss their involvement with First Cities.

SIDRAN THE LINCHPIN, BELLCORE WAITS IN THE WINGS

For some First Cities members, the appointment of Sidran as executive director signaled the start of something big. Sidran, who is still formally a Bellcore employee, spent more than a decade as a technical manager at ABC-TV, engineering and facilitating design and operations at the broadcasting company. He left in 1989 to join Bellcore, and in September 1991 was “loaned” to MCC as a full-time assignee to the First Cities project.

Beyond Sidran’s connection, Bellcore itself is also involved in the First Cities project, which is probably one reason that those who dismiss the alliance say “it’s just a phone company thing.” But Paul Lial, assistant vice president of network systems research for Bellcore, says that even his organization is waiting to see what happens with the business plan before it commits.

If Bellcore does move into Phase II, though, he says Bellcore “would like to have a better sense, and accelerate the development, of network interface standards and specifications for multimedia.” Its contributions are most likely in the area of specifying protocols for bridging networks.

APPLE COMPUTER BRINGS INTERFACE

Apple brings its obvious expertise in human interface design and media computing to First Cities. It also brings Mike Liebhold. Liebhold, manager of media architecture research in Apple’s Advanced Technology Group (ATG), is “eyes and ears” at First Cities for Apple chairman John Sculley and ATG director David Nagel.

Probably as close as you get to a “policy wonk” in high tech, Liebhold’s been active in drafting policy recommendations on privacy, protection of copyright and equitable access to communications and computing power. He’s also been responsible for many of Apple’s strategic partnerships, as well as many of its multimedia products.

SUTTER BAY KNOWS CABLE, SITE DEVELOPMENT

Tom Reiman, a former BellSouth staffer and Pacific Bell network technology and marketing consultant, is now executive vice president of Sutter Bay Associates, a 25,000-acre housing development now in the planning stages near California’s state capital of Sacramento. Sutter Bay, at this writing, is also the only cable service franchise on the First Cities board, and Reiman is cochairing First Cities’ site development activity. He brings expertise in advanced infrastructure for new housing developments, a critical but often overlooked piece of the puzzle for providing future services.

He’s also looking at a much more complex problem — the retrofitting of existing homes with upgraded infrastructure. “Those problems relate to a lot of issues, like depreciating existing plant [wiring] and methods of delivery, whether telephone or TV or wireless,” he says. “We know that we want to be able to bring First Cities’ services into cities that already have base infrastructure in place, but we’re not sure how just yet.”

CORNING, INC. HAS THE GLASS

Corning is the world’s largest maker of fiber-optic cabling, which has exponentially more bandwidth than the existing plant of which Reiman speaks. Getting fiber into the home has been the dream of everyone who’s ever spun a fantasy about the future of multimedia and/or information services.

Though it’s been involved in discussions about multimedia and other high-bandwidth services for many years, David Charlton, program director for fiber amplifiers for the Corning, NY-based company, says Corning joined “really to learn,” since the First Cities brief isn’t directed to doing something specifically with fiber.

BIEBER-TAKI VENTURES FORTH

This “boutique venture capital company,” as it’s described by cofounder Dennis Bieber, specializes in the commercialization of intellectual property and has one of the most interesting backgrounds of any First Cities member.

Both Bieber and Tomio Taki are cofounders of Rebo, the leading high-definition TV production studio in the U.S. Taki, a “nonexecutive” partner in the firm, remains at Rebo and is a major financier.

After selling his interest in Rebo two years ago, Bieber decided that he wanted to avoid technological dead ends as well as keep track of what the “big boys” were doing, he says. He’d followed Trial Cities while part of an HDTV task force, and decided it was a good way to have the best of both worlds: “I had to find a way in which I could work within the mainstream and find out what big boys were doing, using the nimbleness of a small company to take advantage of opportunities.”

Bieber says the company holds investments in a data protection firm that’s developed a new encryption method, and one that’s developing interactive applications for use in shopping malls. In addition, he says his company specializes in taking a proprietary idea that’s worth commercializing and securing it either by patent or copyright.

TANDEM HANDLES THE BILLING, NONSTOP

The capability to process transactions accurately in real time is probably the most critical piece of technology for any system that wants to deliver commercial information services over a network. Closely related is the need for that network to stay operational at all times so that vendors don’t lose revenue and customers don’t lose the “product” they just paid for.

Both features are areas of expertise for Tandem, which builds the NonStop line of computer systems designed for continuous, no-fail usage. It’s also a leader in what’s called “online transaction processing,” or OLTP, via its message-based operating system designed to handle heavy volumes of transaction-based data.

Today, cable TV customers get bills generated by Tandem computers and phone companies run their networks on Tandems.

“We see ourselves as being in the billing business — and in the future, we’ll be able to bill per use,” says Dick Cassam, manager of new market development for Tandem. “When we started looking at multimedia as a market for Tandem about a year ago, we saw it was a perfect match for our capabilities.”

Cassam brings an impressive background to the First Cities work. Before coming to Tandem four years ago, he was the head of network system development for long-distance provider US Sprint. He’s also held positions at GTE Corp., has an MBA from Cal Berkeley, a Ph.D in engineering and computer science from Stanford, and a BS and a masters in radio physics from Cornell.

NO SHORTAGE OF TELCO OPPORTUNITIES

Two regional Bell operating companies (RBOCs) are First Cities members: Southwestern Bell and US West. Although US West consistently downplays its involvement — it has said repeatedly that First Cities is just one of the many paths it is pursuing — Southwestern Bell’s director of corporate planning was more forthcoming.

Steve Dimmitt of Southwestern Bell says he’s involved because of the RBOCs’ newly granted ability to provide information services. “If there is a market, we want the ability to provide services in the markets where we compete, over whatever network — wireless, copper, fiber, or eventually over cable TV.” (Southwestern Bell also owns a cable franchise in the United Kingdom.)

Tethered by regulation. The company is still tethered by regulation, however. Because of legal restrictions, it cannot bring any internally developed hardware to the table because it isn’t allowed to manufacture equipment. This may turn out to be a kind of sticky wicket for RBOCs participating in First Cities, since Dimmit says an RBOC not only can’t own intellectual property rights to any such device, but it cannot own a company that manufactures hardware or even derive any revenue from it.

But he’s not too concerned. “Honestly, my view is that those types of revenues are going to be insignificant compared to the revenues that a site operator is going to make,” he says. “That’s where we’re going to derive the majority of our revenues, being a site operator in multiple sites.”

Dimmitt believes his company’s strength isn’t so much in producing information, but in brokering it. “We aren’t saying we don’t ever want to be producers, but we’re more competent selling various services like storage, formatting, transmission, filtering and distribution to make the process of getting the information from provider to consumer a more efficient one.”

He adds that some information services don’t necessarily include content — applications such as work-at-home teleconferencing, where customers not only consume information, but provide it as well. “There needs to be a network to bring these people together,” he says.

FORGET CHICKEN AND EGG, KALEIDA WANTS OMELETTES

Mike Bloom, director of business development for Kaleida Labs — the Mountain View, CA-based joint venture between Apple and IBM for multimedia technology — is hoping that its cross-platform scripting language, ScriptX, will “make some of these visions come true with titles and services.” So far stymied by the chicken-and-egg problem of what comes first, the network or the applications, he says Kaleida wants to be “in the omelette business. We want to help the creative community using the resources of our parents.”

That’s not all Kaleida has in mind, though. The company is also working on an operating system for a consumer device, and has also been rumored to be working on a hardware specification for some kind of consumer media player.

Get technology out of the way. He would like to see technology get out of the way of people creating and “broadcasting,” so to speak, their own information services. “When you have that kind of environment, where you have access to transportation, creation and development tools, everything changes rapidly,” he says.

The benefit of having heavy hitters in First Cities means that Kaleida won’t have to “worry about every single piece of the value chain,” as Bloom puts it, instead allowing the company to focus where it can best add value. This also means that a company can “poke around on the edges of what you’re good at,” he says.

He gives a “hypothetical” example: “If there were a market for gigantic file servers, and I believe there is, and if there were a market for medium-sized servers and I believe there is, then maybe there is a market for little teeny file servers,” he says. And if those teeny file servers might be the foundation that an entrepreneur uses to build a “garage” information services business, what might that server look like?

Once you decide what the server looks like, he says, then you have the opportunity to set up the set-top, laptop, palmtop device business, and people in the file server business have the opportunity to explore the fuzzier edges of their businesses to see if they can grow them and add value.

KODAK KEEPS PUSHING, NOW WITH IMAGES AND TELECOM

Eastman Kodak, as you might suspect, expects to bring its expertise in imaging systems to the First Cities project. “Our most interesting applications will be image intensive, whether they’re pieces of motion images or still,” says Bob Sanderson, manager of the Kodak Image Telecommunications Center in Rochester, NY.

Sanderson’s unit provides technical support to business units in the process of developing products to be used in a telecom environment. “It’s not the Kodak Telephone Network, it’s about understanding the emerging opportunities as the telecom environment becomes more image capable, with wider bandwidth and that sort of thing,” he says. They’re looking at ISDN, the switched public telephone network environment, and what cable TV and hybrid networks mean in relationship to designing new product interfaces.

He says that Photo CD, Kodak’s new consumer product that marries analog film neatly with digital imaging (see Vol. 2, No. 4, p. 5); will “certainly” be a major piece of Kodak’s First Cities work. “It’s a very significant initiative for our corporation,” says Sanderson.

Kodak has already announced a Photo CD extension called the Kodak Picture Exchange, which will eventually provide browsable online libraries. But the company’s expertise in hardware for image capture, storage, printing and output also makes it likely that Kodak could maneuver itself into the position of being a kind of information refinery for companies with large libraries of analog information, especially motion picture studios, that need to be digitized.

Sanderson also sees potential for image servers accessible over a network, as well as the Blade Runner-esque consumer application of printing a picture right off the TV screen. “If these new applications were to develop into the consumer environment, we would have interest in either the end user devices — cameras, printers, etc. — but we certainly would follow with interest what’s happening with network infrastructure, because we also serve the industries that provide information.”

COMSAT AND ON COMMAND DELIVER MOVIES HIGH AND LOW

The most recent addition to the First Cities lineup, COMSAT Video Enterprises (CVE), is part of the COMSAT Corp. formed by the U.S. Congress in 1963 to “invent” telecommunications satellites. It’s also the largest owner and user of the global Intelsat and Inmarsat communications satellite network, and has a growing business in both mobile and video communications.

CVE uses satellites and eight channels of bandwidth to deliver movies into 300,000 hotel rooms nationwide, including the Holiday Inn chain. Charlie Lyons, president of CVE, says he joined First Cities because he wants to find the leading technology in pay-per-view delivery.

“Very, very wide bandwidth.” But CVE’s subsidiary, Sunnyvale, CA-based On Command Video, doesn’t use the satellite network for delivery. Instead, it has invented what president and COO Bob Snyder calls a “very, very wide bandwidth switch” and sophisticated tracking software to allow users to immediately view the movie they want to see.

On Command was founded by Snyder and Bob Fenwick, both of whom harken from the defense electronics community. Fenwick was founder of BR Communications, which built defense communications equipment. Snyder came from Watkins Johnson, a maker of “spy equipment.”

LIKE A TELEPHONE, BUT YOU ‘CALL’ VIDEO

The system works very much like a telephone, only it connects the “caller” with a video, he says. In addition, it’s analog, not digital — each connection to the system starts a separate video cassette player or a laserdisc. “There’s nothing particularly sexy there,” says Snyder. “It’s just intended to be consistent and compliant with the existing infrastructure. Just because it’s not digital now doesn’t mean it won’t be. The switch will pass audio, video, audio and video and any digital format. We don’t send digital to the room now because no one wants to ‘look at’ CompuServe or Prodigy yet. But we could do it technically, there’s just no demand.”

In addition, he says, it doesn’t matter what the “head end” is — it could be a file server, it could be fiber optics, it could be a VCR or a satellite. “The switch itself is where the technology is,” he says. Unlike most pay-per-view systems available today, when you make an On Command selection using your remote control, the signal does not go through the telephone system. You are actually sending a signal back through the coax cable; your selection is started and is switched electronically to your room.

Snyder says they use the coax that’s already installed in the 32,000 luxury hotel rooms they now service, “which is no different than coax in the street that feeds a home.” And, he says, even though today the players, switch and all the electronics are at the hotel itself, the system could just as easily be installed at a node in a cable network. We’ll let your imagination take over from there.

Denise Caruso