Questions of Power:
Access, Privacy, Security, Profits.
by Ken Freed.
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Guided by a futuristic manifest destiny, cable, telephony and public utilities are joining federal, state and local governments in a struggle to reign over uncharted public policy terrain.
 

"The situation today reminds me of the land rush days in the Old West," said Brother Richard Emenecker, a Franciscan who served as the telecommunications officer for the city of Pittsburgh. "That was a contest to see who had the fastest horse, wagon and gun. It was survival of the fittest and the winners were whoever got the most.

"Competition will be the byword in the years ahead," Emenecker predicted, "and there will be survival of the fittest, but I expect multiple survivors, and these will vary from region to region."

If the free-market push to build a National Information Infrastructure (NII) is akin to an Old West land rush, who's ahead? As the pioneers race from the starting line, the cable television and telephone industries hold the early lead. Close behind are the Internet access providers, then satellite and wireless companies. Scrambling to keep pace are the radio and television broadcasters. Farther back are the electric utilities. Dogging the mob from behind lopes a pack of federal, state and local officers, elected and appointed, duly deputized.

Guided by a millennial sense of manifest destiny, media trailblazers apparently are galloping headlong into fogbound terrain with conflicting maps inside their heads of where we're going and how we'll get there. Figuring possession is nine-tenths of the law, alert media rivals are scouting for shots at staking a claim to as much market turf as possible. Favoring subtlety over open war, leaders have agreed by tacit consensus to abide by a common set of rules to be created as they go along. They know the landscape is vast and fertile, and their hearts thrill at the prospects. The promised land opens before their eyes, a global free market where any and every media company can compete as a provider of video, voice and data services. Breathe the heady air of fantasy prosperity!

The bulk of us "consumers" feel like the unemployed masses crowding cities of America and Europea century ago. We're unhappy, restless, overwhelmed by too much war and disease. We want change. We'll go westward hoping there's a better life awaiting us out there on that brave new media frontier, but we're afraid. We hear wild tales of distant battles with public interest warriors hollering for universal access, personal privacy and freedom of speech. Midnight on the prairie. The specter of Big Brother is watching, waiting. Just talk into my saddlehorn.

Don't spook the cattle, pardner, but, plainly spoken, the issue here is power, raw power. At stake is the power to control the mass communication media that shapes the cultural consciousness of America and the world.

Seems a bit more like film noir than an old western. The Third Man meets John Wayne.

 

Frontier Visions

"A subplot to this tragi-comedy," mused Barry Diller at QVC, "is the jockeying for position among all the different players. Computer nerds tend to think they're going to control this massive new industry, that Hollywood has got to relocate to Silicon Valley because entertainers need computer expertise. Movie makers think they'll be the real winners since they know how to reach mass audiences. Telephone companies, with their massive switching capacity and cash flow, remain convinced they'll come out on top. Cable executives fear they won't. And if that weren't enough, the rules and regulations that govern communications in America are beyond Byzantine."

"Cable will make short-term alliances with the telcos," forecasted cable consultant Michael Hunt, "but in the long term, whoever controls the day-to-day operation will be the dominant player. And I think cable will control the television market by controlling the day-to-day operation."

"There's more heat than light in the suggestions by cable companies that they will be direct competitors," countered John Sodolski, president of the United States Telephone Association. He pictures all the networks converging with telephone companies as the backbone of the whole system. "I can't see any other way of doing it that makes sense."

"We see interactive TV of part of at least three networks that will emerge," said Vincent Grosso at AT&T. "One is a broadband network for television. The other is a narrowband network for online computer services and the Internet. The third is a wireless network for cellular phones and PDA's [personal data assistants]."

"In my crystal ball" said André Chagnon at Vidéotron in Canada, "the 'Information Highway' will be entertainment driven. The set-top box on the TV will have all the power and interactivity needed by 80 percent of the people in ten years. And this cable terminal, by the way, should also offer telephony. The other 20 percent of the people will be covered by add-on cable modems, for those using a PC for things like distance learning or working at home."

Industry players and government officials swear competition between communication companies is the best means of building the NII quickly while generally holding down prices for consumers. By early in the next century, leaders concede privately, lines between the cable, telephone, satellite, utility, Internet, and entertainment production industries will become meaningless. Integrated media companies will be commonplace.

Tomorrow's media marketplace, said Alan Gardner, vice president of the California Cable Television Association, will be like "a big arch" with merged conglomerates and joint ventures at the top. Along the legs of this arch and at the base, national companies will compete individually with the regional and local media on a proverbial "level playing field." Under the 1996 Telecommunications Act, for instance, the incumbent "Baby Bell" local exchange carriers in each region cannot enter the lucrative long distance market until they open themselves to genuine local competition.

How we regulate competition between mass communication companies is undergoing yet another quantum shift. Leaders assert they'll accept "managed competition" within regulatory structures like the Federal Communications Commission, or state public utility commissions, but they'd rather not be ruled in each market by an odd jumble of conflicting local regulations within the same state. Municipalities point at the use of public rights-of-way as a just cause for taxation, so they continue regulating the prices and practices of cable companies under monopolistic franchise agreements. Local governments have mixed feelings on cable deregulation.

Bill Bradley, retired director of Denver's office of telecommunications, co-founder of the National Association of Telecommunication Officers and Advisors (NATOA), understands representing municipal governments to the feds. He summarized the local attitude on new media regulation. "I hope the federal government doesn't force on us a national policy template. We really don't need any more help from Disneyland on the Potomac."

Cautioned Bill Squadron, director of telecommunications for New York City, a past president of NATOA, "We can't have competitiveness unless we make sure mergers and acquisitions don't swallow up all competition, or that competition isn't lost in a sea of joint ventures."

"The fog has got to clear," reasoned William Samuels, CEO of ACTV in Rockefeller Center. "There are people who will tell you that it's all one industry and it's all going to converge into one box, in the TV, but I don't believe it. It's okay if it happens, I suppose, but I don't believe it."

"There is in front of us a radical revolution coming in information and how we process it, which will effect our lives forevermore," declared Barry Diller. "And we now are at the most terrible time, the apex of confusion in this technological evolution. So I not only firmly believe that it will be nice and profitable for this infrastructure to be built, but it is absolutely necessary, if for no other reason than to cope with the flood of choices and information in which we're all drowning."

 

Seeking Mass Acceptance

"We're very excited about interactive television," said Ed McCracken at Silicon Graphics, co-chair of President Clinton's NII advisory council. "It's a fundamental technology that will change the way we do a lot of things in society. We don't see mass deployment until late in the decade, and we see there being a lot hurdles between now and then, but we think it's a certainty that it will happen."

He has reason for certainty. Media companies are spending more than $100 billion on the initial rollout interactive television,which began in 1995 with a second wave commencing in 2000. "Full-service networks" carrying two-way video, voice and data on the info highway have now opened for traffic in North American and European cities, plus cities along the Pacific Rim. Plans are underway to build more networks in industrialized and developing lands by 2010. Beyond the billions spent for hardware, the costly production of interactive content has begun in earnest. Hundreds of millions more are being spent on promotions in every marketplace conceivable. All the whiz-bang toys inthe world are useless if nobody wants to play with them.

"People have been fairly passive with their televisions for five decades," said John Hendricks, founder and chair of Discovery Communications. "The networks once knew that if they could get you to tune into NBC at 8 o'clock, you would likely stay tuned all evening because most viewers didn't want to get up and go change the channel. Today, with channel surfing, people have become a little interactive using remote controls, cruising up and down the TV channels, watching a number of channels at once. But this next wave of interactivity is going to be even more dramatic.

"The great hope is what we're seeing in some of our tests," he continued, "the younger portions of our population are not intimidated by any of this technology. To them, it's very simple because they've grown up with video games. They've grown up with a computer. They've grown up being more interactive. So, I think this next generation is going to seize this platform and get a lot of their information that way."

"I know that everyone over the age of 14 has a certain amount of technophobia," Diller offered as reassurance. "I did, and it's only getting worse. My recommendation, fight it. Because you've got to learn it, because in the end it will inspire you as it educates you to its endless opportunities. And if you don't embrace the technology, if you don't get curious about it, its imperatives eventually will crush you. Maybe the revenge of the nerds is to get everyone so confused that we're utterly at their mercy."

"In the VCTV tests," reported Larry Romrell at TCI, Tele-Comminications Inc, now AT&T Broadband and attempting to merge with Comcast. Referring to the landmark tests of Viewer-Controlled Cable Television in Denver, he said, "what we found is that you can throw too much at customers too soon and they turn off. Us techies tend to think it's really cool what we can do with technology, but if we don't have services people want, it doesn't matter what kind of technology we offer." This realization has become a guiding principle for the company. "Since technology changes so fast, what we do is test markets, not technology. It's more trying to determine what the customer wants, the look and feel they want, than it is a vision."

"Everything starts with quality," stated Samuels. "If what we do is perceived by the consumer as better quality sports, better quality Sesame Street, then we have a chance of building a big business."

"And there isn't that quality content yet" noted Hendricks. "What we're seeing is that people highly value those things that are promoted, so those are the most popular shows on TV. The challenge that we have as consumers is supporting quality programs, not just those promoted."

Samuels agreed, "Interactive TV is going to have a positive impact so long as those in decision-making positions, whether they be the heads of companies or not, emphasize the right applications. It's smart business to focus on quality and providing a good product. This determines the success of capitalism. If we don't, we could have a situation like is in Russia now where capitalism is an excuse for the gangsters to buy off the politicians, so the idea of free markets gets discredited. You've got to have the confidence of the people first."

 

Hunting the Killer Application

One way media leaders hope to win public confidence is by developing what industry insiders call the "killer application" or the "killer app." By this they mean a suddenly popular interactive TV program or game or service that generates an irresistible wave of mass acceptance that at last establishes new media networks in every home and community.

Media leaders seek the fabled killer app like prospectors seeking gold. Eldorado. The interactive television company that stakes a claim to this as-yet unknown intellectual property could well win the "iTV" land rush.

"We don't yet know what this big killer application will be," said Hendricks. "It may be a game where kids nationwide, or even worldwide compete and win scholarships. Or it could be a dating service. We don't know. It'll probably be something we don't even think about."

"I think the jury is still out." Samuels said. "It must be simple and cheap. And my mother, who's now 75, or some kid in a Third World country who doesn't have access to all the sophisticated technology, has got to be able to do it easily. That's important. In the long run, it must be an application that increases consumer interest and willingness to pay. We know game shows work because they're inherently interactive. Sports is a clear winner. Just look what instant replay did for sports. Education is going to be one of the more important applications since parents want quality educational programming in the home."

"The best guess we can make about applications in the future are based on looking in our rear view mirror," observes Grosso, alluding to the photo in Marshall McLuhan's The Medium is the Massage of a stagecoach in the rearview mirror of a car on the highway. "That's exactly where we are now. I think all the innovation is going to come from young people who're now sitting at desktop systems creating whole new environments that they can understand and we're not even imagining yet."

He contributed some of AT&T's early data to the conversation. "We were looking for the killer application in a trial we conducted with 140 employees in Chicago in 1993. What we found there was that people liked any application that was entertaining and had information, transaction , and communication attributes, all in the same application. We had a trivia game about current music -- entertainment. You could get a sports score -- information. They could buy a CD or a baseball card -- transaction. People also could say what they thought of the system, what was good or bad -- communication. No matter where we went, we put those four things together and that worked, which was fabulous."

So, we have seven traits for the killer app -- easy, cheap, interesting, entertaining, informative, transactional, communicative. Yet we return to the core power question here. Who will stake a claim to the killer app? Predictably, all of the leaders tout their own products.

"Video-on-demand [VOD] will be the first big application for these advanced television systems," swore Hendricks. "It's putting quality brand names at the fingertips of the consumer, so people can control their TV viewing, We're seeing enormous demand for that, and we're confident that VOD ventures like Your Chouce TV will be a winning application that successfully competes for digital shelf space. VOD is what the industry is banking on. We don't yet know the consumer appetite for these advanced interactive services."

Samuels suggested that advanced interactivity itself is the killer app. "I think the most important application is the personalization of TV, where you can individualize what you see and hear on your TV screen, and everybody can do it simultaneously. And that's what ACTV does. What you're seeing is tailored seamlessly to you. And we're doing it now. We're not guessing or in a testbed. We're commercial with it already, and it works."

Said Diller, "The problem for all of us on information overload is that, until now, no system exists to slow it all down for us, make it comprehensible. And the only solution I know is the one I've depended on since I started in the entertainment business more than 26 years ago -- to have a simple idea that fills a need, then to carry it through without listening to all the sensible reasons why it can't be done.

"What I've been working on," he continued, "what I've been musing on, driving myself crazy trying to figure out, is how do you tame all this? And I think that one simple thing is smart agenting [artificial intelligence software that helps us navigate the net]. In fact, smart agenting -- finding consistent ways to develop it, make it dependable, get people to trust it -- is the driving idea, the key to a fully interactive convergence of computers, television and two-way communications. I think it's the simple idea that can't be found elsewhere, forget as easily, for which you'll change your habits. You'll make the leap at last and learn how to make it work."

Ask 12 leaders. Get 12 applications. We don't yet know what will be the on-screen something that's so terrific all of us will rush out and slap down our credit cards so we can have interactive television in our homes this instant. Time alone will tell the tale of the fight of the killer apps.

 

More Questions than Answers

Let's recap. The media leaders speaking here are participating in an international effort to develop, deploy and promote the new interactive communication networks carrying irresistible programming. If we don't buy what they're selling, disaster! If we do accept and use the new media, then what happens?

"If you really have a network that allows you, from either a computer or a television, to access millions of sources of information," said McCracken, "then it changes the way we do almost everything, the way we work, the way we get healthcare, and the way we get educated. It changes our criminal justice system. It changes the way we do business, the way we buy things, the way we entertain ourselves -- everything."

Granted, the new media will change life as we've known it, but does anyone know the nature of these changes? When Samuel Morse sent the first telegraph message on May 24, 1844, he quoted Numbers 23:23, "What hath God wrought?" Dare we ask this question again today?

Prophesied Brother Emenecker, "In Pittsburgh, we built the famous bridge to nowhere. The structure stopped abruptly in mid-air because we had no vision for the future. In the same way, we need a clear vision of where we're going with this information superhighway. We need to start with a basic question. Why build a national information infrastructure? If we answer with some statement about global competition, we better ask, is that all there is to life, to be better off than others in the world? Are we building this to improve our quality of life or just to gain some economic advantage?"

To reap the most social benefit from the new media, McCracken said, "I think requires an informed citizenry, which we don't have right now. Part of the reason I think the experimental projects are so important is that they bring the people in this country up to the point where they can make rational judgements about it, come up with things to be changed."

"Interactive TV will raise the effectiveness of the democratic process," attested Chagnon. "It will reduce unemployment and illiteracy with more education. As people learn more, they will ask more and better questions."

And will "we the people" actually use the new media to help ourselves become better citizens, more responsible caretakers of democracy?

"Well, it depends on people's own inclinations to go after the content." answered Hendricks. "People already can get well-informed about the world by picking up the New York Times or their daily paper and really reading it, reading the editorial section. I don't think interactive TV is going to create any more incentive. But for those who do have an interest, they'll have another dimension. They'll have a new way to get information online, quicker, and enriched with video images. Studies have shown that if you hear as well as see as well as read, that if you affect more of the senses, the retention is better. You learn more."

And as we learn more about the media, how will we help shape its course?

"One political effect of interactive television," said ICTV head William Grubb, "is that truth will become known much more quickly. People who speak with a fork tongue will be found out much sooner than in the past."

"Interactive TV must be carefully thought out," concluded Samuels. "It must be carefully regulated and not abused. If not, this improvement we call 'interactive television' will find itself with a consumer revolt on its hands."

Wise media pioneers know there's more to frontier life than land grabbing.
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