He Helped Create the Wave, Now He’s Catching It
Al Sikes, Hearst Corp.>>
As chairman of the Federal Communications Commission from 1989 to 1993, Alfred Sikes personally helped roil the waters that brought the cable and telephone industries to loggerheads. A deep-down believer in driving markets via open competition, he pushed hard — and succeeded — in persuading the Justice Department to allow telephone companies the regulatory freedom to offer both information services and “video dial tone.”
The latter drove telcos into direct competition with cable for the provision of video programming to America’s consumers, and, Sikes hoped, provided them with sufficient incentive to start the costly process of upgrading to fiber.
Presiding over alphabet soup.>> He was also presiding over the FCC during deliberations for, and granting of, spectrum for interactive video and data services (IVDS) and a particularly controversial decision to reallocate some of the radio spectrum already in use by industries such as the railroads for personal communication services (PCS). And it was his innovative “collaborate to compete” solution that finally got the warring factions of high-definition television (HDTV) to work together.
Sikes’s bold moves at the FCC came from a long acquaintance with the issues as both a radio executive and a state government official in the mid-1970s to mid-1980s. Then, from 1986 to 1989, he served as assistant secretary of commerce and administrator of the National Telecommunications and Information Administration (NTIA).
Assessing U.S. policy.>> There he was responsible for the NTIA Telecom 2000 report, which was the first comprehensive U.S. communications policy assessment in 20 years. He also led discussions on trade and market access between the U.S. communications industry and West Germany, the United Kingdom, France, South Korea, the Philippines and China.
Sikes as much as anyone in the world knows about issues surrounding the creation of a communications superhighway. His choice to enter the private sector as a publishing company executive, rather than in a cable or telephone company, should serve as a valuable object lesson for those who still don’t believe that information coupled with technology, and not technology alone, will drive the next phase of the telecommunications revolution.
A SUPERHIGHWAY WE MAY WANT IN OUR BACKYARD
Sikes opened his Digital World remarks by recalling a press interview in 1991, when a reporter asked him what he thought of a bill sponsored by then-Senator Albert Gore and Sen. Conrad Burns. The bill called for the government to take steps to ensure that an information superhighway would be in place by 2015.
“I said the bill’s authors had too little faith in the market, as it would achieve that goal much sooner,” said Sikes. “If the software and system are done well, then I believe the superhighway will arrive by the end of this century, if not before. It’s less certain, however, whether tomorrow’s superhighway will develop as quickly as it should and whether it will be as robust as it should be.”
Field of dreams.>> Sikes acknowledged the difficulty of seeing and designing products that consumers don’t know they want. “We face additionally the perils of conceiving and designing services for a network that’s not yet in existence,” he said. Only the early adopters are using the more sophisticated interactive technologies on the market today, and even they wouldn’t claim they’re representative of the population at large.
Sikes sees only a few exceptions — home shopping, video games, video on demand — but despite this dearth of broad applications, he said, metaphorically, the checkered flag is up. “The competition will be fascinating,” he said. “It will be destabilizing, and it will hold many surprises.”
Like what? “Well, all of a sudden companies headed by engineers are buying movie studios, and entertainment companies are entering into alliances with manufacturers, and software companies are buying intellectual property as if they know how to entertain,” said Sikes. Even the stodgiest print publishers are finding value in alliances with manufacturers and network providers.
The chaos is palpable and it’s “making nauseous” the full spectrum of the communications industry. “The room is spinning,” Sikes said. “The people don’t know how to make it stop. Convergence has arrived on many doorsteps an unwanted visitor.”
SOME CANDID COMMENTS ABOUT LIFE IN BUREAUCRACY
“I must admit it was easier to talk with unrestrained enthusiasm while I was at the FCC,” said Sikes. “The market was to me an abstraction. I could remember its stimulative effects from my days as a broadcaster, but I wasn’t having to make deals. I wasn’t having to invest my capital at risk or to pay debt. I was protected. I was protected from my decisions. Beyond that, I was protected from technology.”
But those days are over. Today, his job is to determine how the digital world will affect the financial picture for the extensive media holdings of Hearst, which include everything from Cosmopolitan to the San Francisco Examiner to TV stations and cable networks the company co-owns.
Extraordinary but nascent.>> “We see extraordinary, yet nascent new opportunities,” said Sikes, echoing the view of many print publishers at Digital World and beyond. “Newspapers, books and magazines are not going away.
“On the other hand, in an advanced interactive communications world, new markets will emerge inevitably, enlarging and changing revenue streams. People will want time-sensitive information now. The word ‘communications’ will be increasingly conditioned by personalization, by customization, and not by mass.”
INTERACTIVE’S ALREADY THEIR STOCK IN TRADE
The good news, said Sikes, is that people already interact with their media — they turn pages, look at tables of contents, browse. While many are looking to the technologists and the entertainment industry for answers, he believes (not surprisingly) they should look east, toward New York City, which is still the capital of the publishing industry.
Missing opportunities.>> Sikes is convinced that holding back will not only put companies at risk, but will preclude them from taking advantage of new opportunities.
A questioner asked if we might see coventures “on the magnitude of US West-Time Warner” for publishers. Sikes said, “Well, I was going to say yes until you added ‘on the magnitude of US West-Time Warner’ and I’m not sure we’re going to see $2.5 billion change hands. That’s an enormous sum of money in the publishing industry in terms of investment.”
Reticent no more.>> However, publishers are getting past their initial reticence. “Some are more aggressive than others,” he said. “But my sense is that there is a lot of movement.”
Hearst, he said, is pursuing alliances within the publishing community as well as with network providers and computer companies. “Using the networks as test beds and entering into relationships for that purpose makes sense,” he said. “When you go forward with a new medium you simply can’t say, ‘All right, we’re going to do magazines and this new interactive TV.’ Working with electronic publishers and software developers, to some extent, probably makes some sense (for us).”
THE GLOBAL MARKET NEEDS SOME WARMING
Sikes’s experience in world trade also made for an interesting exchange about how and/or why we continue to focus on “killing each other” in the U.S. market while ignoring a huge potential global market by not working with standards organizations, etc., on infrastructure issues.
“To set standards internationally is very, very slow,” Sikes said. “As a consequence, a lot of people who are on the leading edge pull back from it. Secondly, standards are frequently set internationally on a de facto basis. While it is a bit chaotic, order almost always emerges. I’m not sure at this juncture I would suggest that we anchor the innovative process in this country to (international standards bodies like) the CCITT or the CCIR.”
And, he added later, the European Community has become very protective of itself — “feeding at the EC trough,” he called it — and is making it much harder for foreigners like the U.S. to do business there. Meantime, the tough competition in the U.S. market for interactive content is pushing forward the state of the art at a much faster rate.
FREE THE MARKETS, DELIVER THE NETWORKS
Five years ago, before it was fashionable to do so, Sikes’s Telecom 2000 report forecast today’s electronic neighborhoods — outlining new ways to provide healthcare, education and other public services. The report was quite confident that the marketplace, if sufficiently free, would deliver the leading edge global networks of the future.
It is the emphasis on free markets that Sikes continues to believe will push sophisticated communications technologies further into the consumer market. He is convinced that by 2015, the date mentioned in the Gore-Burns legislative edict, we will be a generation ahead of that forecast, “and the trip will have been an adventure.”
Denise Caruso