• PACIFIC BELL ADOPTS CABLE SCHEME
The frenzied jockeying for market position among telephone and cable companies reached new levels of unintelligibility last month with Pacific Bell’s embrace of cable television networking technology as its ticket to success in the digital future.
The regional Bell operating company announced it will spend $4–5 billion beyond already scheduled outlays to replace copper lines serving 5 million California households with AT&T-supplied broadband “distribution plant” during the next seven years. The still-evolving network scheme begins with a commitment to marry Bellcore’s broadband telephony protocols to the cable industry’s “star/bus” network topology.
• THE TORTOISE AND THE HARE
Washington, intent on pushing a top-to-bottom overhaul of telecommunications law, appears to be heading into a legislative process that could significantly delay development of the broadband network base that is the foundation for the digital communications era.
Cable and telephone companies alike now have access to the technical means to establish the digital communications platform, whether in competition or in cooperation. But the federal government is much farther away from consensus than many officials will admit.
• MEDIASCAPE: ATM
Every business has its Holy Grail. Physicists root through the cosmic strings seeking a Grand Unified Theory of the Universe. Empire builders salivate over the perfect hostile takeover. And telecom wizards hunt for the ideal data transfer protocol: suitable for all data types and all wiring schemes; robust in recovering errors, yet light on overhead; backward compatible, yet a solid foundation for future growth.
To hear evangelists of the ATM Forum tell it, at least this Grail has been found. Asynchronous Transfer Mode (ATM) is everything you ever wanted for data transfer, and more. It is scalable over a wide range of speeds and network sizes; it carries voice, motion video and computer files with equal ease. And it’s coming to a telco near you real soon — in some areas, sooner than ISDN.
• I/O
Hidden dollars in the female video game market.
• SENATOR KERREY
A statement on Bell Atlantic-TCI merger.
• CHANNELS
CD-ROM rental in the video channel.
• WESTERN SHOW
Cablephones, online services via cable big at event.
• CABLE FIRMS UNITE
Five top MSOs in venture for telecom, energy services.
• CABLENET
CableLabs demonstrates a prototype full-service network.
• COX PAIRS WITH A BABY BELL
Southwestern Bell bids for cable.
• BLOCKBUSTER OFFERS CD-ROM RENTALS
Analog tape king goes digital and may bring multimedia to the mass market.
• IMA PROPOSES STANDARDS
Multimedia group votes for cross-platform compatibility.
• BRIEFS
Paramount/AT&T on ITV; Atari’s 64-bit game player; Apple home shopping; Results of ITV trial; Allen acquires Ticketmaster; ITV Association formed; QuickTime to adopt MPEG.
• EVENTS
NAB ‘94.
>FOCUS
PACBELL ADOPTS CABLE SCHEME
RBOC plans to deliver integrated services
Phone or cable network architecture may seem like an esoteric topic, but it is vitally important. The network architecture determines what it will cost to wire a community for high-speed, high-bandwidth service and the type (and quality) of service the network can provide.
The current telephone network is a “star/star/star” network: conversations are routed through a series of “star” hubs or switches all the way to the home. There is a separate pair of wires for each phone line coming into your home, and a different set of wires for the lines running into your neighbor’s house.
Most of the plans for upgrading the phone system envisage retaining this architecture, but running high-capacity fiber to the neighborhood star level Q or even all the way to a connection box on the side of the house. The existing copper wire would carry the signals the last bit of the way.
Cable television uses a “bus” architecture. A common coax cable serves all of the houses in a neighborhood. Everyone taps into the same wire.
Initially, the cable industry planned to replace all but the last mile of cable with fiber to create the much-talked-about 500-channel cable service. However, the vision has expanded during the past 18 months. The cable industry’s Cable Laboratories has appropriated the latest telephone ATM (asynchronous transfer mode) technology and married this to the coax cable run that serves a neighborhood. (For an explanation of ATM, see p. 14.)
The resulting “star/bus” network combines the advantages of a fully switched, two-way packet network with those of using shared coax cable rather than separate copper or fiber runs for the “last mile” to the home (and through the home). This was demonstrated for the first time in a live “CableNet” demonstration at the recent Western Show in Anaheim, CA (see Western Show story, p. 18).
In a remarkable turn of events this past month, Pacific Bell announced that it was returning the favor and stealing back CableLab’s hybrid star/bus technology. It plans to replace its existing copper phone wiring with a new system that looks exactly like those to be implemented by the cable operators!
— Pub.
The frenzied jockeying for market position among telephone and cable companies reached new levels of unintelligibility last month with Pacific Bell’s embrace of cable television networking technology as its ticket to success in the digital future.
The regional Bell operating company announced it will spend $4–5 billion beyond already scheduled outlays to replace copper lines serving 5 million California households with AT&T-supplied broadband “distribution plant” during the next seven years. The still-evolving network scheme begins with a commitment to marry Bellcore’s broadband telephony protocols to the “star/bus” network topology pioneered by the cable industry.
The project goes well beyond any use of cable-derived technology yet announced by a telco. Unlike US West, which is deploying a parallel network — a cable-like fiber/coaxial overlay — in conjunction with a fiber-to-the-curb conversion of its existing voice network, PacBell is integrating its voice services onto a single fiber/coaxial pipeline and eliminating the existing copper network altogether.
INFRASTRUCTURE COST ASSUMPTIONS OUT THE WINDOW
The PacBell decision adds a major element of uncertainty to the red-hot cable/telco debate. It challenges existing assumptions about timing, costs and regulations in deployment of the national information infrastructure. In effect, it suggests that the telephone industry’s long-standing message to regulators concerning the ultimate benefits of point-to-point, star/star/star fiber networks is wrong, and it threatens slower delivery and higher prices for digital communications.
Jumping on the star/bus bandwagon. The performance capabilities of the new star/bus design, as touted by a growing number of major telecommunications suppliers, extend to virtually any type of service envisioned for broadband networks. What PacBell is asserting is that these manufacturers are not only justified in their claims but also have the cheapest means for delivering such services.
PacBell’s projected costs come to about $900 per household, which is some $200 or more below the costs anticipated for other approaches. Moreover, PacBell’s $900 comprises the entire increment above the costs of already-scheduled digitization and fiberization of the core central-office backbone, whereas the broadband costs cited for other topologies exclude narrowband distribution elements, such as any fiber that might be cost-justified for voice service under various copper depreciation schemes.
Taking the wind out of cable’s sails. Under PacBell’s plan, high-speed data and interactive digital video circuits would be deployed to more than a third of the state’s households by the end of the decade (and within currently allowable spending parameters). This represents a market base of users that the cable industry would be hard-pressed to match in that period of time. Indeed, if PacBell were to garner government support for its agenda, it could take a lot of the wind out of cable’s sails. The cable industry’s growth strategy has been pegged to the cost and performance advantages of the same type of network that PacBell is proposing, but PacBell wants to build at lightning speed.
“We’re pursuing an ‘if we build it, they will come’ strategy with a twist,” says Ron Stowe, vice president, Washington operations, for Pacific Telesis Group, parent to PacBell. “Here, the ‘they’ is also our competitors, who are coming whether we build it or not.”
The trick is to provide protection against facilities competition, Stowe says, even if the competitors have an advantage with regard to regulatory freedoms. “If public policy doesn’t change and become more forward looking, we’d better be in a position of having such an impressive array of facilities available that the competitors will want to put their services on our facilities,” says Stowe.
Beating cable at its own game. Using cable’s technology to preempt cable means moving as fast as cable, which PacBell thinks it can do, based on the low estimated costs of implementing its system. PacBell, because it must replace rather than merely upgrade the existing network, will pay more per unit of construction than cable. But the telephone industry traditionally spends five times as much as cable on construction, leaving more than enough margin to keep pace with cable at PacBell’s projected cost rate.
BELL ATLANTIC DISPUTES THE MERITS OF THE PACBELL PLAN
Ray Smith, chairman and CEO of Bell Atlantic, has much to lose in California if PacBell beats TeleCommunications, Inc., to the punch. But he also has much at stake on the other side of the country, where Bell Atlantic has won strong support among state regulators for the alternative dedicated-star approach to network design. In New Jersey, for example, Bell Atlantic recently filed an accelerated deployment plan that rests on the cost and performance claims it has made for the traditional telco broadband network approach. State support for this expansion includes a considerable amount of revenue-enhancing deregulation, which will allow Bell Atlantic to charge what it wants for services that are deemed competitive at a very low threshold of competitive activity.
A contradiction for Bell Atlantic. Smith fell into an apparent contradiction in a recent attempt to discount the merits of PacBell’s technological choice. Talking to reporters at the Western Show cable convention in Anaheim, CA, earlier this month, he suggested that PacBell was signing off on old technology that would be quickly outdated by the type of network his own company is building in its operating territories.
“A cable system is all PacBell is building,” Smith said. “Those who build analog type networks only to fight off cable companies will be doing the wrong thing.”
But Smith’s remark ignored his commitment to the cable full-service network idea that TCI (the largest cable MSO) embodies — and which Bell Atlantic plans to take over. Indeed, it ignored the fact that TCI technologists, including CEO John Malone, agree with PacBell’s contention that integrating voice, data and video services over a cable-like network is a better way to go for any anticipated applications, extending into the next decade.
WILL CALIFORNIA REGULATORS APPROVE THE APPROACH?
It’s not a certainty that PacBell will actually be allowed to do what it says it wants to do. A lot depends on whether the California Public Utility Commission (PUC) thinks this is the right approach. If it does, other states will fall under tremendous pressure to reconsider their regulatory support of the costlier star/star/star design.
So far, California regulators have not indicated whether they believe PacBell is on the right track. Daniel Fessler, president of the California PUC, says he has doubts about the technical viability of the star/bus approach. But other commissioners are less concerned.
Not another Betamax. “I’m very concerned about having a lot of money invested in California in ‘Betamax’ machines,” Fessler says. “If this architecture fails, a lot of products will fail. It will chill consumers’ acceptance of products if they believe they will be punished through mechanisms of the marketplace for being one of the first individuals to accept the risk of making personal investments in new equipment.”
Fessler says it appeared his fellow commissioners are less concerned about this than he is. But he added that both his and their concerns go further, extending to the issue of “stranded capacity.”
Issues of backward compatibility. “There’s some concern about backward compatibility (between the new network sections and the old),” he says. “There is tremendous investment in, and reliance on, the existing system.”
PacBell executives, however, are confident that once the regulators understand what is going on, the whole scheme will make sense to them. This star/bus network is so superior a choice, they say, that it not only matches the capabilities of any currently available or soon-to-be-available design options, but it does so at costs that can be recouped from savings in operations alone.
SAVINGS IN MAINTENANCE COSTS TO PAY FOR NETWORK
The potential savings from being able to remotely identify fault locations and to take preventive action based on telemetric feedback from any point in the network has long been a driver in the digitization of telephone backbone networks. But the costs of extending digital capabilities to the home have always been considered too great to be justified by savings on maintenance alone. Complete digitization of the network, it was thought, required a significant revenue gain as well.
Greater control with star/bus configuration. According to Lee Camp, PacBell’s vice president of strategic planning, the star/bus system puts a digital, easy-to-monitor signal out in the field all the way to the customer premises at far lower cost than would be possible over twisted-pair copper phone lines or fiber.
“We’ll be able to pay for this network through savings from lower maintenance, improved inventory management and lower provisioning costs,” Camp says.
Growing support for star/bus network. There are signs of growing support for the star/bus argument beyond PacBell. Joe DeMauro, strategic planning director for Nynex, says his company’s rollout of broadband networks (which closely matches PacBell’s in scope and timing) will use the fiber/coaxial hybrid in densely populated areas, while sticking with traditional fiber-to-the-curb in the suburbs.
And US West, after initially opting for the dual narrow/broadband networks described above, is now considering going to an integrated star/bus approach as well, company sources said.
Vendors, too, are flocking to the concept. Leading the stampede is AT&T Network Systems, the supplier for all of PacBell’s broadband distribution gear and a pioneer in development of “cablephone” technology. Other entrants among the telecom giants include Scientific Atlanta, General Instruments Corp. in an alliance with DSC Communications, ADC Telecommunications and Northern Telecom.
AT&T TO SUPPLY PRODUCTS FOR BROADBAND TELEPHONY
The PacBell deal marked AT&T’s first product entry into broadband telephony in the United States, following several years of internal research and debate. According to Jack Harrington, a regional vice president of AT&T Network Systems, the company will provide whatever design approaches customers desire; but at this point, no other broadband product line is slated for the U.S. market.
“We think that, across the globe, customers are going to settle in on some variation of this theme we have introduced here,” says Harrington. Even in Europe, he adds, the present commitment to all-optical systems could change and probably will in some areas.
“We’ll be responsive to what customers want, so we’re not eliminating any possibilities by going in this direction,” he adds. “But we see a tremendous opportunity here.”
PacBell opts for “integrated services approach.” Harrington indicated there are significant distinctions between what AT&T is supplying to PacBell and the type of overlay fiber/coaxial analog network that was derided by Smith. “The type of design you want depends on how you view the migration path to broadband,” Harrington says. “Do you want to build the business around existing services, or do you want to move directly to next-generation fully integrated services? PacBell has chosen the integrated service approach.”
AT&T Network Systems won the PacBell order for everything from the central office-based Host Digital Terminal (HDT) through to the network interfaces mounted outside the customers’ houses. It represents one of the biggest single-vendor contracts ever announced in the telephone industry. The companies said the technology, while similar to the AT&T system developed for the UK cable-TV market in cooperation with Optical Networks International, differs in important respects. It employs proprietary software from Pacific Bell, and it takes an overall design approach that is more compatible with U.S. telephone networks.
Cable operators want to cooperate to compete. Already, according to sources close to California cable operators, PacBell’s plan is stirring cable companies to think about ways to cooperate in network development, where facilities sharing would support service competition. Sources said that with San Jose on the list of early PacBell deployment targets, TeleCommunications, Inc., the holder of the city’s cable franchise, is exploring the possibility of sharing facilities rather than facing the prospects of PacBell completely overbuilding its facility.
“TCI has to spend $70 million on underground conduit alone,” a source said. “PacBell will have to spend even more. Does it make sense to dig separate trenches if you’re pursuing the exact same layout with the same type of wiring?”
This topological compatibility, combined with the high potential capacity of the star/bus system, suggests that regulators could soon come under pressure to permit joint ventures — if not joint ownership of facilities — among competing cable and telephone companies. If the PacBell plan takes hold, a lot of assumptions underlying government resistance to such approaches could fall apart.
Fred Dawson
A LOOK AT THE STAR/BUS NETWORK
Telephone and cable network engineers have different parameters to work with when designing a star/bus system, but the basic elements of the design are applicable to both industries’ existing network infrastructures.
The key facilitating piece of equipment is the HDT (Host Digital Terminal), which is located at the central office in the telco’s case or at the headend or at major distribution hubs in a cable system. The HDT serves as a concentrator and manager of traffic. In the case of both cable and telephone networks, fiber carries the signal from HDT to nodes, which are points of interface between the fiber and coaxial distribution cable that passes all the customers in a service area.
The ordinary telephone network (a star topology) dedicates a separate wire to each customer. In contrast, bus techniques put many customers on a single wire. The customers’ calls are kept separate either by assigning specific time slices to each in turn (time-division multiplexing) or by assigning a separate radio-frequency channel to each (frequency-division multiplexing). Currently, frequency multiplexing appears to offer advantages, such as the flexibility to choose a multiplexing technique that is best suited to each application.
Virtual channels. The design supports dynamic allocation of bandwidth on a “virtual channel” basis, although vendor products vary significantly with respect to these and other details. With fiber penetration to 500-home service areas, all designs claim to offer ample bandwidth for high-contention use of the facilities.
They are also intended to preserve the look and feel of existing services at the customer premises. As Ron Foster, vice president and general manager of telecom systems at Scientific Atlanta, says, “The (voice-over-cable) system was designed from scratch to mimic everything that a telephone system does with no changes in customer equipment.”
The system terminates the coaxial drop at a residential interface unit (RIU) mounted on the outside of the customer’s premises. The RIU directs voice signals to standard twisted-pair lines inside the premises and passes the cable service to the in-home coaxial wiring. The system has no impact on which types of cable security and settop devices are used by the cable operator.
The General Instrument method. In a contrasting approach, Andy Deveraux, General Instrument vice president of strategic planning, says the integrated-service system GI has developed with DSC provides a single unswitched path to the settop from the headend. The customer terminal electronics are located in the settop box instead of the RIU.
The DSC system is designed to meet Bellcore’s broadband-switching standards, which means the box in the home will have access to every type of advanced digital service envisioned for the telephone industry. According to Deveraux, the firms will also offer other versions of the system that establish different locations for the customer interface units.
THE WAY BACK
It is also important to provide transport for return signals from customers over the coaxial-bus portion of the network back to the interface with the fiber trunkline. Some vendors are sticking with the established cable-industry return path, which uses the 5–30 MHz (megahertz) band. Others, like AT&T Network Systems, are moving to wider bandwidth, in the range of 5–42 MHz; this is made possible by a big performance leap in the filters that separate upstream from downstream signals.
PacBell and other users contend that this amount of return bandwidth is more than enough to handle any reasonable level of usage of phone service within the 500-home coaxial serving area. Northern Telecom, in fact, is working on a new cablephone system that it claims enhances bandwidth efficiency to the point that much larger coaxial serving areas, covering as many as 2,000 households, could be provided phone service without deeper extension of fiber.
Fred Dawson
THE TORTOISE AND THE HARE
Telecom regulatory policies lag behind technology
Washington, intent on pushing a top-to-bottom overhaul of telecommunications law, appears to be heading into a legislative process that could significantly delay development of the broadband network base that is the foundation for the digital communications era.
Cable and telephone companies alike now have access to the technical means to establish the digital communications platform, whether in competition or in cooperation. But the federal government is much farther away from consensus than many officials will admit. There is still confusion on most of the relevant points, from universal service and open platforms, to the sorting out of federal, state and local lines of authority.
TURF WARS IN WASHINGTON STYMIE POLICY DEVELOPMENT
The contrast between marketplace readiness and government bottleneck was starkly apparent at the cable industry’s Western Show convention in Anaheim, CA, earlier this month. On the exhibit floor vendors displayed an unprecedented array of the technology required to make digital communications a reality, from $10 million asynchronous transfer mode (ATM) broadband routers to interactive consumer interfaces of every description. (For more on the Western show, see p. 18.) But in the panel discussions on government policy, turf-sensitive officials made clear the range and difficulties of issues that must be dealt with before they can act on the rules that are essential to massive deployment of the technology.
Administration delays proposals. The latest signal as to just how factionalized the regulatory battle might become was delivered prior to the convention by officials of the Clinton administration. Backing away from earlier indications that they would act immediately to provide policy input on various Congressional initiatives, they instead declared they would present their own legislative proposals after the first of the year.
“I know there’s no such thing as a perfect bill,” says Larry Irving, assistant secretary of commerce and chief of the National Telecommunications Information Administration. But he made clear that he believes the Administration can come closer by forging one on its own than it can through negotiating revisions of bills already in the hopper.
A multitude of sticking points. The divisions among policymakers cut across party lines and, to some extent, spheres of influence. Beneath a widely held preference for competition over regulation, there is very little consensus at all.
Key points of disagreement concern:
• The priority to be attached to facilities competition.
• The degree to which state and local authorities are to be pre-empted by the federal government.
• The conditions under which telephone and cable companies will be allowed into each other’s business.
• Means for ensuring continuation of universal service.
• The extent to which the definition of universal service should be expanded.
• The role of government in the setting of standards.
• And, perhaps most contentious of all, the degree to which broadband network platforms should be open to all service providers.
In other words, virtually every point that matters in the reshaping of telecom policy is a bone of serious contention among government officials. The disagreement extends across virtually every unit of government, from the Clinton administration down to the National Association of Telecommunications Officers and Administrators — the organization of cable franchise overseers.
State’s rights. The conflict and confusion extends even to relations between the federal and state governments. This was evident in Anaheim, when Daniel Fressler, president of the California Public Utilities Commission, upbraided Irving over Congressional passage of a provision pre-empting states in cellular regulation. The measure, slipped into last summer’s Budget Reconciliation Act passed with little or no debate.
“That was an exercise in pre-emption that has had a chilling effect,” Fressler said, calling the maneuver led by Rep. Ed Markey (D-MA), House telecommunications subcommittee chairman, “an act of political brutality which is going to be difficult for us to live with.” While Irving defended the measure, he quickly acknowledged the sensitivities on the subject, including those of the ex-governor of Arkansas who runs the White House. With regard to an eventual Clinton telecommunications bill, he said, “no decision has been made at any level with regard to federal, state or local responsibilities.”
House and Senate favor open competition. In general, House and Senate leaders on telecommunications issues appear to be concerned first of all with creating a regulatory regime that invites facilities competition (two wires into the house) with a minimum amount of supervision at any level of government. In their eyes, facilities competition becomes the primary justification for pre-empting state rules.
In late November, Rep. Markey and Rep. Jack Fields (R-TX) presented legislation along these lines. The Markey/Fields proposal is very similar to an earlier initiative undertaken by the Senate telecommunications subcommittee chairman Daniel Inouye (D-HI) and ranking minority member John Danforth (R-MO). In both cases, states would be forced to permit open competition to entrenched telephone monopolies and the federal ban against telco ownership of cable services would be removed.
At a Washington forum in mid-November, Gerry Waldron, Irving’s successor as senior counsel for Rep. Markey’s subcommittee, made a case for letting cable and telco forces go at each other over separate facilities. “Facilities competition may not be the most efficient approach where costs are concerned,” he said, “but it’s the way to go if you want maximum benefits to customers.”
Clinton makes universal access top priority. However, the Clinton administration is approaching the entire telecommunications policy question from a different angle. “For the administration we have not made a decision and intend not to make a decision as to whether or not we’re headed to a two-wired world,” Irving said. “What we’re trying to head toward is a competitive world, and that competition might be facilities based and it may be something other than a facilities-based competition.”
Irving added, “We believe there is probably a role at some point in the future for more entrants in the telephone market. We believe there is definitely a role at some point in the future for more entrants into the cable television or the video provision marketplace. But if you start asking us whether it’s two wires, three wires, five wireless providers — that’s a discussion we’re not getting into.”
Instead, the Clinton administration’s focus will be on achieving competition through open access to the network. At the mid-November meeting in Washington, Mike Nelson, senior advisor for science and technology policy at the White House, said universal access of service providers, down to the individual, is “essential to real competition.”
“We don’t want to see a situation where only a few people can get on line,” Nelson said.
“We have to have an open system,” echoed Irving. “That is a very important philosophical underpinning in the administration as we move forward. We want universal service, but we also think we have to have an open-access system.”
USING PROFITS FROM CONTENT TO PAY FOR THE INFRASTRUCTURE
But many people in and out of government in Washington believe this is the wrong emphasis. In a recent discussion, James Mooney, a consultant and former president of the National Cable Television Association, commented, “It’s very naive to expect these (telephone and cable) companies not to give their primary programming focus to services which they think will generate the revenue necessary to make this a business. The classic common carrier model just won’t work here. You’re going to have to let the facilities providers use their own facilities.”
This is what the pending House and Senate bills would do, with the stipulation that, for the first five years of broadband operations, the local exchange carriers would be limited to using 25 percent of the network capacity for transport of services in which they hold a proprietary interest. This is a long way from what Irving is talking about.
“We don’t believe anybody should be able to control the flow of information to the American people,” Irving said. “The common carrier model probably doesn’t work for cable or telephony as it exists today, but it did serve some very important purposes.”
A raft of complex problems for operators. Whatever common carrier model the administration intends to introduce, it will have a raft of complex problems to address that would otherwise be left to the marketplace in the competitive model favored on Capitol Hill. Ed Horowitz, senior vice president of Viacom International and president of its broadcast television division, doesn’t trust the competitive model, but his list of concerns suggests why the open access provisions could be extremely difficult to put in place.
“The bottlenecks in the digital environment can be at the server,” Horowitz noted. “Whose server are you on? Who owns the operating system? Do I have to pay $10 to Microsoft to get my application to every user and to get on that system? Will that server be open at the same price to everyone? If I need a million bits for my $100-per-month service, do I pay the same as someone who needs a million bits for their $2-per-month service?”
Horowitz enumerated similar areas of concern with respect to the network switches and customer terminals. He questioned whether telephone and cable companies should be able to “buy 10 million boxes” at discount costs and then tell service providers that, if they don’t want to pay the proprietary toll, they can put their own device into the home. It would have open access to the network, but it would be hard to compete.
“Is that open competition?” Horowitz asked. “I suggest not.”
Time to rethink legislation that limits RBOCs? Just to make things even more complex, the cable-telco debate is also saddled with the issue of court restraints on Bell operating company freedoms stemming from the Consent Decree in the AT&T breakup. Two House leaders have introduced a bill to eliminate these restrictions, which cover manufacturing and long-distance services, and have won Markey’s support for weaving these issues into those addressed by his legislation.
IN THE ABSENCE OF LEGISLATION, INDUSTRY STRIVES FOR SOLUTIONS
Against all of this action, some industry executives are calling for a more immediate solution. They would retain consideration of the whole range of issues as a priority but would address the immediate business opportunities opening up in telecommunications. Metropolitan Fiber Systems, a leading telecommunications supplier of so-called alternate access services, has called on the federal government to order states to allow competitors to interconnect with telco facilities at all points in the network, thereby supporting the flow of local exchange traffic among all facilities providers. This is a trail already blazed by state regulators in Illinois and New York.
“From a public policy standpoint the focus shouldn’t be on the telephone companies per se but on the telephone subscribers,” said Andrew Lipman, vice president for MFS. “As long as no residential or small business subscriber is impaired by a high level of competition, then competition should be encouraged.”
“The cable companies are too limited in network capability to take very much business away from the telephone companies right now,” noted a leading cable executive, asking not to be named. “But, if you give them the opportunity, you’ll see the process moving forward while everything else is sorted out. A simple law preventing exclusive franchises in telephony just like we have for cable franchises would get the ball rolling.”
The enticement is large where cable is concerned, even if the initial payoffs might be small. As noted by Tom Gillett, president of Gillett/Lehman, a telecommunications consulting company, local telephony is an $88 billion annual business while cable is a $20 billion business. “If Ameritech wins 30 percent of the cable business in its territory and cable wins 30 percent of Ameritech’s business, it turns out Ameritech’s revenues will go down by 22 percent and cable’s will go up by 86 percent,” Gillett said.
“We’re in a position to launch telephone competition, which means turning our networks into advanced platforms that would support every digital application you can think of,” said a senior cable executive, who asked to remain anonymous. “Imagine, here’s a revenue opportunity that could transform our networks immediately and would drive the telcos harder in the direction of upgrading theirs, and we can’t put that gear to use in most states under current law.”
The threat of facilities competition has already driven several telephone companies to accelerate network expansion, and, of course, the opportunity to compete is drawing telephone investors into cable. But the caution light flashing in Washington suggests that, if competition isn’t the cure-all, whatever the regulatory answer turns out to be is likely to be a long way off.
Fred Dawson
SENATOR KERREY’S STATEMENT ON BELL ATLANTIC-TCI MERGER
The following comments are excerpted from Sen. J. Robert Kerrey’s statements before Congress on Oct. 27, 1993, regarding the proposed Bell Atlantic-TCI merger.
Mr. President, two weeks ago today America witnessed the latest and largest piece of evidence that we are in the midst of a communications revolution. On that day, Bell Atlantic and TeleCommunications, Inc. announced their intention to merge. It is a move which signals the marketplace is aware of the possibility that we could change the way Americans communicate.
The announcement is the most dramatic signal to us that our old regulatory devices can no longer work. If we want to ensure that these new technologies improve our economy, culture and political system, this merger should be a wake-up call that it is time for us to change as well.
For some, the deal raises understandable concerns and in particular creates antitrust questions. In some ways they are right: We do need to think long and hard about what public purposes we want to achieve. For others, there is only excitement about new possibilities, if government will only leave the process alone. In some ways they are right: We do need less, not more, government involvement.
My hope is that we will respond to this merger in a spirit of productive partnership, not reactionary regulation. My hope is that we will address the important antitrust questions without quashing either the bold vision that guided this merger proposal or the energy which has powered the great engine of American entrepreneurship throughout our history.
My preference would be to allow the information companies to compete more openly. To me, the restrictions of the Modified Final Judgment, agreed to in 1983 and enforced for the past 10 years by the Federal Court, should be lifted. Consumers should be allowed to purchase their information needs from any company capable of supplying those needs. Neither the government through regulation nor a company through monopoly power should be allowed to limit our choice… And, where there is competition, the steady march toward improved quality and lower price continues.
My vision of the kind of regulatory structure we should impose is different today than it was before the announcement of this merger. Before Oct. 13, I still thought the important question would be how to manage the transition from a local telephone monopoly and a separate local cable franchise toward an environment where each would be allowed to provide telephone and television service. I thought we would, and should, see competition between the cable companies and the telephone companies to provide video and phone service for the so-called last-half-mile connection to the long distance service of AT&T, MCI and Sprint.
Now, however, I see a different possibility. I see the cable and telephone technologies converging, not competing. And in that convergence, I see the possibility of providing American households with real competitive choices in a much different and far superior fashion.
My idea is this: Allow open competition for all telecommunications services directly to the home and business. This would mean that at my home in Omaha, NE, I would have the option of choosing between a variety of services offered by a host of information companies. My idea is to allow the consumer to choose between purchasing voice, data and video services from US West-Time Warner vs. Bell Atlantic-TCI, or AT&T-McCaw vs. MCI-British Telecom, or CBS, Disney, or any other company.
That vision can be achieved only if we agree that the Old World technologies of telephone, television, radio, publishing and video have been shattered by the blows of the new kids on the block: computers and fiber-optic technology. Prior to development of the computer and fiber-optics, the old technologies were easily and naturally divided. Voice was carried over the phone lines, radio and television signals through the air, and text on paper. Before the advent of computer and fiber-optic technologies, it made sense to divide our regulatory effort into common carrier, broadcast and related ownership issues.
But today where I used to hear the dial tone and the sound of a friend’s voice I now hear sound waves which were once the ones and zeroes of a digital stream of information. Likewise, the video image on my television screen, the video tape in my VCR, the words on my newspaper or book, and text on my computer are all encoded into the ones and zeroes of the digital world.
The significance of this to me as a consumer is that all information — no matter how different its form and look — can and will be converted into the same code and will be transmitted in the same wired or wireless fashion.
There are those who see telephone and cable technologies converging and fear that it will create unfair competition, or unfair pricing. We must understand that the merger of Bell Atlantic and TCI is about marriage of technologies born of science, not corporate greed. We should not attempt to force these technologies to compete. Their convergence is inevitable. What we must do is see that those who provide this combined technology and the services associated with it compete fairly and aggressively.
In fact, Mr. President, this so-called convergence presents an opportunity for more choice and more power for the consumer if we, in our capacity as the makers of regulation, do the right thing.
If we do the right thing, American consumers will no longer buy their dial tone from a phone company, video signals from broadcast or cable companies, content from production companies, sound from radio companies, or text from newspaper and publishing companies. Instead, consumers will buy information from each of these and many more. Instead of being restricted by an old regulatory structure, Americans will be able to buy according to their social, economic, entertainment and educational needs.
The right thing, Mr. President, is to make certain that consumers have genuine choices and that real competition occurs in the marketplace. Our most recent experience in the long-distance market shows that consumers need real choices. AT&T just raised its prices almost 4 percent, and so did MCI and Sprint. Follow-the-leader price competition does not benefit Americans’ wallets. We obviously need to inject more competitors into this market — and the logical choices are AT&T’s seven offspring.
However, we should not try to manage the competition between cable companies and telephone companies, nor between long-distance telephone companies and local telephone companies, nor between networks and producers, nor between publishers and telephone companies. Instead, we should allow all of these and more to come directly to the customer and offer to provide some or all of the information needs of the American consumer.
Our role — particularly as we transform from the monopolistic model to a competitive model — should be to ensure that competition exists. The best way to create real competition is to allow the so-called big guys to have at each other as quickly as possible. Efforts to control the pace will merely preserve the heavy cash advantages these monopolies currently enjoy.
There are five other areas where a public interest exists and where we should direct our attention.
Education. We should challenge the information industry to deliver a plan which will provide every American classroom with affordable access to the Internet. This access could be wired or wireless, but it cannot be funded with property, sales or income taxes. Local schools cannot fight this battle alone. Unless we address the problem faced by the all of America’s 100,000 schools as a group, education will enter the age of information too slowly.
We should also consider creating a communication technology fund for our schools so that workstations and software do not become cost-prohibitive for all but our wealthiest schools. Perhaps we should dedicate a portion of the proceeds from the 160-MHz auction which will begin next year for personal communication systems.
Rural access. We are at a crossroads for enhanced rural service. As we steer onto a path which will provide rural American homes and business with enhanced service, I prefer to use direct spending subsidies instead of regulatory restrictions.
Privacy. We must remain ever-mindful of the easy invasion of privacy which can occur once a connection is made to our homes. The idea of privacy should not be abandoned in the electronic age.
Control. Simply put, we should not allow any owner of infrastructure to use the advantage gained as a consequence of having been granted a monopoly franchise to use this power to strangle innovative and entrepreneurial information services.
Content. Pornographic and violent content must be easily excluded if the consumer does not want such content entering their home.
Mr. President, those who sense that this merger signals a need for government to do things differently in order to avoid an abuse of power are correct. My hope is that we do not react with a regulatory model designed for a technological world which no longer exists. American jobs, American culture and our capacity to govern ourselves all depend on our actions.
CALL FOR SPEAKERS
The rush toward a digital world is accelerating at a breathtaking pace. The interactive information highways are under construction, merger and alliance fever are at an all-time high, and the creative communities are finally driving the technology with programming, content and services that will bring the technology to life.
During the past five years, the Digital World Conference has become the place where the digital revolution is defined — the place where leaders from all of the major industries meet to discuss, explore and shape their common digital future. Precisely because it does not belong to any of the old industries, this is the event at which leaders from computer, telecommunications, cable, consumer electronics, entertainment and publishing meet and interact on common ground.
June 6–8, 1994, Digital World moves to the Los Angeles Convention Center. This allows the Exhibition to blossom into a full-scale trade show to showcase the platforms, tools and creative content now flooding into the marketplace.
However, the Conference portion of the program will remain the very special, intimate high-level event that has been so important to the development of the new digital world. Conference attenders will have their own separate area, complete with comfortable lounge, eating and meeting areas to support the side conversations, deal-making and shmoozing that are so important to this event.
We are now working on the program for the 1994 Conference. We would like your help and involvement. Please take a few minutes and think about the topics you think should be discussed and/or speakers whom you think would make an important contribution.
Drop us a note via fax, mail or E-mail, or call us if you have something you would like to discuss. Please do it now before you forget. It is important we hear from you by Jan. 21.
Please send proposals to Jonathan Seybold, Seybold Seminars, 29160 Heathercliff Rd, Suite 200, Malibu, CA 90265; you can fax the proposal to (310) 457-8542; or send them via E-mail to 428-5531 (MCIMail), or SEYBOLD.JON (AppleLink).
And, please mark your calendar for June 6–8, so you can join us for the Digital World ‘94 Conference and Exhibition, and for the Interactive Media Festival. We hope that you will be there with us.
>CHANNELS
CD-ROM RENTAL IN THE VIDEO CHANNEL
A borrowed idea for digital media whose time has come
This holiday buying season has brought us the next major step in creating a mass market for multimedia: CD-ROM titles are now available for rental in leading video stores. In part the shift toward more consumer-oriented distribution for digital media is based on the increase in the installed base of CD-ROM drives and the mass market buzz surrounding interactive media. Basically, it is a borrowed idea whose time has come.
The idea of renting CD-ROM titles originated from the gaming industry’s cartridge rental model: More than 60 percent of Sega’s game cartridges that are purchased have been rented first. And Sega cartridges are at a similar price point to CD-ROM titles. The interest in testing this model of rental-to-sell-through stimulated Compton’s NewMedia, Baker & Taylor and Blockbuster Video to initiate their own extensive pilot programs in video stores.
Blockbuster establishes trial in Bay area. Blockbuster recently announced an in-depth pilot program in the San Francisco area, demonstrating more than 200 titles from more than 35 publishers on five major platforms in more than 50 stores. Kiosks are being setup to show off the titles, which are being demonstrated by experienced, trained sales personnel. “[We want] to stimulate the multimedia market out there,” says Mike van der Kieft, director of business development and manager of new media markets at Blockbuster Entertainment. “We want to create a new business for ourselves, but to do that all participants must be successful. We are trying to create a win/win for all concerned.”
Not incidentally, Blockbuster was extremely influential in creating the home video rental market by becoming one of the first chains to rent both VCRs and videos to customers. (For more on the Blockbuster announcement, please see News story, p. 28.)
Baker & Taylor, Compton’s go nationwide. Baker & Taylor launched a program to rent CD-ROM titles in 100 video stores across the country. This program recommends various product mixes from a list of 300 titles by 20 publishers, including about 100 titles from Compton’s NewMedia.
Compton’s, in conjunction with The Major Video Chain, began its own rental program earlier this year, offering a selection of 30 titles to independent video dealers across the country. The number of participating dealers has grown now to 150 “Mom and Pop” stores. In describing the Compton’s program, Diane Morgan, executive director of North American sales for the company, says, “Our mission with rental is to inform the average consumer… that there is this new technology out there that they have to see. [We are] reaching millions of people who would not go to a computer store.”
PREVIEWING MULTIMEDIA FOR A NEW MARKET
Until now, the multimedia market was limited to early adopters who already understood the technology and its potential. These early adopters could purchase software through mail-order catalogs or in software stores or computer superstores.
The movement to make CD-ROM titles available for rental in video stores is the first step in targeting the non-technical consumer market. Brad Grob, group director of market development at Baker & Taylor Software, referred to CD-ROM rental as a “key turning point for multimedia which takes the product beyond the traditional software channels into other channels.”
The broader mass market of non-technical users, particularly those seeking entertainment, have had no mechanism for previewing CD-ROM titles. Every other entertainment segment has its previewing mechanism: radios play new music, book review sections tell us about new books, and movies have trailers and coming attractions.
CD-ROM rental could become this previewing mechanism. Visitors to video stores can rent CD-ROM titles in the same way and for the same price that they rent videos. They can buy both in the same store. The mix is extensive and includes all categories of CD-ROM including games, edutainment and reference.
Bonnie Predd, senior vice president of marketing and new business development at Baker & Taylor Software, remarked that “video stores — with their less intimidating and more convenient shops — are uniquely positioned to move CD-ROM into the family market.”
Careful strategy required. Not all publishers should offer their products for rental, however. Some titles, however interesting, challenging or useful, may exhaust the user’s interest in the course of a weekend. This might be true for a strategy or adventure game, certain story books, or utility products.
If a title is likely to be rented and never purchased, it should become available for rental only at the end of its product life cycle, when the publisher’s next title is available for sale (but not for rental).
When releasing an aging title to the rental market, a publisher should add an advertisement or announcement of the new product in the opening screens of the rental product. In this way, the sampling of the publisher’s product also offers the renter an opportunity to buy the newest release.
There will most likely be an increase in sampling or trailers of publishers’ other products in the titles available through rental programs. It is possible that the rental of CD-ROM titles will offer the first legitimate forum for advertising on CD-ROM discs to the mass market. At first these advertisements will function as the equivalent of “coming attractions” in the cinemas, but later may expand to more aggressive forms of commercial advertising.
The next wave. The rental of CD-ROM titles creates new marketing opportunities on many levels for the expansion of this market, and there is great excitement among the video and software distribution community.
The next wave is under way. As Paul Bader, vice president of sales at Compton’s NewMedia, says, “Nothing is more important than the rental of CD-ROM titles for making the new media a mass market product. Rental is critical to its retail success.”
Joanna Tamer
>MEDIASCAPE
ATM: THE NEXT BIG THING IN COMMUNICATIONS
Fast, compatible and becoming affordable
Every business has its Holy Grail. Physicists root through the cosmic strings seeking a Grand Unified Theory of the Universe; empire builders salivate over the perfect hostile takeover. And telecom wizards hunt for the ideal data-transfer protocol: suitable for all data types and all wiring schemes; robust in recovering errors, yet light on overhead; backward compatible, yet a solid foundation for future growth, and so on.
To hear the evangelists of the ATM Forum tell it, at least this Grail has been found. Asynchronous Transfer Mode (ATM) is everything you ever wanted for data transfer, and more. It is scalable over a wide range of speeds and network sizes; it carries voice, motion video and computer files with equal ease. And it’s coming to a telco near you real soon — in some areas, sooner than ISDN.
ATM CHARACTERISTICS
ATM is a group of standards for moving packets of data over a network. It is characterized by several features: switched-circuit topology (think of the telephone system); small packets of data (53 bytes apiece); virtual circuits; and negotiable, guaranteed bandwidth.
Switched-circuit topology. ATM uses a connection-oriented approach. Each device on the network is connected to a central switch, which sets up connections between devices; a connection stays in place until the switch is told to disconnect it. While a connection is in place, a workstation can count on a known amount of bandwidth being available, regardless of the other connections that may be going through the switch. ATM is similar in spirit to the telephone system: local switches connect close neighbors, central exchanges interconnect the switches and fiber backbones span long distances.
This is in marked contrast to computer networking schemes such as Ethernet, Token Ring or LocalTalk. These are all broadcast-oriented approaches; every packet, no matter which station it is addressed to, gets sent to many stations. As you add more stations, the available bandwidth is spread ever-thinner.
The advantages of a switched-circuit network are flexibility and scalability. Each device on an ATM net can run at its own speed; an interface card at the switch handles the clocking and buffering issues. (In contrast, every device on an Ethernet must go at the same speed or the whole net fails.) An ATM network can grow as big as needed without cutting performance simply by adding more switches.
Another advantage is that switches can be connected by multiple paths. If a circuit fails or a fiber is bulldozed, the traffic can be rerouted around the damage. When everything is working, the network can allocate bandwidth to match demand by adjusting the routes.
All packets are created equal. The universal ATM packet (also called a cell) is 53 bytes long — 5 bytes of header and 48 bytes of message — no matter whether it contains voice, video or files. Because all packets are the same size, the network and the switches don’t have to understand each separate kind of data, but can blindly forward packets to their destinations.
Although 48 sounds like a small number, it was deliberately chosen. Audio and video quality suffers if there are long time delays in transmission. (For voice conversations, the threshold of annoyance is about 50 milliseconds of lag time. Anyone who has made a satellite phone call knows how disconcerting longer delays can be.) It is thus important to minimize the time to assemble and forward packets. The shorter the packet, the less time to process it — the packet cannot be sent until the last byte has been digitized.
On the other hand, each packet requires some overhead for network management and addressing. Network efficiency (ratio of overhead to payload) improves and thus transport cost falls with longer packets. Both mathematical queuing theory and field trials indicate that the optimum tradeoff between packetization delay and network overhead is somewhere between 30 and 100 bytes long.
At ISDN (64 kbps) data rates, a 48-byte message incurs a 6-ms packet-assembly delay. There are other system delays, among them the time lag imposed by the speed of light, so you wouldn’t want to start with delays much greater than 10 ms. And with a 5-byte header, this formula yields an overhead-to-payload ratio of less than 11 percent, which is tolerably good.
(As it happens, the choice of 53 bytes owes as much to politics as to math. When ATM was first brought to CCITT, the international telecom standards body, the Europeans had strong technical reasons for proposing a 32-byte message with a 5-byte header. The Americans, for equally sound technical reasons, wanted a 64-byte message plus a 4-byte header. The diplomats, with true Solomonic wisdom, resolved the matter by splitting the difference.)
Virtual addressing. ATM provides two levels of addressing, called virtual paths and virtual channels. Virtual paths are analogous to cables joining user sites. Within the virtual paths are virtual channels, which are analogous to individual wires within a cable. Here, the word “virtual” indicates that we aren’t talking about wires or fibers, but about bandwidth allocations and routing setups along a shared network. The distinction between the levels is made by dividing the address information in the header of each packet into two parts, with 8 bits signifying the path code and 16 bits identifying the channel.
The reason for this distinction is that, with today’s switching technology, there is a noticeable cost to setting up and tearing down a connection. It is often cheaper to keep a connection (say, between campuses of a state university) open for weeks and months at a time than to relinquish the connection only to reopen it a few hours later. A split addressing scheme allows the long-distance switches rapidly to identify packets headed for a common destination, while still supporting the many different phone calls and computer sessions that users may require.
The distinction means that long-haul networks now offer two classes of service: A “permanent virtual circuit” (PVC) or dedicated line between two fixed points, and a “switched virtual circuit” (SVC) that lets you dial up any destination on the net. This year, a PVC is likely to be cheaper — indeed, it may be all that is available. But during the next 18 months we expect SVC service to come down in price, to become ubiquitous and eventually to displace PVC altogether.
Global addressing. One consequence of this path/channel addressing scheme is that there aren’t very many bits available for specifying the packet’s destination. The solution is to separate the creation of an end-to-end connection from the maintenance of each leg of the journey.
Setting up a connection is done with “administrative” packets whose payload contains complete destination and routing codes. As it happens, there is already a worldwide scheme for encoding destinations on public networks: the E.164 standard, otherwise known as telephone numbers. Within local area nets, other schemes such as Internet or Novell Netware addresses might be used. During setup, it is the responsibility of software within each switch to choose the next leg of the route. For this purpose, the switch might query a network name server, consult internal directories and lookup tables, etc.
Once the end-to-end routing has been set up, each switch along the way no longer has to worry about ultimate destinations; it just accepts packets and forwards them to the next intermediate point. For this purpose, a complete address is not necessary. As part of the setup process, each switch in the path would have reported back to the previous switch, either to reject the request (all circuits in use, not enough bandwidth available, switch out of service, etc.) or to accept the request. With each acceptance would come a reference number identifying the path that the receiving switch had prepared for this connection.
This reference number thus acts as a virtual address for packets during one leg of their journey. It will probably be different for each leg. When all is going well, the end user never has to worry about this; he sees a single unbroken link to the destination. But it makes system troubleshooting rather problematic. Existing network management tools (i.e., SNMP) rely on “all points” broadcast queries, which are hard to implement in switched systems.
Negotiated quality. Unlike most other network protocols, ATM contains explicit features for negotiating the quality of service — peak and average bandwidth, maximum allowable packet delay, etc. — that will be available during the call. During the call setup, each switch requests the quality that it wants (i.e., that the user is willing to pay for). In granting such a request, the downstream switch undertakes to protect that quality level for the duration of the call. If it can’t guarantee the requested service, it rejects the request. The upstream switch can try again with a lesser request, seek an alternate path or wait a while.
One novel aspect of quality is the allowable packet-loss rate. ATM explicitly allows a network to fail to deliver a certain (negotiated) percentage of the packets it is given. This sounds terrible, but it actually lets a net work better.
Most communications run in bursts of data interspersed with silence. The network attempts to align the bursts and silences among all its calls so as to deliver the maximum amount of data without excessive delay for any packet. In a well-designed net, most of the time the switch will succeed. Once in a while, though, all the bursts will arrive at the same time, threatening to overwhelm the switch.
Discardable packets. For this reason, ATM contains a mechanism for handling overflows. Each packet header contains a Cell Loss Priority bit; if this bit is set, it tells the switch that this packet can be discarded if there’s not enough network bandwidth to handle it. (As the joke goes, the CLP bit is how a packet with low self-esteem identifies itself.) The situation is analogous to an airline that overbooks flights and allows standby passengers. In both cases, unused capacity (empty seats or idle packet times) is gone forever, so it pays to overbook slightly; but when a rare peak load does occur, the full-price passengers (or the non-discardable packets) get served first.
Discardable packets are especially useful in handling time- and cost-sensitive traffic. For example, when sending a movie down the wire, it is important that the sound and picture stay synchronized, even at the expense of an occasional missing line of video or an occasional blip in the sound. Allowing this controlled degradation of bandwidth means that the movie can be transmitted in a lower-cost channel. On the other hand, some kinds of traffic — computer files, for instance — cannot tolerate any missing packets, but the packets don’t have to arrive on any particular schedule.
WORKING WITH EXISTING MEDIA
An important consideration for any new technology is how well it can coexist with older technologies in the years to come. (Lest you get the idea that old technologies can just be replaced, remember that there are still a lot of rotary-dial phones in use, even though tone dialing has been ubiquitous for 25 years.) For this reason, the ATM Forum has devoted a great deal of attention to making ATM interoperable with existing communication services both long-haul and local.
ATM for LANs. One of the beauties of ATM is that it works equally well for local area networks as for phone systems, cable systems and wide area networks. This means that it will be possible to use the same technology, data packets and protocols for local communication as for remote communication. ATM requires no changes to existing application software. Each computer needs an ATM interface.
ATM works well in local area networks without needing any changes to existing application software. Each computer needs an ATM interface (with appropriate driver software) instead of an Ethernet or Token Ring or FDDI interface. The active or passive hub of the old network is replaced by an ATM switch.
At the moment, a 45-megabit ATM LAN using Class-5 unshielded twisted-pair wiring (UTP5) is roughly as expensive as a 100-megabit FDDI fiber-optic LAN. The cost of one workstation interface card plus a pro-rata share of the switch (or active hub, in the case of FDDI) is about $3,000. ATM cards for optical fiber are now about $300–500 more; fiber switches are similarly more expensive on a per-port basis. Costs are dropping — by 50 percent during the past year — but it will probably be three to five years before ATM costs less than $1,000 per workstation.
Keep in mind that a 45-mbps ATM network can actually have a greater total throughput than a 100-mbps FDDI net. ATM, being a switched system, supports many simultaneous connections, each getting the full 45-mbps bandwidth. FDDI, based on a token-passing ring topology, can pass only a few packets (typically two per ring) simultaneously, no matter how many computers are using the net.
Equally important, existing networks and ATM nets can be logically united by commercially available routers. This means that network planners can phase in ATM as dictated by budgets and demand. The same routers can join older nets to ATM-based wide area networks.
ATM for MANs. For many companies, the most immediate and practical use for ATM will be in metropolitan area networks that interconnect branch offices and outposts with Permanent Virtual Circuits leased from Bell, Sprint, MCI, MFS and others. One 45-mbps ATM line now costs about as much as ten T1 (1½ mbps) lines, so data-hungry customers may actually save money by increasing bandwidth.
ATM around the world. The 53-byte ATM packet format is readily mapped onto most of the existing telco fiber-transmission standards, such as DS3 at 45 megabits per second or Sonet at 155 and 622 mbps. This means that today’s installed base of fibers and exchanges can carry ATM data along with other traffic, and no new infrastructure will be needed. In addition, the telcos have already specified that ATM will form the basis for broadband ISDN.
Equally important, the connections between LANs and WANs are almost seamless. An ATM LAN can simply plug one or more of its ports into an ATM public network. At the interface between the ATM network and other kinds of local-area or wide-area nets, there are commercially available routers from Cisco, Fore and other firms.
The next big thing? Our take is that ATM will rapidly become the new common denominator for high-speed local networks and for long-distance traffic of all kinds. As prices for the gear fall, ATM will take on the stature that Ethernet has today: an expected feature of every decent computer and phone system.
Peter Dyson
A CULTURAL PERSPECTIVE
Let’s ignore the technical differences between Ethernet and ATM for a moment, and look instead at the cultural and sociological aspects. This is particularly apparent in the different methods for allocating bandwidth in the two systems.
[[don't know how to format this table. P. 16 in hard copy]]
Ethernet ATM
Private networks Public networks
Socialist ethos Capitalist ethos
Bandwidth is shared Bandwidth is negotiated
• grab as much as you • ask for what you need
want
• live with what you get • pay for what you get
• based on courtesy • based on contracts
— George Marshall, Adaptive division of Network Equipment Technology
ATM INFORMATION RESOURCES
The ATM Forum, in addition to developing standards and protocols, sponsors educational seminars and presentations that range from layman-oriented to jargon-rich.
ATM Forum
480 San Antonio Road, Suite 100
Mountain View, CA 94040
Phone (415) 962-2585, fax (415) 941-0849
Resources:
Asynchronous Transfer Mode: Bandwidth for the Future by Telco Systems. $10 (plus $5 for UPS shipping; add sales tax in some states) from Advanstar Marketing Services, 7500 Old Oak Blvd., Cleveland, OH 44130; phone (216) 826-2839 or (800) 598-6008.
Understanding ATM. Free from Cabletron Systems sales department; phone (603) 332-9400.
ATM in Private Networking: a Tutorial. Free from Hughes LAN Systems field marketing dept., phone (415) 966-7300, fax (415) 960-3738.
>NEWS
THE WESTERN CABLE-TELCO/COMPUTER SHOW?
Non-traditional cable companies shape the future
In the keynote session that opened the Western Cable show earlier this month, Ted Turner said the past 20 years in the cable business has been a great ride, but it’s over.
The cable industry that Turner, John Malone and others built is doomed. In its place will emerge a new industry whose business is providing two-way interactive communication infrastructure and services. It is an industry that will look as much like the telephone industry as it does the “old” cable industry. It is an industry that may end up funded by, allied with and indistinguishable from the “new” regional telephone industry.
From demonstrations on the exhibition floor to closed-door meetings in hotel suites around Anaheim, CA, the buzz was “interactive technology,” and the influences of both the telecom and computer industries could be felt in almost every discussion.
CABLE’S DIGITAL INFRASTRUCTURE
By far the most impressive thing at the show was the working fiber-optic/coax cable network at CableLabs’ CableNet booth. Anyone still concerned that the cable companies are going to build a digital replica of the current analog system (complete with a finite number of “channels”) would have been delighted by the demonstration.
In essence, CableNet appropriated the best of the latest telephone technologies and married them to the existing coax cable infrastructure to create a new, fully switched, two-way broadband interactive network. (For more on CableNet, see p. 23.)
DIGITAL COMPRESSION
The key to making this viable is the compression/decompression of digitized video. At the Digital World conference in June 1992, Intel chairman Andy Grove argued strongly that digital video compression/decompression would remain expensive and/or of inferior quality for some time to come. The focus for the ’90s would therefore be on using less-than-TV-quality digital video for business applications.
Immediately following Grove’s speech, Dick Green, president of CableLabs, laid out the cable industry’s plans (and time table) for 500-channel digital video service for consumers. To make this happen, the cable industry would have to count on new and/or significantly lower-cost technologies being ready just in time to meet the schedule. The biggest bet would be on video compression technology.
CableLabs bets on MPEG-2. Six months later, CableLabs selected the emerging MPEG-2 digital video compression standard. It appears to have made the right bet. MPEG-2 specifications are now out for final review and MPEG-2 implementations are being shaken down.
At the show, C-Cube Microsystems of Milpitas, CA, demonstrated the state of its MPEG-2 compression/decompression technology. In the demonstration, movie clips were compressed, transmitted and decompressed on the fly using a not-yet-complete MPEG-2 implementation.
The demonstration was running at full 704×480 resolution with an 80-Mbit-per-second transfer rate. There was a total delay of just less than two seconds due to compressing and decompressing the images. C-Cube claims that it will soon be down to something on the order of a 6-frame (1/5 second) delay — plus, of course, whatever transmission delays are encountered. Even the current delay is short enough for live broadcasts such as news and sports. The 1/5-second delay would almost certainly be acceptable for two-way conversations.
We asked C-Cube to run the system for us at various combinations of lower resolution and slower data transfer rates to see what the effect would be. There are definite trade-offs: Lower resolution gives you a “softer” (less sharp) image. Lowering the data transfer rate without decreasing resolution can cause you to lose picture information in action sequences. Most of the systems installed will probably include adaptive logic that will be able to adjust the bit rate on the fly. The system might select a higher bit rate during the action in a basketball game (one of the toughest things to digitize because the camera pans so rapidly), then drop back to a lower bit rate for interviews or commercials.
It can only get better. Things that can be compressed in advance (essentially everything except for live broadcasts) pose a different set of problems. On one hand, extra time (and/or extra computing horsepower) can make it possible to do a better job of compression. On the other hand, system operators will be tempted to move to lower resolution to reduce the amount of digital storage required per movie, and increase the number of simultaneous channels that can be transmitted. In Orlando, for example, Time-Warner will be transmitting at 352×480 resolution and allowing the system to interpolate the extra horizontal resolution. Although this is theoretically as good as VHS tape, to our eyes the images look distinctly “soft” — well shy of the quality of a good analog cable system, let alone that of a good laserdisc.
The systems installed in full-service-network, interactive television field trials in 1994 will certainly do better than the prototype software at the show — and continuing technological advances will make the systems put in place in 1995 and beyond better still. We do not know how good “better” will be, but from what we have seen, we do not think that compression technology will be a serious problem either for tests in 1994 or for more widespread deployment starting in 1995.
FROM MAINFRAMES TO VIDEO SERVERS
Digital video on demand represents a new lease on life for the big computer guys. This is a truly demanding application: billions of bytes of online data storage, extraordinarily high data transfer rates, tens or even hundreds of thousands of online users.
IBM and AT&T, both of which were at the show, along with Oracle and others that were not, are moving rapidly to extend their technology to meet this need. There are no magic breakthroughs here. The technology is not going to be either simple or cheap — and it probably will not be entirely fail-safe either. But the technology should be adequate to the task. And, again, it is going to get better and cheaper during the coming years.
THE SPLINTERED SETTOP BOX MARKET
From a technological standpoint, the settop box, or “user terminal” market, is the area that is still in the greatest chaos.
The traditional suppliers of cable converters, General Instruments and Scientific-Atlanta, were the two early favorites in this area. They had the established relationships with cable companies as well as the technology and the know-how to handle the essential analog cable services, including the extra-cost premium services. However, as phone companies have become more involved, and as the perceived role of the settop box has expanded, other companies have set their sights on what promises to be the biggest personal computer market of all.
Early on, settop boxes were conceived of as very inexpensive personal computers, capable of presenting a truly easy-to-use graphic user interface on the television screen. More recently, there has been increasing desire to equip them with sophisticated graphics processors to support special effects, 3D games and other “sexy” capabilities that go well beyond those available on most personal computers.
Some of the important players jockeying for market advantage include the following.
General Instruments. As you would expect from the market leader, GI has set out to design and build its own box in expectation that it will become the new de facto standard. However, its initial vision was pretty much a garden-variety personal computer without much razzle-dazzle graphic capability.
At the show, however, GI and Intel announced a $1,400 box with a built-in router and Ethernet/LAN output. It will be used in the Castro Valley, CA, trial that Viacom International and Comcast are conducting next year.
Separately, GI unveiled an elaborate settop terminal prototype called the Jerrold LinX module. When inserted into an analog addressable cable box, the module can become a digital interactive terminal. Microsoft, a partner of GI and Intel, is writing a new operating system kernel for the system, which is not based on either Windows or Modular Windows. LinX is expected to be available to consumers in late 1994.
Scientific-Atlanta. A distant number two to GI in the settop box market, SA has followed a different strategy — wrapping its analog know-how and market connections around computers provided by other companies: Silicon Graphics for the Time-Warner Orlando trial, and the 3DO Multiplayer for the US West trial in Omaha.
At the Western show, SA announced a third alternative: its own box based on the Motorola PowerPC RISC processor (the same one to be used in the next-generation Macintosh), plus a new, low-cost graphics chip, called Malibu, which was designed by Kaleida Labs but will be manufactured by Motorola. It is optimized to work with the PowerPC, and has built-in support for the Kaleida ScriptX interactive media programming language. For graphic applications, this box would be more powerful than the PowerPC Macintoshes which will not have the extra graphics chip.
In addition, SA announced an agreement to develop 300,000 boxes for TeleCommunications, Inc. According to SA, the boxes will be customized to meet TCI’s requirements.
As is typical in the current state of settops, none of the SA boxes are compatible with any of the others —let alone compatible with any of the other boxes coming onto the market!
Hewlett-Packard. As a newcomer in the settop box race, computer giant HP garnered a great deal of the media attention at the show, as well as attention from cable operators.
TCI (surprise, surprise) signed a letter of intent to buy as many as 100,000 digital compression terminals from HP during the next two years. This makes HP the first computer company to make the transition into this area of the consumer electronics market. Although both companies were reluctant to discuss any of the details behind the deal, HP representatives said the first generation of the TCI terminal will not support HP’s video printer technology.
HP’s plans are founded on a very hardware-centric approach, according to HP’s Casey Lemas, market development manager for interactive television appliances. In fact, the company does not plan to develop the interface for the TCI-contracted terminals. (According to Electronic Engineering Times, Dec. 6 issue, HP will adopt the Amiga CD32 architecture and employ the Amiga graphics chipset in its first-generation settop model.) HP declined to comment.
“Clearly we are not deluding ourselves into thinking that we are replacing SA or GI,” says HP’s Lemas. “We may be competing with them in this instance, but we might also cooperate in the future. This is not unusual in the computer industry, but it is new to cable.”
Confusion. In addition to the players mentioned above, we cannot discount the behind-the-scenes work going on at AT&T, Zenith, Silicon Graphics, 3DO, Microsoft and Apple Computer — all of which have either directly or indirectly (as in the case of AT&T) stated their intentions to be contenders in the settop box arena. All of this adds up to a mess: We have no idea yet what the user terminal will evolve into, how they will interface with the network, how they will talk to network servers and/or to other user terminals — or even how developers are going to program them. At the moment it looks as if these boxes will all be sufficiently different that any service that wants to exploit the capabilities of the user terminal will have to write different software for each settop terminal to be supported — not the way to create a broad market for interactive services.
There is nothing surprising about this. New markets are usually chaotic. But they do not really start to grow until they become less chaotic.
ONLINE SERVICES DELIVERED OVER CABLE
The user terminal market is not the only area where we are witnessing the marriage of computer and cable technologies. Several of the major cable operators, online service providers and computer companies have announced joint tests to link personal computers to cable TV lines, so that computer users at home can use cable lines to retrieve data as much as 1,000 times faster than over phone lines.
CompuServe. CompuServe, in conjunction with Continental Cablevision and the Teleport Communications Group, is expected to begin delivering online information via cable lines this month. (For more on Teleport, see p. 22.) The pilot program will link Continental Cablevision subscribers in Exeter, NH, to CompuServe Information Services, which has a worldwide subscriber base of 1.5 million. Participants in the cable test will use personal computers linked to the cable lines via Zenith Home Works cable modems. (Zenith has actually been selling cable modems for about 10 years, but until most recently the company has not been able to convince too many people to buy them.)
CompuServe members participating in the test will pay $8.95 per month for unlimited connect-time access to 48 basic services and $8 per hour when accessing CompuServe’s hourly priced service.
Prodigy. In late November, Cox Cable Communications and Prodigy Services announced a similar test using Zenith cable modem technology. According to the companies, Prodigy’s services will initially be delivered to households in Cox’s San Diego system, where the cable plant is two-way capable. No official launch date was announced.
Prodigy and America Online. Not to be outdone, cable operators Comcast Corp. and Viacom International each announced at the show that they plan to test both Prodigy and America Online as part of their respective interactive field trials slated for 1994. Both cable operators have inked deals to use a prototype cable modem under development by General Instruments, in conjunction with Intel. Viacom, of course, plans to provide the online services over cable to participants in its 18-month Castro Valley, CA, field trial, which is expected to be launched in early 1994. Comcast declined to identify the site of its 1994 trial, which it says will last for 12 months.
The cable-PC connection. These announced alliances respond to the growing demand for high-speed data connections for personal computers. Each of the trials provides an excellent work-around to the problem of slow access speeds over phone lines — without demanding a massive capital investment by cable companies.
500 CHANNELS AND NOTHING GOOD ON?
The most disappointing part of the demonstrations held at the show involved the interactive content. Most of what was demonstrated was, naturally enough, either a pretty straight carryover of something already available to computer users via online services or a displacement of something that already exists (i.e., movie rental).
But why should anyone be surprised or concerned? Most people have always supposed that the initial applications will be the obvious: movies on demand, online information services, etc. It is going to take much longer to explore the potential of new applications and new services.
This sorting out of what is to come is one of the major functions of the initial ITV trials: to provide a platform to help us start the process of learning what interactive services people really want. We expect to see appreciably more — and more inventive — interactive content and services at the various test sites than we saw at the Western show.
A harbinger of things to come. As a way to understand what delights — or nightmares — future interactive programming could offer the home viewer, it is important to note the amazing amount of new analog programming that was exhibited on the show floor. In addition to the QVCs, ShowTimes, and E’s of the cable world, there was also The Military Channel, FAD TV, the Adam & Eve Channel, America’s Disability Channel, the TV Food Network, Romance Classics Channel and the History Channel. While these particular topics might not be what we personally hope for when we imagine a future of personalized TV, these niche-oriented traditional services are definitely a harbinger of things to come.
THE GREAT RAPPROCHEMENT
For all of this technology, the biggest topic of conversation on the show floor was not fiber and coax or interactive services, but the likely merger of the phone and cable industries. Clearly, the most dramatic turn of this year has been the sudden rapprochement between cable and phone companies.
Richard Green of CableLabs forecast this turn of events at this year’s Digital World conference when he called for collaboration between phone companies and cable companies. Still, it caught almost everyone by surprise when John Malone, the man who had carried the flag for the cable industry against the phone companies, agreed to sell TCI to Bell Atlantic.
BELL ATLANTIC’S SMITH PRESENTS AT SHOW
Not surprisingly, Ray Smith, president of Bell Atlantic, and co-architect of the Bell Atlantic/TCI merger, agrees with Green. In his remarks to the press corps during a luncheon on the second day of the show, Smith outlined how the telephone and cable companies are perfectly complementary. Cable and telephony, he said, are both mature industries, that have “reached the limits of their current business.” At the same time, both see the opportunities facing them if they could “re-invent” themselves.
Those cable companies, and those telephone companies, that do not evolve toward interactive and transactional-based services and become providers of a broad range of programming will soon be out of business, he warned.
The combined strengths of the two industries could create companies that provide excellent service (like the phone company); customer choices (like cable) and customer loyalty (which goes hand-in-hand with excellent service and low prices).
Of course the flip side — which Smith did not dwell on — was the possibility that the new cable/telco entities could continue the negative practices of each industry. Imagine a communications system with poor customer service, frequent system outages, inaccurate billing, limited programming options, high prices and poor customer service.
As far as Smith is concerned, the biggest obstacle to creating telecommunications Nirvana is ill-conceived and/or outmoded government regulation. He derided the current cable re-regulation legislation, calling it “no way to run a country’s information policy,” and called instead for a policy that was based on “symmetry and simplicity.”
The new Bell Atlantic has extremely ambitious plans: 150,000 subscribers with video-on-demand capabilities by the end of 1994, and 1.5 million by the end of 1995. “We’re going to offer cable, wireless, telephony, flossing —anything!” Mr. Smith’s dream is to have us spend most of our waking hours tied into his network.
THE MILLENNIUM JUST AROUND THE CORNER
So, where does all of this leave us? From what we have seen to date, it is easy to believe that Time-Warner, Viacom and others will be able to bring up their test sites in 1994. We should expect that there will be all manner of problems — with the networks, the content, the settop boxes, etc. That is the nature of tests — especially tests of systems as large and complex as even these modest initial installations will be. However, it looks as if the base technology will be there, and that it will work.
We have a harder time believing that this technology will be ready to roll out on a larger scale in 1995 or even 1996, as Ray Smith, his partner John Malone and others predicted. This allows almost no time to evaluate and incorporate the lessons learned from the 1994 trials. Nor does it give us any time to sort out the areas (such as user terminals) that are still in chaos, or time for settop interface standards and protocols to begin to emerge.
More importantly, it gives us precious little time to develop compelling content that will really help to drive the technology.
Everything on view at the Western show made us more convinced than ever that this phenomenon called digital media really is going to happen. It just is not likely to happen as quickly — or as smoothly — as Malone and Smith tell us.
Jonathan Seybold, Janice Maloney
CABLE GIANTS FORM JOINT VENTURE
Plans to offer telecom, other services
Any thoughts that there will be any fundamental differences between next-generation cable systems and next-generation phone systems should have been put to rest by the announcements and demonstrations of the past few weeks:
CableLabs demonstrated a fully switched ATM-based fiber/coax system at the Western Cable show (see p. 18).
Pacific Bell announced that it will install this (cable) architecture to replace its existing twisted-pair phone wiring (see p. 3).
And, five of the six top cable MSO’s (Multiple System Operators) announced an as-yet-un-named joint venture to develop and support virtually every sort of telephony and interactive data service except (for the time-being) for local residential voice service.
In many ways, the new joint venture is the culmination of a gradual — but profound — shift in thinking and strategy on the part of key cable executives. During the past couple of years, the focus has shifted from movies-on-demand to a broad spectrum of subscriber-based telecommunication services. We suspect that the success of local telephone service over cable in the UK (where cable operators are permitted to compete with the phone company) has had a great deal to do with this shift in thinking. It is clear that cable execs now see as much (or more) gold in telephony over cable as they do in video on demand and home shopping.
TOGETHER AT LAST
The new joint venture is supported by TCI, Time Warner, Cablevision, Comcast and Cox. Together, they serve more than 40 percent of the U.S. cable subscriber base. Three of the five (TCI, Time Warner and Cox) already have ties to one of the seven regional Bell operating companies.
Partially because they are barred in most states from offering standard residential phone service, the cable companies will focus initially on other residential services. These will include wireless Personal Communication Services (PCS), “bypass” access to long-distance telephone service with a lower surcharge than levied by local phone companies, videophone, broadband data communications and on-line energy management. Working in conjunction with Teleport Communications Group (also jointly owned by the same five companies), the new venture will also offer data communication services and “bypass” access to long-distance carriers to business customers.
Most important, the partners will interconnect their local systems to create metropolitan area-wide networks that can more directly compete with regional phone companies. One of the major problems cable operators have faced is the way in which cable franchises are fragmented. Chicago, for example, is served by 12 different — and disconnected — cable franchises. The new consortium (which other cable operators will be invited to invest in) will strive to link regional franchises into a coherent network.
THE TELEPORT LINK
Teleport Communications Group is (along with MFS Communications) one of the two largest business “bypass” service providers. Teleport has installed fiber rings in 11 metropolitan areas, offering business users inexpensive, high-bandwidth communication services between any two connections in the Teleport net, as well as, direct access to the switches of major long-distance carriers — thus bypassing the local phone company and the local phone company access charges for long-distance service.
Last year, TCI and Cox bought Teleport from Merrill Lynch (which had supplied much of the capital for the company). Since that time, Comcast, Continental and now Time Warner have joined the consortium. Cox owns slightly more than 25 percent of the company, TCI slightly less than 25 percent; the other three own 162/3 percent each. The Time Warner investment, announced on Dec. 1, is being made by the parent company, not Time-Warner Entertainment (which is partially owned by US West).
Through Teleport, the five owners and other cable operators have begun to move into the business communications market. So far this year, Teleport has announced joint ventures with cable operators in Detroit, Phoenix, St. Louis, Providence and south Florida.
RESIDENTIAL SERVICES
Cable companies in this group and many others have been quietly conducting experiments with new types of telecommunications services, going well beyond the commercial access services offered by Teleport and other CAPs (competitive access providers), Time Warner, for example, has just completed a technical test of a system to provide residential customers access to long-distance services via the cable network. In addition, Continental Cablevision Systems Corp. and others have been experimenting with a broad range of data services, including work-at-home, institutional connections, broadband access to the Internet and wireless data.
Experimenting with PCS. Cable companies have been experimenting with PCS even longer. Most of the effort has been focused on using existing coax cable as a “backbone” to connect the thousands of PCS transmitters/receivers required to service a metropolitan area. However, PCS could also provide an elegant means of providing residential service to cable customers. A transmitter/receiver attached to the cable coming into the home could turn the home into a micro-cell. The same phone handsets could serve as wireless phones at home and PCS cellular phones away from home.
With the FCC scheduled to begin licensing PCS operators next year, cable companies in and out of the joint venture are now looking at the best approaches to bid for spectrum. “The work with PCS, data communications and other things of this sort has pulled me out of the digital television stuff almost altogether,” says the engineering vice president of one of the top cable companies, who asked not to be identified. “The more we look into the telecom side, the bigger the market we find for the services we can offer over broadband channels. It’s absolutely amazing.”
Standard telephony over cable? The latest test to come to light is also the first to involve delivery of standard telephony to residential customers over cable lines in the U.S. In late November, the commercial telecommunications provider Jones Lightwave and its affiliated cable multiple system operator, Jones Intercable, named Scientific Atlanta as its supplier for the first U.S. market trial of cable-delivered telephony service. This is scheduled to begin in the Chicago area by the middle of next year. The companies, with MCI as the long-distance partner, will also provide a long-distance access service to 50 of their employees in Alexandria, VA.
But not just yet. As for the new joint venture, Robert Thomson, senior vice president for communications and policy planning at TCI, says the group’s focus would not be on standard residential phone service at this point, owing to the legal barriers in most states. (Illinois is an exception.) Instead, it will put together support operations for each of the five service categories listed above, which will allow local cable participants in the venture to offer whichever mix of services makes the most sense to them, from just one to all five.
UTILITY SERVICES MANAGED BY CABLE
While PCS, datacom and long-distance access are fairly well-explored service categories, energy management and videophone are largely unknown possibilities at this point. Venture participants said their networks would support full-motion video telephony, which might be offered as a component of long-distance service at the outset or as part of a work-at-home connection between employees and their companies.
Remote energy management employing wideband or broadband connections is just catching fire in utility circles. Energy and environmental concerns are shifting the emphasis from adding power capacity to cover expanding peak load requirements to curtailing capacity expansion by reducing peak use. As reported in Vol. 3 No. 5, p. 12, TCI has taken a lead among cable operators in this area and is discussing a test of the concept with Pacific Gas & Electric and Microsoft Corp. Sources said several other utilities could become involved in tests at other locations.
John Bringenberg, manager of strategic planning at TCI, while declining to discuss specific negotiations, said the concept involves use of cable lines to provide utilities with a wideband telemetry link. This can be used to monitor energy use on an ongoing basis. Customers can be billed different rates for energy use at different times of the day. Even more interesting, the system could be set up to turn off or cut back heating/air-conditioning, pumps, hot water heaters, etc. automatically. during peak periods.
According to members of the utility industry who are advocates of the idea, the ability for customers to capitalize on off-peak electricity prices could translate into significant reductions in consumption, thereby alleviating pressure to add peak power generating facilities.
$1,200 savings over 20 years. Entergy Corp., the first utility to apply demand-reduction techniques over a broadband cable system, is operating a test outside Little Rock, AR, involving about 100 households. The company estimates it can achieve savings of $1,200 per household over 20 years in households where people are away from the home during peak consumption periods.
Access through utilities. For a cable company, the energy connection has several ramifications extending beyond whatever direct service revenues could be derived. In fact, Bringenberg said, the revenue part of the equation isn’t the primary driver behind TCI’s interest.
Equally or more important, he said, are benefits to cable penetration that might come with a tie-in with a utility. “We are reasonably convinced that the electric utility can help cable get access to homes that don’t subscribe to cable,” he said. “By working together we believe we can find an economic way to put connectivity in all those homes so that those people do have access to the broadband highway.”
In addition, he noted, adding the utility management service to the integrated service equation puts cable in the position of providing a LAN (local area network) capability into the home.
“This is basically a chip which would give the utility the access to various appliances in the home over the power line carrier or possibly some RF (radio frequency) carrier in the home,” Bringenberg said. “Once you have that LAN capacity you also probably need to devote some of the processing power (in the cable service control box) so that the utilities can have access to some of the brain in order to manage things, and they probably need a little bit of the memory as well.”
This sharing of device power, along with use of the network, represents another savings for the utility, he added. “Once we do this, we can probably save the utility several hundred dollars on a device of this type that they would have to put in for their own communications purposes anyway.”
BORN-AGAIN TELCO EXECUTIVES
All in all, the shift in focus is remarkable. In not much more than two years, cable executives have progressed from first talking about “channels” and programming services to talking about movies on demand and interactive television, and now to talking about a wide variety of innovative telephony services.
This does not mean that video on demand, home shopping and the rest are not interesting. Rather, it means that the vision has broadened. People who only recently thought of themselves as being part of the broadcast and entertainment businesses are now sounding increasingly like enlightened telephone company executives.
The new joint venture will add another interesting dimension to the increasingly complex competitive/cooperative relationship between the phone industry and the cable industry. Never a dull moment.
Fred Dawson, Jonathan Seybold
FULL-SERVICE NETWORK AT CABLE SHOW
A prototype fiber/coaxial design
Twenty-three companies teamed up to demonstrate a fully interoperable ATM-switched full-service network in California early this month, employing the fiber/coaxial “star/bus” design pioneered by the cable industry.
The demonstration, put together by Cable Television Laboratories for the industry’s Western Show convention in Anaheim, CA, served as confirmation that the many streams of advanced protocols now emerging in telecommunications, computing and digital television can be put together for provision of a vast array of media and telephony services over such networks. And it also provided a useful snapshot as to where vendors are going as they push capabilities ever further in the interim between first iterations and wide-scale rollout of their products.
CABLENET DELIVERS INTERACTIVE SERVICES
The demonstration involved all the services we would expect: delivery of distance learning, voice service, teleconferencing, data services, video on demand, community local area network, commercial telecommunications (T-1), access to the Internet, digital ad insertion and automated network control. There were also unique new applications, such as Hewlett-Packard’s color printer system, which captures and prints images shown on the television screen, and Kodak’s digital picture exchange, an extension of the company’s Photo CD system. But the real story was not the applications and services but the underlying technology that made them possible.
All of these applications were running simultaneously, supported by two asynchronous transfer mode (ATM) switches that were interconnected over an OC-48 fiber ring, which is the 2.4-gigabit/second SONET (Synchronous Optical Network) protocol used for regional trunking applications. The demonstration also used fiber links outside the convention area, supplied by Teleport Communications Group, for importation of distant signals.
DEMO BASED ON CABLELABS MODEL
The setup mimicked the type of ATM and fiber node array that CableLabs is recommending for cable systems, starting with regional interconnection and extending down to the individual customer level. The regional ATM switch, a Northern Telecom Magellan Gateway, operated network-to-network and network-to-user interfaces at DS-3 (45 Mbits/sec.) and OC-3 (155 Mbits/sec.) speeds. The Magellan can service up to 24 ports, each running at DS-3 speed, or a smaller number of ports in various combinations of DS-3 and OC-3 speeds.
ATM as the backbone. The role of such a switch is to steer traffic from high-speed inputs and outputs across a broad range of networks and operating territories. Beyond this core interface, the fiber ring extending over a large geographical region would serve several additional ATM nodes, which might be set up along the lines of the second ATM switch at the demonstration, an NEC NEAX Model 10 ATM Service Node. (For a primer on ATM technology, see Mediascape on p. 14.)
The second-level ATM switch serves as the traffic manager for the local serving area, such as a cable system’s franchise territory. It provides the interface among the various cable network components, including servers, ad-insertion systems, head-ends and local telecommunications switches. Eventually, the cable industry envisions another layer of ATM routers that would be dispersed further into the field to accommodate higher levels of user contention for switched services.
Officials at the demonstration noted that many ATM applications envisioned for media distribution, as opposed to the initial commercial applications in network computing and telecommunications, remain to be woven into the set of protocols. For example, the International Standards Organization’s task force recently selected a 188-byte packetized transport layer for MPEG-2 video compression with the intention of achieving an easy mapping of such transmissions into ATM cells, but the details of how this interface will be structured have yet to be worked out.
Backward compatibility. Another detail that needs to be worked out is support for existing (analog) video transmission over the same network. ATM has been formulated to work with SONET protocols but not with RF (radio frequency) transport protocols, such as are used in cable TV. This means that specific allocations of frequency levels within any given RF channel must be matched to each of the bytes within the 53-byte ATM cell, and it probably means some of the ATM functions built into the 5-byte header will be removed to achieve greater bandwidth efficiency and to eliminate unnecessary processing from ATM-compatible premises terminals.
But these are details that vendors appear ready to focus on, according to Richard Green, president of CableLabs. “I’m very encouraged that further work on ATM will maximize its efficiency for applications such as we have in mind,” he said. The key point, he added, is that no major technological innovations are required to make these accommodations.
Meanwhile, as the demonstration proved, ATM is more than adequate to meet the requirements of early market tests such as are scheduled by Time Warner in Orlando, FL, and by US West and Cox Cable in separate trials in Omaha, NE, next year. Here, the ATM units served to support video-on-demand techniques offered by IBM, as well as the Grass Valley Group’s interactive distance learning system, the American Memory program (using Mosaic in conjunction with accessing multimedia material from the Library of Congress) and broadband access to the Internet (the Consortium for School Networking’s Multimedia Internet Applications).
A MIX-AND-MATCH APPROACH TO SERVICES
A number of other applications were also on the network but bypassed the ATM switches, showing how network operators can mix and match various approaches to providing services by dividing service categories by frequency (frequency multiplexing) and routing them through whatever network components they choose. These applications included two uses of Ethernet over cable: one by Zenith Corp. for work-at-home applications and one by Unisys demonstrating “multimedia on demand.” There was also another video-on-demand system in addition to IBM’s operated by Hewlett-Packard, which connected to HP’s server located elsewhere in the convention exhibit hall.
IBM’s video on demand. IBM’s video on demand employed the company’s Ultimedia Server 6000 in conjunction with TRW’s Ramcube 26G, which is a large, solid-state memory subsystem for high-speed, high-volume data-handling applications. Together, the units showed how a video-on-demand service could support a combination of high-volume use of current box office hits with much lower levels of demand for less-popular movies, with the net effect of lowering the overall storage and access capabilities required for the primary server.
As explained by Tom Gritzmacher, program manager for TRW’s Space and Electronics Group, the solid state Ramcube can serve as a temporary storehouse for the movies that are most in demand, accommodating up to 1,000 simultaneous viewings of a single film. The configuration of films in this unit can be changed whenever the network operator wants to by simply downloading selected films from the IBM server into the solid-state unit.
Next round of improvements. The demonstration also highlighted some improvements in bandwidth efficiency that are on the horizon. Even though the MPEG-2 protocols have established a set of bit rates for various types of applications that is likely to be the universal standard for a long time to come, continuing advances in modulation techniques promise considerable improvements in spectrum efficiency — the overall bit count per unit of bandwidth frequency (Hertz) — as well as gains in robustness for any given level of bitstream per channel.
For example, Northern Telecom (NT) showed an application of a technology known as discrete multitone (DMT), which can deliver up to seven bits per Hertz. At five bits per Hertz (as demonstrated in Anaheim) it can support transmission of two-way services over much longer extensions of coaxial cable than once seemed possible.
DMT divides a channel within a given transport medium into a multitude of discrete subchannels and then determines which subchannels are most appropriate on any given network segment for transmission of the telephone or other signal. For example, when DMT technology is used over standard telephone copper wire, the approximately 1.1-MHz capacity of the line is divided into 256 individual carriers, allowing the system to determine the points within the link spectrum that are best suited to a high level of bit loading, a medium level or none.
Telephone service over coax. Earlier this year, the T1E1.4 subworking group of the Exchange Carriers Standards Association chose DMT as the preferred modulation scheme for the telcos’ ADSL (asymmetrical digital subscriber line) technology, owing to the superior robustness and high bit rate of the system. NT claims that the system will support transmission over 12,000-foot runs of standard copper wire at 7.7 megabits/sec., which is enough for four movie channels, two digital telephone circuits, an analog voice circuit and a data channel. Bellcore estimates that about 50–55 percent of all households in the U.S. fall within this line reach.
The technology should provide equal benefits for transmission over coax. Said Stefan Sherman, senior market development manager for residential broadband at NT, “We believe DMT will permit cable companies to operate telephone service over coaxial serving areas of 2,000 homes or more.” This would expand the cable industry’s opportunity in telephony by a considerable margin, since most discussions about “cablephone” have assumed fiber penetration to the 500-home level, which is still a rarity among cable systems.
Sherman said the cablephone application has been under development for only three months at NT and, as yet, has not won a go-ahead for final product development. “We have to run tests over cable systems and talk with the industry more about it,” he said, acknowledging that NT is a latecomer to the burgeoning cable hardware market.
However, given the success of DMT in improving the capabilities of twisted-pair phone lines, the technology does look promising for telephone service or other interactive services over longer coaxial runs, where “noise” from outside signals and online amplifiers is a serious problem.
Sherman noted that NT was not operating the system at the Western show at maximum bit/Hertz rates. “The principle is the same,” he said. “We could run at 7 bits/Hertz; it’s just a matter of how far you want to go versus how much you want to carry. In cable, bandwidth isn’t at such a premium as it is over copper, so you can opt for greater range.”
Seven bits and what do ya’ get? By the time digital communications become a reality, seven bits/Hertz could well be a standard. This would mean that the digital capacity of any transmission medium could be some 30–40 percent above what people had anticipated. At the Western show, ComStream demonstrated another modulation technique known as 64 QAM (quadrature amplitude modulation), which operates at five bits/Hertz. However, according to a company engineer, ComStream (as well as several other companies) is working on a refinement called 256 QAM, which will offer 7 or more bits/Hertz, possibly before 64 QAM ever gets off the ground.
This would appear to put QAM techniques, now under development by a wide range of manufacturers, on course to catch up with another new modulation scheme — Zenith’s 16 VSB (vestigial sideband) technique, which also operates at about 7 bits/Hertz. Zenith specifications call for 23 movie channels per six MHz cable channel or as many as nine live TV programs. The commune also demonstrated its modulation scheme that supports transport of two HDTV channels over a single 6-MHz cable channel, effectively doubling the HDTV carrying capacity within the traditional 6-MHz cable-channelization scheme.
Engineers anticipate that by the end of next year all of these advanced modulation systems will be on the market. The freeing up of bandwidth for more channels over star/bus networks means not only more carrying capacity for point-to-multipoint “broadcast” services, but also more capacity for allocation of dedicated point-to-point channels such as were demonstrated at the CableNet exhibit.
Fred Dawson
COX PAIRS WITH AN RBOC
The other shoe drops
The $12 billion Bell Atlantic/TCI deal (Vol. 3, No. 5, p. 12) has irrevocably changed the cable/telco landscape in the U.S. John Malone, the largest and most powerful cable operator in the country — and the leader in cable’s crusade against the regional phone companies — has decided to join the enemy! Since that time, it has been “gentlemen, find your partners” at the telco/cable dance.
US West had already committed $2.5 billion for a 25 percent stake in Time Warner’s Time Warner Entertainment company. Viacom and QVC quickly signed up telco partners (Nynex for Viacom and BellSouth for QVC) to help finance their $10 billion ego war for Paramount (Vol. 3, No. 5, p. 3). Now, the latest partners on the dance floor are Southwestern Bell and Cox Enterprises.
ANOTHER BILLION DOLLAR DEAL
Each of these deals has been structured differently. This one bears more resemblance to US West/TWE than it does to any of the more recent arrangements. In essence, Southwestern Bell will invest $1.6 billion for a 40 percent share of the Cox cable empire. The deal does not include any interest in Cox print publishing holdings (Atlanta Constitution) or — for the moment — any part of Cox’s partial ownership of several properties (QVC, Discovery, E!).
Cox Cable president James Robbins announced that the bulk of the money will be used not to upgrade Cox plant to fiber (as TWE is doing), but to acquire additional cable franchises to increase Cox’s clout in the market. Cox claims 1.7 million subscribers, which makes it the sixth largest cable MSO. It would like to expand its coverage to at least 3 million subscribers in order to give itself real clout with program providers.
THE SHOOT-OUT IN OMAHA
Although Cox would rather focus on expanding its reach than on converting its current base to fully switched fiber/coax systems, it cannot afford to ignore the challenge of interactive services — especially when it faces a head-to-head challenge from a phone company invading one of its franchise territories.
RBOC vs. cable. US West had already announced that it will be installing a test interactive system in Omaha, NE, which is Cox territory. The US West test will be a fully interactive digital system with 3DO/Scientific Atlanta user terminals (settop boxes). Cox has now announced that it will respond with a test of its own that will use Santa Clara, CA-based ICTV’s technology to provide movies on demand and other interactive services over the existing coax cable wiring.
ITV on the cheap. You will recall that the ICTV “starter” system puts the digital-to-analog conversion circuitry into cards mounted in a rack at the “head end” of the cable service. Analog signals are transmitted on dedicated channels over the existing cable plant to the subscriber’s home. Since it is improbable that everyone who subscribes to interactive services will be making use of the interactive services at the same time, the system can make do with considerably fewer digital-to-analog converter cards than there are interactive customers.
The Omaha test will use the previously announced “package” of IBM servers to store digitized movies and other programs, ICTV’s interactive technology, and customer management and billing software provided by New Century Communications. Zenith Electronics Corp. has been awarded the contract for the relatively simple settop boxes.
The schedule calls for a trial of movies on demand and “other select services” starting in June 1994, with a later expansion to “thousands” of customers and a wider variety of services, including music videos on demand, interactive games, classified advertising, eating and entertainment guides, catalogs and home shopping services, and “distance learning.”
A strategic fit. This is exactly the type of customer ICTV’s system was designed for: A cable operator who feels that he needs to provide interactive services to stave off competition, but who does not want (or cannot afford) to upgrade his plant to a full ATM/fiber configuration.
In essence, Cox is betting that interactive services will take considerably longer to sweep the market than TCI, Time Warner, Bell Atlantic and others assume. If this is the case, Cox is better off spending Southwestern Bell’s money adding new service areas than in upgrading the “plant” in existing service areas. It may be right.
Jonathan Seybold
BLOCKBUSTER OFFERS RENTALS OF CD-ROMS
Future consumer distribution channel for multimedia?
Blockbuster Video, one of the largest video rental and music retail companies in the world, has embarked on a new program to bring multimedia software and hardware to the mass market. The program, which was launched on a trial basis in November, is a potential turning point for interactive media.
To date, multimedia title distribution has been limited to computer software outlets and mail-order catalogs, but if Blockbuster’s plans are carried out, interactive media titles and platforms will, for the first time, reach a mass consumer audience.
Initially, Blockbuster will rent software in 57 company-owned stores in the San Francisco Bay area. As part of the trial, Blockbuster plans to stock more than 200 CD-ROM titles from more than 35 software publishers. Titles will range from games and adventure to education, edutainment and reference. Each of the stores will also carry five different hardware platforms: Panasonic’s Real 3DO Multiplayer, Sega’s Genesis CD player, Philips’s CD-I platform, Apple’s Macintosh TV and IBM’s PS/1 computer system. According to Blockbuster, trained salespeople will be stationed at each machine to answer questions about the hardware and to demonstrate various software titles.
THE ANALOG TAPE KING GOES DIGITAL
Although Blockbuster is initially distributing CD-ROM titles only as a part of this in-store trial, there can be no doubt that the company, with its core business founded on analog media, is looking for ways to evolve toward interactive entertainment. During the past couple of years, the company has been very active in acquiring new retail chains and strengthening the Blockbuster brand name, not only in the United States, but overseas.
In addition, it has been developing technologies for media delivery (see story on the NewLeaf partnership with IBM, Vol. 2, No. 9), and new in-store product categories, such as Sega video game and Philips’ CD-I rentals.
Tracking customer habits. Blockbuster’s business model for the pilot was derived from its extensive research in tracking consumer profiles and buying habits at its stores. The average Blockbuster customer profile is one that every multimedia publisher would love to reach: typical customers are in their mid-thirties, are married with children and have median incomes of more than $50,000. In addition, the percentage of Blockbuster customers with personal computers in their homes is nearly two times the national average.
It may be frightening to contemplate, but the Blockbuster organization (like the Tandy Corporation) also tracks every single customer’s rental history, every single store’s daily business and the sales record of every single store item. With more than 40 million customers, this is its most important source of information on consumer demographics and purchase decisions.
Additional data that convinced Blockbuster to pursue new media markets came from the game industry. According to Sega, three out of five of its video games are rented before they are purchased. Blockbuster also points out that Gaming magazine and Game Pro both found that more than 80 percent of the people they questioned would prefer to rent game cartridges and CD-ROMs before buying them.
COLOR CODED FOR YOUR CONVENIENCE
Within its stores, Blockbuster has designed areas for interactive technologies that it hopes will appeal to consumers unfamiliar with new media. Each of the five multimedia machines is set up in its own color-coded kiosk, with promotional material surrounding it. Color-coded shelves contain software for rental or purchase. As is Blockbuster’s practice with videos, original packaging for the software is prominently displayed, with copies of the software behind the box.
By color-coding the kiosks and shelves as well as the stickers placed on every software package, Blockbuster hopes to alleviate consumer confusion about which software will play on which machine. In addition, Blockbuster says an employee versed in use of the game players will be on hand to demonstrate the system and answer questions about the titles.
USING HARDWARE TO SELL SOFTWARE
With the exception of the Apple and IBM computer platforms, consumers can rent players from Blockbuster. (Computers will not be available for rent because Blockbuster officials didn’t want to be saddled with the liability.) Customers who, after renting a system, decide they must have one of their very own can even purchase the Sega, Philips or Panasonic players in the store or place orders for the Macintosh and IBM machines through an 800 number.
Rental fees are $4 for titles, $15 for players and $20 for three titles and a player. All rentals may be kept for three evenings.
The chicken and the egg. It is not Blockbuster’s intention to be in the hardware business. However, the company realizes that a business in multimedia software cannot succeed without a healthy hardware market. To that end, even though Blockbuster doesn’t believe that selling players will be a major component of the program, the company has agreed to allocate space and personnel to promote the various hardware platforms.
By putting the different platforms in the store, Blockbuster is also making the shift to interactive media easier on the consumer. In essence, the company is creating a scenario whereby it can generate consumer interest and excitement by lowering the economic barriers for experimenting with the new technology. In addition, it is providing an opportunity to satisfy “impulse” purchases of hardware.
AWAITING THE RESULTS
On March 31, the company plans to review the trial program and re-craft it for a national roll-out in time for Christmas 1994. Ultimately, as many as 4,000 Blockbuster stores nationwide may rent and sell multimedia software.
Blockbuster will collate the results of the initial test, and share that information with the participating hardware and software companies. All of the participants will receive the common data from the test (total usage, in-store responses, etc.). Individual product information, such as how well a specific title or platform rented or sold, will be shared only with that company.
Invaluable market research. Most of the participants in this program are eagerly awaiting the information that will be gleaned from the test, as well as the exposure of having their products in front of an audience that probably doesn’t go into CompUSA or the other computer stores for their entertainment and information.
“The [traditional computer] channel has been doing a terrible job of merchandising CD-ROM,” says Scott Walchek, president and COO of Sanctuary Woods, a software publisher participating in the test. “It’s reached the point where it is more risky for me to rely on the status quo, anemic software channel than to try to extend my reach into an already proven, mass-market channel.”
Walchek is looking for data to help understand the “single-play” model — also known as the “pay-per-play” model — which he believes will carry over into the interactive television market. Will people rent and play a title one time only, or will they want to buy it so they can play it over and over again? As Walchek asks: “Is the product we are doing going to satisfy the hunger” of multimedia users?
THE ‘BLEEDING EDGE’ OF TECHNOLOGY
While the rental trial is still only a few weeks old, Blockbuster officials are pleased with the preliminary results. Store traffic in San Francisco is up; game rentals and sales are higher than predicted; and the interest in personal computers is very high, especially with those Blockbuster members who are parents of school-age children.
Interestingly, the early numbers show that educational titles are following the game model of rental before purchase, according to Mike van der Kieft, Blockbuster’s director of business development and manager of new media markets. Van der Kieft declined to comment on the exact figures.
Survival of the fittest. That Blockbuster is willing to devote floor and shelf space — about 30 feet per participating store — to interactive media is a sure sign that the company, which owns virtually 20 percent of the multi-billion dollar home video rental market, believes in the future of interactive media. Especially if one considers that Blockbuster is one company that is truly on the bleeding edge of technology — the more successful the technology, the greater this company could bleed. If video on demand became a widespread reality tomorrow, Blockbuster, with its core business rooted in analog technology, could very well go the way of the dinosaur.
In looking for ways to diversify and adapt its business, Blockbuster has put itself in the forefront of interactive entertainment, at least as far as the consumer is concerned. This could only strengthen its position as a leading provider of software — from movies and music to games and multimedia.
David Baron
IMA PROPOSES MULTIMEDIA STANDARDS
Group recommends cross-platform compatibility
Earlier this month, the Interactive Multimedia Association, a Washington, DC-based trade group representing more than 260 corporations and institutions, issued two recommended practices for cross-platform compatibility standards in multimedia. The recommendations are in the areas of networked multimedia system services and multimedia data exchange. A third recommended practice for scripting languages is due sometime in early 1994.
We applaud the IMA’s efforts to set standards for multimedia, an area in which multiple incompatible platforms and applications have created a confused and complicated market. However, the results raise some questions about whether the industry will adopt the technologies. Because the IMA is not a standard setting body, it can only make recommendations to industry, not impose standards.
TWO ENTRIES, TWO WINNERS
In both data exchange and multimedia system services, the winners were the only final submissions to the RFTs issued last December. (For more on the IMA’s RFTs, see Vol. 2, No. 12, p. 27, and Vol. 2, No. 8, p. 32.) In the only category in which two viable technologies were submitted, by Kaleida Labs and Gain Technologies for scripting languages, a decision on which technology to endorse was not reached. Brian Marquardt, director of the IMA’s Compatibility Project, says the submissions were accepted based on their technical merits. The IMA was “certainly ready to reject them if necessary” in order to “delay for good technology to come available,” he says.
Multimedia System Services. In the area of multimedia system services, the IMA approved a set of specifications submitted by Hewlett-Packard, IBM and SunSoft, called Multimedia System Services, version 1.0.
Multimedia System Services (MSS) defines specifications for creating, transmitting and playing synchronized multimedia information within a distributed computing environment that includes components from different vendors. MSS is an augmentation file for operating systems that is intended to smooth play of multimedia by determining the capabilities and configurations of workstations.
Multimedia for Unix only. So far, the specification is limited to Unix computer networks only. Although this is an extremely limited base for a proposed multimedia standard, Marquardt says the technology provides a flexible “framework for a lot of future work” that the IMA intends to pursue.
The MSS architecture group, a committee of roughly 40 members that drafted the recommended practice, is working on applying the foundation technology to distributed multimedia data types such as video and audio in local area networks, wide-area switched networks, cable television systems and teleconferencing. No details were available on when any new specifications might be available.
Multimedia System Services, version 1.0, is available on the Internet at ibminet.awdpa.ibm.com.
Avid seals exchange with Apple. In the area of multimedia data exchange, the IMA recommended a combined submission from Avid Technology and Apple Computer, called Open Media Framework (OMF) Interchange. The objective of a data exchange specification is to make it possible for a single audio or video file to be played back on different hardware or software platforms and applications without expensive conversion or modification.
OMF Interchange, version 1.0, is a standard format for the interchange of digital media data among heterogeneous platforms. The format, which was introduced in April, is designed to encapsulate all the information required to transport digital media, such as audio, video, graphics and still images, as well as rules for combining and presenting the media.
The Apple lunchbox. Apple and Avid, which had been in discussions prior to the IMA RFT, originally made separate submissions, but decided to combine their technologies shortly after the review began. Apple’s Bento technology is the underlying container format of OMF. (Bento is a Japanese word meaning lunchbox — the analogy being that data are put into a lunchbox container for easy portability.) OMF is a public domain technology that more than 25 companies have collaborated on.
The OMF Interchange technical specification is available by contacting Avid in Tewksbury, MA, or on the Internet at omf-request@avid.com.
Kaleida spars against Gain. Kaleida Labs and Gain Technologies have submitted multimedia scripting languages for review. A recommendation from the IMA is due in early 1994.
A recommendation on scripting languages is intended to specify a hardware-independent language that defines interactions and behavior of a multimedia title, without using platform-specific software codes. Once a language is broadly accepted, then “script players” for each platform can be created so one script can play on many platforms without modification — making it faster, easier and less expensive for developers to create a title on one system, and making it possible for titles to be played on a range of platforms.
Unclear on the market. A recommendation was originally scheduled for release this month. However, in reviewing the technology, the architecture committee decided the RFT was too broadly written and needed to be further refined. “When the RFT was first written [a year ago], we were a little naive in thinking that everyone wanted the same thing,” says Marquardt. “We found that the business and consumer markets have different requirements.”
The consumer market, as the IMA sees it, is primarily interested in standalone computer systems, while the business market is increasingly employing distributed computing environments. “A year ago we would have all said the market was in standalone,” says Marquardt. “Now we are seeing so many multimedia business applications out there that distributed is important too.” The architecture committee is addressing which market the IMA wants to address and whether the RFT is adequate. (We are completely puzzled as to why, with all of the current focus on high-bandwidth interactive services to the home, IMA should assume that a standalone solution will be adequate even for home markets.)
A CHANGING MARKET FOR MULTIMEDIA
The IMA’s attempt to establish standards for multimedia is a laudable, but extremely challenging undertaking. The market for multimedia is a sea of varied and incompatible applications and platforms. For developers of multimedia content, the lack of standards adds cost and time to projects because their materials must often be modified and rewritten in order to run on different platforms. For consumers, it adds confusion and uncertainty about what technologies to invest in. This chaotic state is only further compounded by the fact that with cable, telecommunications, publishing, entertainment, consumer electronics and computer industries all jumping into interactive media, the number of multimedia platforms, networks and technologies only keeps growing.
Slower than the market… As the IMA’s dilemma with scripting languages reflects, a central problem in trying to set standards in multimedia is that definitions, technologies and markets can change with the blink of an eye. The recommended practices issued this month took more than a year to emerge from committees. Marquardt says the architecture committees are working on accelerating these timetables so decisions can be made faster.
Faster than a standards body. The IMA might be criticized as too large and bureaucratic a body to carry out swift deliberations for recommended practices in the area of multimedia. However, it should be noted that its review cycle is a speeding bullet compared to the laborious deliberation processes of official standard-setting bodies, such as the International Standards Organization (ISO) and the American National Standards Institute (ANSI), which take an average of nine years to set a standard.
A membership for convergence. Certainly the IMA has a membership that should help keep it abreast with the pace of changes. Membership in the IMA, which was founded in 1988 as the Interactive Video Industry Association, reflects a strong computer influence, but also includes a growing number of consumer electronics, publishing and telecommunications companies as well as educational institutions.
Association sponsors are Apple, Digital Equipment, Eastman Kodak, Hewlett-Packard, IBM, Intel, Lotus, Microsoft, Mitsubishi, AT&T/NCR, Pioneer and Sun. Other members include Cable Television Laboratories, Bellcore, MTV Networks, PBS, New York University, 3M, Motorola, Philips, Compaq, Hitachi, Times Mirror, Sony, Southwestern Bell, General Instruments, Paramount Technology Group, Ziff-Davis Publishing and the National Association of Broadcasters.
Negotiating a difficult industry. The ultimate problem with attempts to set standards is that there is no guarantee that anyone will follow recommended practices for multimedia standards, no matter how sound the technology proposed. Computer companies are loathe to relinquish any perceived advantages in the marketplace to adopt another’s technology. Although Microsoft, the 800-pound gorilla sitting in the middle of the multimedia field, is an IMA sponsor, history has shown it to be reticent to follow any lead except its own in setting standards.
Unfortunate though it may be for confused consumers and frustrated developers, the fate of the IMA’s recommended practices and other de facto multimedia standards lies in the hands of Microsoft and companies in the industry, which (understandably) view the creation of standards through the prism of their own technical and commercial needs.
Amy Johns
>BRIEFS
PARAMOUNT, AT&T PLAN INTERACTIVE PROGRAMMING
Paramount Communications, Inc., and AT&T recently announced plans for Paramount to develop interactive television programming using an authoring system developed by AT&T. The first programs to be created will be Interactive Entertainment Tonight and Sports News Desk Interactive.
The authoring system, developed at AT&T Bell Labs, will ultimately enable traditional film and video producers to format their products for an interactive video network, be it cable, telephone or satellite, according to AT&T. The system is designed to work with the AT&T interactive television technology now being deployed in Viacom’s Castro Valley project.
“We looked at every authoring system there was, including Apple’s EZTV, Microsoft, IBM, 3DO,” explained Paramount Technology Group president Keith Schaefer. “None were perfect, but AT&T was further along with development and the most flexible to work with our television producers and designers in the Media Kitchen.” Schaefer said the two companies will combine efforts to develop the system further.
Despite the fact that the authoring system runs on a Sun workstation and requires proprietary hardware, Bill Schell of the Bell Labs technical staff, says it is so graphically oriented that there is no need for a programmer. The environment is visually oriented, making interactive programs more “pleasing to the consumer because it looks like television today, as opposed to text-based authoring tools which most [interactive systems] are based on,” said Schaefer.
While Paramount plans to rely on AT&T for its authoring system, many developers, including the Time Warner Interactive Group (TWIG), are spending time and money to create their own systems, based on the particular needs of both the software and intended playback device or devices.
TWIG, in fact, has virtually stopped creating new software titles while it builds an authoring system that is designed to be used by the creative entities within Time Warner, and to work over the company’s interactive television systems. This could be a strategic advantage for TWIG, as its system will be optimized for the networks that it operates. Unlike Time Warner, Paramount does not maintain television or telephone networks.
AT&T’s system may later be commercially available to other producers.
ATARI DEBUTS 64-BIT GAME MACHINE
The former king of the video game market wants to reclaim its title. Atari Corp. of Sunnyvale, CA, the leader of the video game industry in the late 1970s to early 1980s, recently introduced a 64-bit game machine called Jaguar. The $249 machine became available in New York and San Francisco markets in mid-November and is slated for a complete roll out in the U.S. and Europe early in 1994.
While we haven’t yet tested Jaguar for its ability to handle graphics and live game action, its 64-bit processor is the fastest on the market. The technology will allow Jaguar to display true color graphics and 3D environments as well as to play 16-bit CD-quality audio, according to Atari.
More than 20 developers have signed on to create game titles for the CD-ROM-based entertainment platform, according to the company. Four titles were released with the introduction of the platform. The first titles for the player include Cybermorph (developed by Attention to Detail), which is bundled with the unit, Crescent Galaxy (developed by Atari), and Raiden and Dino Dudes (both developed by Imagitec Design). Time Warner, which has a stake in Atari, will make its library of video clips available to Atari and its licensed publishers for use in software for Jaguar. Titles for Jaguar are expected to range from $39 to $69.
Atari says it is developing future options for Jaguar, which include a double-speed CD-ROM peripheral to be released in 1994 for $200, as well as an interface that will allow play over phone and cable lines, and a virtual reality helmet.
With Jaguar, Atari is hoping to leapfrog its competition and garner a significant slice of the $5.3 billion U.S. video game market. (This is revenue it could desperately use. It recently announced a third-quarter loss of $17.6 million. Restructuring costs and writeoffs of older systems were citing as contributing factors.) Jaguar processes more than 100 times as much data at one time as 16-bit systems from both Sega and Nintendo — market leaders — and is twice as fast as 3DO’s 32-bit machine, according to Atari. Both Nintendo and Sega announced their intention to develop new game machines based on a 64-bit processor. Nintendo and SGI recently announced a joint initiative, called Project Reality, to develop this faster machine, which they expect to be available in 1995. (For more details, see Vol. 3, No. 4, p. 27.)
Also eyeing this market is Sony, which recently announced plans to introduce a home video game machine in Japan in 1995. The 32-bit, CD-ROM-based machine is to be launched by a newly formed subsidiary called Sony Computer Entertainment. With game players of superior capabilities already being introduced, Sony’s machine may arrive too late to have an impact. No pricing details were released.
APPLE, EDS, REDGATE IN SHOPPING PILOT
To learn more about consumer expectations of interactive home shopping, Apple Computer, EDS and Redgate Communications are teaming up on a two-month interactive CD-ROM-based program called En Passant. As part of the pilot, which went into effect earlier this month, the companies plan to distribute approximately 30,000 interactive discs to a select group of registered owners of Apple CD-ROM drives.
En Passant CDs include 21 catalogs from retailers, such as LL Bean, Land’s End, Williams-Sonoma, Tiffany & Co., The Apple Catalog, Patagonia and Pottery Barn, as well as interviews and video segments. Items can be searched by catalog or topic. Several catalogs include interactive features such as fashion coordination, on-screen color changing, and video and audio product descriptions. In addition, the discs contain QuickTime video interviews with medical, fashion and management experts plus articles from Elle Decor and Wall Street Journal Guide to Understanding Personal Finance.
Consumers can use the discs to browse catalogs and other materials, but not to place orders, which requires calling an 800 number being used to track usage and buying patterns. The caller will then be transferred to the retailer of his or her choice.
At the end of the trial, Apple’s New Media Division (lead sponsor of the trial), EDS, which is providing operations and systems technology, and Redgate, which is supplying management, market research and sales promotion, plan to analyze the results to determine what types of CD-ROM-based material to develop. Future plans include expanding the service to the Windows platform.
While the implications for such a service to be placed on a network are obvious, Apple says its plans to date involve only CD-ROM. (Apple predicts there will be 10 million CD-ROM users by 1994.) Online services are still too limited in their ability to display graphics, video and other information, according to Ian Diery, VP of Apple USA. Apple made no comment about whether the trial might expand into an online offering or whether the pilot would be incorporated into its interactive television projects.
DEMAND FOR VIDEO ON DEMAND
AT&T, TCI and US West released the results of the first half of a combined pay-per-view and video-on-demand service trial that took place over the past two years in Littleton, CO. While it is not surprising that online video rental “stores” will be a popular attraction for two-way TV systems, what was surprising was the level of usage for true video-on-demand service.
Participants in the Viewer Controlled Cable Television pilot were offered one of two different services: scheduled pay per view or video on demand. The two services were offered to groups of 150 households. After a period of time, the groups switched. That is, one group was offered video on demand and the other, scheduled pay per view. The cost per movie ranged from 99 cents to $3.99, with video-on-demand services costing the premium. Customers were not charged additional fees.
On average, video-on-demand services were used a whopping 12 times more than the national average for traditional pay-per-view movies. Customers paid the premium on price to see a movie on their own schedule, and purchased more movies than normal. The typical customer in the VCTV trial bought two and a half movies per month, compared with the national PPV average of 2.6 per year. In addition, 70 percent of the trial participants used the service each month.
Phase Two, which calls for trial participants to have access to both the PPV and VOD services at the same time, will run through the first quarter, 1994.
ANOTHER ALLEN ACQUISITION
Paul Allen, Microsoft co-founder, has bought an 80 percent share in Ticketmaster, one the largest ticket processing event marketing companies in the world. Much as Barry Diller wasn’t buying QVC to sell faux jewelry, Allen didn’t acquire Ticketmaster to just sell concert and sporting event tickets.
“Ticketmaster is an important vehicle for the informational and technological highway of the future, and complements my existing suite of technology companies,” said Allen in a prepared statement.
Put Ticketmaster together with Allen’s other holdings, including software company Asymetrix, interactive media developer Starwave, wireless network services company Metricom, and R&D thinktank Interval Research, and you get the picture of someone who is quietly amassing the resources and the facilities to become one of the major forces in the interactive future.
In addition to those companies, Allen has a large stake in America Online, which (coincidentally?) recently began offering subscribers in Chicago access to Chicago Cubs tickets and merchandise through a joint venture with… Ticketmaster. Allen also has a stake in Houston-based Telescan, a designer, developer and operator of online services.
The guts of Ticketmaster are a very sophisticated transaction processing facility, which handled 52 million transactions last year. If the future of online services and interactive television is transaction processing, Allen just bought himself the capability to start at the top of the game.
ITV INDUSTRY ASSOCIATION FOUNDED
Joining the ranks of the Interactive Multimedia Association, the Interactive Services Association and other industry groups promoting interactive media and technologies, the Interactive Television Association recently opened shop in Washington, DC.
Andy Sernovitz, ITA president, says the association was formed in response to the need for information on ITV developments and issues on Capitol Hill and among companies in the field. “This is the most competitive, fluid, fast-changing market in America,” says Sernovitz in a statement. “But because the players and products change almost everyday, it is also an industry that is often misunderstood and very hard to follow.”
ITA’s mission is fourfold: to provide members with information on the industry and developments; to coordinate political action and lobbying efforts on federal, state and local legislative and regulatory levels; to communicate developments in interactive television to consumer organizations, public interest groups and the media (not that ITV needs to be further hyped in the press); and to facilitate networking and communication among members of the ITV industry.
Perhaps the largest part of the ITA’s work will be to act as a lobbying group for the ITV industry in Washington. “There is an incredible eagerness on Capitol Hill to change the regulatory environment and make decisions regarding ITV, but members of Congress are lacking the information and direction” they need to make decisions, say Sernovitz.
Although no members have joined the association yet, ITA says it’s talking with AT&T, Bell-Atlantic, Time Warner, Edison Electric Institute, Hewlett-Packard and Citicorp, among others. Membership fees are $2,000 (standard), $500 (individual) and $5,000–10,000 (founder).
APPLE TO INTEGRATE MPEG INTO QUICKTIME
In a move that Apple watchers have been expecting, the Cupertino, CA-based computer company recently announced its intention to support the MPEG digital video standard in its QuickTime system software for interactive media.
Since QuickTime was designed to be modular, especially with respect to compression technologies, it was only a matter of time after MPEG products began to appear on the market that Apple support the standard.
Apple representatives have said that the company will build MPEG into future versions of QuickTime, much the same way JPEG (the still picture compression standard) is implemented today. Unlike JPEG, which can operate in a software-only environment, MPEG requires additional hardware to compress a video stream. (MPEG decompression can take place using a software-only codec.) MPEG-compliant hardware products are expected to be on the market by mid-1994.
MPEG, an acronym for the Moving Pictures Experts Group, is a compression algorithm that was established by the International Standards Organization to be a unifying digital video standard. MPEG was designed to facilitate the use of video on CD-ROM. An MPEG 2 standard, which is still under development, is being designed for digital television, cable and satellite broadcasting. (For more information on MPEG 1 and 2, see Vol. 2, No. 7, p 20)
>I/O
>READERS RESPOND
VIDEO GAMES FOR FEMALES?
Hidden dollars in the interactive market
Heidi Dangelmaier has conducted research on developing interactive game titles for companies including Sega and The 3DO Company. She has a Master’s degree in computer science from the University of British Columbia and is a computer science Ph.D. candidate at Princeton University. Her E-mail address is htd@cs.princeton.edu.
Over the last year, I have come to the conclusion that video game companies are simply disinterested in doubling their profits. Just to size up the facts: females predominate the population at 52 percent; there are more than 15 million girls between the ages of 4 and 12 in the U.S. alone; young girls regularly write companies like Sega requesting more “girl games.” You can’t help asking, “Why aren’t these companies making more products for females?”
I could understand this phenomenon if someone had irrefutably demonstrated that digital media is inherently uninteresting to females. I might even sympathize if there were one epoch in the history of video games when companies earnestly invested large sums of money in the female market, only to be firmly rejected at great monetary loss. Since I have seen no evidence of either situation, it simply follows that companies are content with their existing profit margins.
Why else would they resist those more than 500 million 4- to 12-year-old girls (if you tally in Western Europe and Mexico), who have equal buying power to boys and so few products that coincide with their interests? The only other reasonable (and I do not consider prejudice reasonable) cause for resistance would be that companies have not made an intelligent effort to understand the female market.
What qualifies as an intelligent effort? An intelligent effort makes decisions about market potentials based on substantiated information. An intelligent effort recognizes, respects and accounts for the differences between females and males in its evaluation. An intelligent effort is honest enough to take responsibility for the sway it holds over the current market demographics.
Why aren’t companies making more products for females? For the last year, I have been on an enterprise to bring multimedia products to females. To achieve this agenda, I broached this question at many of the major game companies. One common response was, “Our primary market (boys) might feel alienated if we make products for girls.”
Firstly, such a response is very prejudiced; its motives favor the interest of one gender over another and are as unjust as the pleas of groups that rallied together to protest female membership in Little League. These groups were afraid of the damage the male ego might suffer if they were ever defeated by the females. A secondary flaw in the reasoning of companies using this response is that it hasn’t been supported with statistical evidence. I wasn’t provided any study that concluded boys’ interests in video games would be negatively affected if products were made for girls.
“Girls don’t play video games,” was another common answer I received to the question of why companies aren’t making more products for females. This justification doesn’t take into account that the current selection of products offers very little stylistic diversity, and the diversity that does exist is more reflective of the play patterns of males.
By not considering game content in their evaluations, companies are implying “games are for boys.” Companies are correct in assuming that there are strong divisions between what a given gender is and is not likely to take part in. But they are not correct in assumptions that females intrinsically dislike video games.
Are video games sex-typed as male? Research has shown that gender divisions can either evolve from cultural sex typing, or they can be born out of differing physical capabilities. Sex typing asserts gender appropriateness of objects and activities. An example of a solidly established sex typing: Guns are for boys, jewelry boxes are for females. Sex typing is based on traditional sex roles, and is essentially impossible to uproot or reverse.
Sex-type awareness is important because researchers have consistently demonstrated that children request same-sex stereotyped toys, and tend to play with these toys rather than toys stereotyped for other sexes. Not only do children begin to make such sex-typed choices before the age of three, but parents have demonstrated a propensity to purchase and encourage play that abides by traditional stereotypes.
Studies demonstrate that video game systems are not sex-typed. There are activities you can perform on these systems that are more appealing to boys. But there are also activities you can perform on these systems that are more appealing to girls. One study in the journal Sex Roles indicated that 85.7 percent of females sampled had no negative inclination toward video game systems and agreed that video games can be fun. This result was not significantly different from attitudes expressed by men.
Do females inherently dislike video games? Two other studies from the same journal surveyed sex appropriateness of common items and activities among boys and girls. Computers and video games were statistically demonstrated to be considered culturally neutral. Things given similar neutrality ratings were cameras, playground equipment and plastic horses. Another analysis looked at the use of computers in three different areas: gaming, programming and applications. Males used the computer predominantly for gaming and programming, but less for application-oriented tasks; whereas females used it in the exact opposite way. Activities supported by applications such as writing, drawing or electronic mail are not sex stereotyped, and coincided with female interests.
Companies cannot justly argue that it is because video game systems are sex-typed male. Toy choices may be influenced by factors other than culturally perceived sex appropriateness. Children can select toys based on the child’s physical characteristics. Are females equipped with the physical skills needed to use a video game system? Absolutely! Females have full ability to perform the hand-to-eye coordination required to operate a controller.
Scientists have demonstrated that different skills are improved with different types of toys. Toys for boys tend to emphasize more visual and spatial tasks that involve depth perception and the solving of mazes or puzzles. Because many video games emphasize these types of tasks, they reflect a bias toward boys. There is no reason that other skills, such as procedural thinking, which is more like following a recipe or pattern and which girls excel at, could be the basis for challenging games as well.
Does advertising discourage female game use? Any game company that makes decisions based on the premise that “girls don’t play video games” employs anecdotal rather than thoroughly analyzed behavior. Why aren’t companies making more products for females? A common answer is “We don’t make gender-specific products.” For video game companies to evaluate the potential of a female market fairly, they must take responsibility for any gender bias they are perpetuating through their advertisements.
Gender-biased marketing influences purchase demographics. Eugene Provenzo, in his book Video Kids, Making Sense of Nintendo, dedicates a chapter to quantifying the alleged “neutrality” of the industry. In doing so, he analyzed 47 of Nintendo’s most popular cartridges. Assessing the graphic compositions of the cartridge covers, Provenzo calculated that there were 115 males pictured and only nine females.
Three of the females shown were in overtly subordinate positions. Images that females see contribute to their self-conception, ability and status. Dreams are formed partly from the image of the roles other females play. Rarely seeing females in video games, or seeing females play only passive roles, diminishes the likelihood that a female will play the game. Ad slogans like “Game Boy” or “Gamegear: Separates the men from boys,” tell young females that they are an afterthought in the video game industry.
Titles for females make sense. Gender is not a burden to tow, but an intriguing human dynamic that can bring texture to interactivity. Companies like Sanctuary Woods should be applauded for taking a step in this direction with its title Hawaii High, a girl’s adventure title with a strong female lead character.
Girls do have preferences, and they are willing to vote for their interests with their buying dollars. Anyone who does not know this yet is clearly unfamiliar with Bantam’s bestselling Sweet Valley High series, which sells primarily to pre-teen females. Within the first three years of publication, more than 34 million books were distributed in the U.S. alone, and the series was translated into 15 languages.
To conclude, I remind people involved in the emerging technologies that video game technology is often a child’s first and most intimate exposure to computer technology. It would be a grave mistake and a huge hindrance to the futures of our daughters, if we take something as flexible as digital technology and encourage it into becoming the dominion of males.
Heidi Dangelmaier
>EVENTS
NAB ‘94
March 20–24, Las Vegas
National Association of Broadcasters, Interactive Multimedia Association
(202) 775-4972, fax (202) 775-2146
NAB ‘94 is an annual conference and exhibition for the broadcasting, post-production, teleproduction and multimedia industries. The focus of NAB ‘94 will be on converging TV, audio, phone and computer technologies. The show will also examine public policy issues such as the competitive nature of telco-cable mergers.
A total of 250 seminars and workshops will be offered. Conference tracks include production and post- production; broadcast engineering; HDTV; radio advertising sales and marketing; television advertising; radio management; broadcast law and regulation; television management; and broadcast education. An all-day post-production seminar, sponsored by the Society of Motion Picture and Television Engineers (SMPTE), and a half-day digital transmission tutorial, sponsored by the Institute of Electrical and Electronics Engineers (IEEE) Broadcast Technology Society, will also be held.
Within NAB ‘94, the Interactive Multimedia Association and NAB are sponsoring the second annual NAB Multimedia World. This conference is designed to explore the emerging relationships between multimedia and broadcast communications.
Sessions in this conference include case studies in title planning; convergence of multimedia and HDTV; analysis of multimedia markets for education, training, games and publishing; interactive design strategies; profiles of successful licensing agreements; case studies in designing for interactive broadcasting; interactive marketing; multimedia for large audiences; and international issues in multimedia. Profiles of Apple, MPC, Photo CD, CD-I, Sega, Nintendo, 3DO, Silicon Graphics, General Instruments, Scientific-Atlanta, Avid and Kaleida will be featured, and a variety of advanced workshops will be offered.
Among the 800 expected show exhibitors are Autodesk, Avid, COSA, DEC, Digital F/X, General Electric, LSI Logic, Mitsubishi, Progressive Image, RGB Spectrum, SGI, Toshiba, Truevision and WPA Film Library.
More than 64,000 attendees are predicted for NAB ‘94.
-30-