Interactive TV's unclear picture - the real future of the telecommunications revolution - Cover Story

0 Comments | Insight on the News, Dec 20, 1993 | by Philip Chalk

Futurist George Gilder, author of Life After Television, believes naysayers such as Noll make a mistake in viewing interactivity as a mere expansion of television. Real interactivity "is the expansion of the personal computer industry," says Gilder, "and nobody bothers to get very cynical about an industry in which the number of computers connected to networks has risen from under 10 percent to over 60 percent since 1989."

Fifty million personal computers will be sold this year worldwide, says Gilder, with 75 percent of them attachable to Internet, the international computer network, and other such services. Internet alone accommodates 15 million users in 50 countries and is growing at a rate of 15 percent per month, according to the Wall Street Journal.

Gilder acknowledges that a successful interactive system will have to be simple to use, with programming and services far superior to those now available. This would require many false starts and failed experiments, he says, as risk-taking corporations create whole new markets. "It's the competitive, strategic survival of a company, and not some increased return on investment, that motivates [a cable company] to commit $2 billion to getting fiber to 95 percent of its customers," he says. If the cable companies don't, "the phone companies or the wireless cable people or the satellite people or somebody will cut into the market. All these guys that look at return of investment, asking |Will it pay off?' and |Will consumers buy it?' just miss the point."

Generating public interest is not the only obstacle to interactivity. Congress and the Federal Communications Commission are expected to pay considerable attention to what remains of industry regulation and the original consent agreement that broke up AT&T. Nevertheless, judicial watchdogs don't expect antitrust action. "A cable company and a phone company are not in the same business, so they are not forming a monopoly - that's the legal end of it," says a key House staffer. "Plus, we have to give someone the incentive to build the information highway. If they don't, we're going to have a hell of a time making all these wonderful things people keep prognosticating happen."

More to the point, perhaps, is the possibility of a cozy duopoly: two phone/cable hybrids comfortably coexisting and sharing a profitable market. To avoid this, Congress can regulate pricing for the start or cancellation of service to allow consumers to switch companies easily. In dense urban areas, however, wireless alternatives to phone/cable companies could make competition fierce. Radio broadcasting companies will offer digital transmission over frequencies recently allocated for this purpose by the FCC. Television broadcasting networks such as Europe's Sky TV that exploit powerful plate-size satellite dishes far more discreet than their huge predecessors are emerging in the United States as still another competitive delivery system.

For now, various bills before Congress would more or less codify the status quo. Proposed in slightly different forms by Missouri Republican John Danforth and Hawaii Democrat Daniel Inouye in the Senate and Ohio Republican Michael Oxley and Vermont Democrat Frederick Boucher in the House, the bills attempt to safeguard competition by maintaining a prohibition on mergers between Baby Bells and by removing state restrictions on local competition. They would maintain the ban on Baby Bells' purchase of cable systems in their service areas. The phone companies would be allowed to send video signals along their lines, however, and cable firms could offer telephone service. Also, phone customers without cable subscriptions would be protected from any rate increases intended to subsidize cable expansion. Edward Markey, a Massachusetts Democrat who is chairman of the Energy and Commerce Subcommittee on Telecommunications and Finance, expects action to be taken by the House by this time next year, says a member of the subcommittee staff.