The industry starts talking infrastructure

A recent private seminar on future information services for consumers at the Palo Alto, CA-based Institute for the Future reached consensus that the provision of video services by the regional Bell Operating Companies (RBOCs) would require about $400 per subscriber in infrastructure improvements.

The seminar, directed primarily toward an audience of RBOCs, also revealed that the RBOCs aren’t sure there will be sufficient demand for such services. But they say they’ll continue to press forward with some major projects since they feel there is a business demand for information services.

SERVICE UPGRADES ARE COMING

Ameritech, for example, has announced that it will be upgrading service to 2.5 million subscribers in five years. A $1 billion investment will upgrade Ameritech’s network to include optical loop carrier gear, the electronics that reside between the central office and the home (from DSC Corp. of Plano, TX), as well as fiber-optic cabling and equipment from Raynet Corp. of Menlo Park, CA, which will link the phone network’s fiber backbone to the subscriber’s curb. (These two investments are the source of the “$400 per subscriber” figure.)

Fiber to the curb. Ameritech was one of Raynet’s first big contracts. The company, a subsidiary of Raychem Corp., has spent hundreds of millions of dollars developing its “fiber to the curb” technology. Whether the company will ever get that money back was openly discussed at the recent Telecommunications Association conference in San Diego.

At TCA, it was generally accepted that the cable TV industry could provide even more interactive video capacity than a fiber-wired phone company at less than $100 per subscriber. The expectation is that the cable industry will certainly upgrade because of franchise requirements and the need to obtain additional subscriber revenues.

CABLE’S STRUGGLE WITH INTERACTIVE

RBOC participants at the Institute for the Future seminar felt that the cable industry would probably continue to be heavily leveraged, and will not be able to handle interactivity (i.e., the one-to-one switched line capability at which the phone companies excel) very well.

However there was an opportunity, they felt, for the RBOCs to pick up cable systems cheap in the future if restrictions against such purchases are relaxed. This would be particularly useful since the provision of video dial tone to the RBOCs.

Waiting for the local. Though regulations still forbid cross-fertilization between cable and phone companies, common wisdom is that these restrictions will be lifted when there is full competition for local telephone service; most believe that will occur within three years.

However, non-RBOC participants at the Institute felt that sentiment was overly optimistic. The broad vision for Sony and Matsushita, for example, seems to include hardware (both wireless and wired), fiber connectivity (cable TV and RBOC), advanced databases (with intelligent agents), and visual materials in one company’s package.

It was remarked several times that this type of system seemed the aim of Sony and Matsushita too. Closer to home, industry watchers are convinced that companies such as Bill Gates’ Interactive Home Systems will go much further than the acquisition of digital image rights. Gates and the Japanese companies certainly do not intend to leave the field as easy pickings for the RBOCs.

Tom Hargadon