IP: NYT Digital Commerce: Deja vu with John Malone and ITV

[Dave Farber <farber () cis upenn edu>]

March 2, 1998


DIGITAL COMMERCE / By DENISE CARUSO


New Ways to Deliver the Same Old Goods?


John C. Malone, the tough-talking chairman of the cable television giant
Tele-Communications Inc., is back in the news again, and industry watchers
who were around for the first "interactive television" debacle of the early
1990s are having flashbacks.


Back then, convinced that the convergence of computer technology with
television and telephones was only a couple of years away, Malone was
making headlines with promises to spend hundreds of millions of dollars on
beefy new cable wires and whizzy new digital set-top boxes designed to
deliver a still-uninvented generation of interactive entertainment.


Today, convinced that the convergence of computer technology with
television and telephones is only a couple of years away, Malone is again
making headlines -- with promises to spend hundreds of millions of dollars
on beefy new cable wires and whizzy new digital set-top boxes designed to
deliver a still-uninvented generation of interactive ...


Deja vu! Who spiked the punch?


The answer, of course, is the same gang that always spikes the punch: the
people who run not only the cable business but also computers, software,
telephones and media, all of which have "converged" on the creation and
distribution of their products and services with digital technology.


Malone -- called the "Infobahn Warrior" by Wired magazine in 1994 -- once
told an industry conference in the early '90s that these so-called
convergence companies were octupuses whose primary goal was to get their
tentacles into one another's pockets.


Those tentacles have only become more aggressive in the ensuing years.


Recently announced partnerships between computer and cable companies --
including Microsoft Corp. and Comcast Corp., and TCI and Sun Microsystems
Inc. -- trumpet bright and shiny interactive entertainment services that,
we are told, await only the arrival of their new digital set-top boxes.


But truth is that there are no new services in the offing. Each industry is
simply trying to grab away another industry's customers.


Adding cable modems and upgrading the capacity of cable wires to deliver
digital video -- which Malone has promised for TCI customers, to the tune
of $1.9 billion by 2000 -- are moves intended to steal Internet customers
from the telephone companies in the short term and eventually to steal the
video rental business.


Set-top boxes are meant to steal people away from their PCs and get them to
buy or rent a new box that lets them sit in front of the television to read
their e-mail and surf the World Wide Web.


This is a far cry from interactive television, although it does meet a
growing need.


Nick Donatiello, the chief executive of Odyssey LP, a research firm that
studies consumers' adoption of new technologies, says that Americans, at
least, are demanding more choice and control over their information and


entertainment.


And, he says, "the Internet and World Wide Web are riding that trend."


But at the same time, he says, "consumers are desperate for new kinds of
entertainment at home," and merely sticking a box on top of their TV sets
and giving them high-speed access to the Internet will not pacify them for
long.


"It's not about more bandwidth," he says. "It's about what you do with it.
More may be beside the point."


At least one early critic of interactive television agrees.


"No one is breaking any new ground, or doing anything that says they will
evolve the form and shape of TV in the future," said Gene De Rose, chief
executive of Jupiter Communications LLC in New York, a new-media consulting
company that was sharply critical of the interactive television hype in the
early 1990s.


Set-top boxes and high-capacity cable wires may be part of an interactive
cable system, but none of the recent announcements discussed the less
mediagenic, yet crucial component that an interactive cable network needs
to function: a reliable back-office computer system, like the one being
developed by the cable equipment provider Scientific Atlanta, to handle the
billions of instructions that such a network would have to process every
day.


Naivete or arrogance about the difficulty and cost of building these
sophisticated networks mortally wounded early projects by TCI and by Time
Warner Cable, which invested millions of dollars in a high-profile trial of
interactive television in Orlando, Fla.


But the deeper problem, say both Donatiello and De Rose, is that unless
they want to see another generation of investment money circling the drain,
convergence companies must stop themselves from jockeying for technological
clout and start thinking about giving something new to their customers.


Donatiello, whose company was scheduled to release a white paper on Monday
called "10 Ways New Media Will Change How Things Work," says that far more
emphasis must be placed on creating unique interactive services -- not, he
says, "on 60 more start times" for pay-per-view movies.


"Think about how much the world has changed," Donatiello said. "Fifteen
years ago, everyone had a dumb television set with no intelligence
whatsoever, no processing capability. Now we're talking about a world where
not only will there be bandwidth, but the ability to do something
interesting with what comes down the wire. You can use the technology to
make an experience, but ultimately it's the experience that matters."




DIGITAL COMMERCE is published on Mondays.
Copyright 1998 The New York Times Company


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Denise Caruso                                   'Beware the lollipop of
415.695.0508                                     mediocrity. Lick it once
Columnist, New York Times                        and you suck forever.'
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