Computers Today, May 1-15, 1999, Master File; pg 1

The television, computing, and telecom industries are obsessed with talk of "convergence". It has created a confusing mess where companies can simultaneously be partners and enemies. While the Web's destiny is obviously moving towards the television, at the corporate campus the paradigm lies in the convergence of data, voice and video over a single network. But nobody's exactly sure what mix will strike the consumer's fancy.

More than 200 years ago, the Industrial Revolution changed the fortunes of people, companies and countries. Similarly, the Internet Revolution today is driving change and economic growth. The infotech industry is rapidly maturing with the convergence of data, voice and video over a single network. As a new world economy begins to evolve, the Internet is being used as a tool to communicate, shop, educate, conduct business and more. Imagine using a single device to listen to phone messages, check E-mail, do a little Web surfing, buy a Dussera gift online, and settle in for an interactive version of Computers Today-controlling every function with voice commands and never touching the machine.

Many believe that much of this future will be determined by whoever controls the first screen that is seen when this avant-garde device is turned on. It could be a home page, portal site, electronic programming guide, operating system interface, or "first boot". So fast is this hybrid industry developing that it has been given a label of generic description-"convergence"-that doesn't even reflect any particular technology or market because it is too early to say what those will be.

Convergence, by definition, is the coming together of two or more disparate disciplines or technologies. For example, the so-called fax revolution was produced by a convergence of telecommunications technology, optical scanning technology, and printing technology.

Right now, at the home front, convergence is evident in the mix of entertainment and information/education through such new-age medium like PC/TV, WebTV, cable modem, or set-top box. In a wireless scenario, a usual cellular phone, pager, digital satellite phone, or a combo like Nokia Communicator does the job of bringing in Web surfing, faxing or E-mailing on a phone.

At the corporate computing front, convergence is bringing together voice, data and video on a single network, often run on Internet Protocol (IP). As data traffic exceeds voice traffic on public networks, service providers are meeting the challenge with packet-based networks designed for data but optimised for voice. The killer applications, of course, are E-commerce and data warehousing.

The prime phase of convergence of the Internet, the World Wide Web and online services is already over. Now as the emerging technologies permit voice, data, image, and video services to be distributed on- and off-site in an increasing number of ways, real-time data/video/audio streaming and multicasting is becoming norm of the day. Swimming upstream, we are witnessing content convergence in the new phase of portal revolution.

The computer industry is especially sensitive-if not down-right paranoid-over the constantly changing dynamics of technology, and understandably so. No one wants to be caught off guard the way Microsoft was with the advent of the Internet in the early 1990s or IBM was with the personal computing revolution of the 1980s. Thus, for the present paradigm, Microsoft made the first move that set off seismic aftershocks: it bought WebTV.

Until that acquisition in 1997, high-tech companies had made forays into the content business mostly through the Web. But through WebTV, entertainment companies saw the potential for Microsoft-controlled content-be it cable shows, Web sites, or digital music-through a subscription service that even carried the Microsoft brand.

The balance of power shifted even more dramatically with last year's blockbuster news that AT&T planned to acquire TCI for $48 billion, followed by reports of negotiations with Time Warner as well. AT&T has been cautious in outlining its cable plans, as its TCI merger is still awaiting approval from regulatory agencies.

One thing is certain: the long distance telephone giant will raise the stakes of the convergence business still higher by adding the considerable resources needed to upgrade TCI's cable system to deliver all the services of a converged future. And both firms can leverage their customer and subscriber lists to offer the ultimate one-stop shop on one consumer bill, controlling virtually all links between the home and the rest of the world.

"Offering Internet service under the closed cable TV system will, quite literally, change the character of the Internet as an engine of creative technological and marketplace innovation, open entry, economic growth, and free expression," according to a coalition of consumer groups called the Media Access Project. This scenario is precisely what frightens the established players of today's computing and media industries.

Digital technology will allow broadcasters, TV manufacturers, set-top box makers, and service providers to offer a slew of features revolutionising the television experience as we know it-and blazing the way toward true technological "convergence". However, a nagging problem is that nobody's sure which of these or what mix will strike the consuming public's fancy and, consequently, what will drive the new market for digital television sets, cable set-top boxes, or DTV (digital or high-definition TV) services.

A brief look at the possibilities shows why the digital guessing game is so complicated: a high-definition signal with roughly twice the picture clarity of current TVs; an interactive, computer-like screen; Internet access, including E-mail; online shopping; as many as 500 channels (ultimately); powerful TV program search engines; advanced programming guides akin to Web browsers; movies on demand; and PC applications such as basic word processing.

Viewer interaction-specifically, the ability to buy things through this technology-is what many believe to be the catalyst driving the engine behind digital TV development.

"We didn't get colour television because users were tired of black and white. We got it because you needed to show what colour a shirt was to sell it," said Ron Rappaport, an analyst with Zona Research to cNet. "The notion of sitting on a sofa and doing nothing in this era of high degree of activity is absurd." That's where digital technology becomes key, to provide the kind of pipelines necessary for viewer interactivity. Many insiders caution against developing too much too fast without gathering enough information about what consumers really want.

"When you get to 500 channels, navigating [with electronic programming guides] gets very difficult...You have 10,000 hours of programming raining down on you. You need search engines...a My Yahoo for TV," Mike Ramsey, founder of DTV start-up TiVo, said. "Choice of channels is more exciting than picture quality, especially when the sets are $5,000."

Executives at Yahoo, America Online, Excite, Lycos, and other top portal companies are bullish on this new market potential, looking at expanding their brands beyond personal computers. As more household appliances get wired, portals could become more mainstream, they say. But questions remain whether the Internet heavyweights of today will be the controlling forces in the onset of a next-generation digital boxes and other devices combining television, phone service, high-speed Internet access, and myriad other features. Although portals have become almost synonymous with the Internet, the short life span of their industry has been directed at personal computing, not television or telephones.

Portals will have to push their brands out of the computer box and into the consciousness of the mass market before they can achieve common usage, analysts and industry executives say. Firms will need to take hard decisions to increase distribution while lowering marketing costs.

Many say the future of a world where television and the Internet become fully integrated rests upon the once-humble, no-frills cable TV set-top box. Formerly relegated to just switching channels, it will be endowed with the potential to control an entire network of devices in the home ranging from PCs to VCRs, as well as serve as a communications device for phone and videoconferencing service, says Mohan Tambe, managing director of Bangalore-based Innomedia Technologies Pvt. Ltd. Innomedia is offering interactive media services, under the brandname CHOIS (Cable TV-based Home & Office Interactive Services), to more than 4,000 subscribers in Bangalore and Chennai. A CHOIServer at the cable head-end allows Web surfing, TV viewing, video-on-demand, statistics and information distribution into each home via CHOISpads (its own set-top box). While the novelty of the service is still a handicap, Tambe is bullish about spreading CHOIS services to all the metros by the end of this year.

E-mail and Web browsing: surf the Internet or send and receive E-mail at high cable modem speeds, many times that of the fastest dial-up modem. No waiting for dial up or connections.

Movies-on-demand: obviates the need to make a trip to a video rental store. Select from a library of movies and request to see them "on demand".

E-commerce: set-top boxes (such as Scientific-Atlanta's) have a public/private key security system to allow secure home shopping. And it comes with a smart card slot where users will be able to insert a debit card to make payments over their TV. Also, a smart card can be used to transfer electronic cash from their bank account.

Cable modem: set-tops come with an Ethernet connection "port" and integrate a high-speed cable modem. Supports hook up to a consumer's PC and can function as a stand-alone cable modem. Can use the set-top on both the TV and PC.

Hundreds of digital channels: high-resolution images, high-quality music, interactive games.

Industry executives with cable companies, cable equipment manufacturers, and high-tech companies all agree that the devices will become increasingly sophisticated over the next five or six years. What follows is a distillation of their expectations of what new technologies will appear in set-top boxes and what they will be able to do.

Next year, the feature most commonly added to the set-top box will be enhanced electronic programming guides that let users sort through viewing choices more quickly and with interactivity. Viewers will be able to surf to a Web site with more information about a show or see snippets of programs embedded in the program guide. Some will be able to control the programming of a VCR or set-top device with storage capability through the use of infrared wireless connections-the same technology used in a remote control. The more advanced cable STBs available will offer USB (universal serial bus) connections to hook up cameras for videoconferencing or downloading pictures.

By 2001, more cable companies will offer true video-on-demand services, starting shows for the customer when they are ordered online, not at hours determined earlier by the system. "Pause" and "rewind" capabilities may be offered as well, with the addition of enough local storage in the form of a hard drive or enough server capacity.

Well beyond a digital VCR, the set-top box will also allow viewers to videoconference and will be the entry point for a broad range of Internet services into a consumer's home. Top-of-the-line models might also include what is expected to become a critical technology for bridging the gap between consumer electronics devices and computers: high-speed digital 1394-Firewire connectors. This technology can be used to hook up a television set, audio-video components such as a stereo or DVD player, and even a standalone PC so that all the devices can share data and be controlled through a central "hub". Also, multiplayer gaming is expected to become common as set-tops add more memory and advanced graphics processors, with some manufacturers looking at devices that integrate a DVD player for both loading games and playing back movies. By 2006, most STBs will be able to decode high-definition digital TV signals, replacing the standalone decoders needed for today's first-generation digital TV sets.

Worldwide, the shift to digital platforms has already begun, and an early move by India's giant cable operators like SitiCable and IN Cable to provide Internet service through existing cable TV network is just a pointer. Industry executives expect voice recognition to be a prevalent feature of future set-top boxes, allowing for control of a wide range of household functions such as alarms, lights, and other devices through voice-activated programming. In fact, for an extra fee, cable companies might even manage the home network through preferences and other information stored on central servers. Software programs for these boxes will be smart enough to "learn" customer preferences for TV and Web-based programming.

In reality, economic and regulatory conditions might be the only brake on the movement toward technological convergence.

Five Points of Convergence

Personal computers
Consumer PCs from Compaq, Hewlett-Packard, and others will continue to metamorphose into hybrid devices containing both traditional PC technology and consumer electronics features: DVD movie playback and TV capability; also connection to digital cameras and camcorders.

Networking
Telcos like AT&T, Ericsson, Alcatel, Newbridge and Nortel are joining hands with networking specialists like Cisco, 3Com, Bay Networks, Cabletron or UB Networks to create a single fat pipe to carry data/voice, video, mostly over the Internet Protocol.

DTV
Sony, Panasonic and RCA are offering costly high-definition TVs and cheaper digital solutions. TV networks are charting interactive programming and PC-like interfaces.

TV set-top boxes
Some advanced digital versions will be like having a (cheap) personal computer hooked up to your TV, enabling an array of interactive features. TV gaming machines may provide these features too.

Intelligent devices
Advanced handheld phones will take on more advanced computer features such as better E-mail capability, input functions. Handheld computers will become more intelligent. Plus a variety of intriguing convergence gadgets that will invariably hit the market in the coming years.

Should We Bother About Convergence?
Six representatives of content, hardware and software majors debate over pressing issues

With television and the Internet-connected personal computer slugging it out more than ever for entertainment, commerce and advertising dollars, a big question revolves around the convergence of the two technologies. Jupiter Communications, at its sixth annual Consumer Online Forum last month, brought together six participants from widely varying segments within the industry to debate that point.

One company that could stand to lose if TVs and PCs converge to, say, a set-top box environment is chipmaking giant Intel Corp. But Ronald J. Whittier, senior vice president and general manager of Intel's content group, would argue against the thought of PCs losing out to STBs. Whittier says as PC and TV technologies converge, a "high-performance client"-one powered by a processor such as a Pentium III-would be needed to run these powerful systems and applications. In addition, Intel sees commerce as a "prime driver" of the audience to an interactive platform. "We're not talking about wars for eyeballs, but wars for electronic wallets," Whittier says.

Mitchell E. Kertzman, president and CEO of Network Computer Inc. (NCI), which builds Internet software for information appliances and set-top boxes, says he doesn't see products like set-tops taking away market share from PCs, just as PCs didn't replace mainframes. "Information appliances (like STBs)...will extend connections to the Net, and will extend interactivity, content, and applications to a new type of devices." This new class will deliver information in a way that takes advantage of the display capabilities of the units.

As a pioneer in the set-top world, Microsoft Corp. subsidiary WebTV Networks Inc. has taken its lumps over performance issues among others, said division co-founder, president and CEO Steve Perlman. But he says the service isn't doing too badly nowadays, as its users surf via WebTV more than two times the amount of time an America Online member is online, and three times that of an Internet service provider (ISP) customer. In the future, WebTV sees a kind of convergence where a WebTV box will have a hard drive that can store video and then play it back later in customer-set "virtual channels".

Session moderator David Card of Jupiter tossed the "do we need all of this?" question to David Robinson, senior vice president of digital network systems at set-top box developer General Instrument. Robinson said that in developing all of the "gee whiz" technologies, "sometimes we lose focus of the mass market..."

But cable operators have an advantage in the consumer market, in their high-speed, increasingly two-way network, Robinson said. With all digital deployments to date being focussed on entertainment programming, he said the market will be driven to convergent technologies via entertainment.

Content provider, Warner Bros. Online president Jim Moloshok, argued the average end-user doesn't care about what platform they use, they just want the content.