Thought-provoking articles hosted by Blue Cat Design on new media and telecommunications technology topics including: the Internet, multimedia, Canadian television industry and World Wide Web content publishing.

The following article originally appeared in the September 25, 1995 edition of PLAYBACK magazine, Canada's broadcast and production journal, and was revised March 1996.

photo of Wade Rowland

WWW Spells Trouble for Stentor, Rogers

Are the superbahn mavens
heading for a dead end?

Wade Rowland

© 1996 Wade Rowland

The phenomenal demand this month for the first offering of Netscape Corporation shares is the best indicator yet of just how rapidly the world of on-line services is evolving, and how quickly the Internet is maturing as a commercial vehicle.

In 1995, when Canada's telcos were announcing their ambitious, multi-billion dollar Beacon Initiative to recable the country for broadband, on line applications and fill those cables with fresh, new content and services, the Internet was seen in most corporate board rooms as an exotic land of unintelligible language and pimpy, half-civilized natives called hackers. It was a place without much of a future among ordinary folk and certainly no real commercial prospects, a kind of on-line analogy to amateur radio, of which it has been said: "The problem with ham radio is the only people you get to talk to are radio hams".

Today, the picture has changed dramatically. As The Economist pointed out a month or so ago, the Internet is not a fad: "Shambling toward their distant goal of a wired world, they (the cable and telephone giants) have been too busy to notice the unruly bunch of computer hackers, engineers and students scurrying about at their feet. They should have paid more attention. For while the giants have just been talking about an information highway, the ants have actually been building one: the Internet."

As if to underscore the point, a few days later came the announcement of a merger of Internet enterprises currently being run by two of those communications giants, MCI Communications Corporation and Rupert Murdoch's News Corporation, just one of several significant mergers and acquisitions involving Internet players this summer.Suddenly, everyone's realizing that the Internet does indeed have money-making potential.

This year, the first in which advertising on the Internet has been much more than a novelty, revenue is expected to be just shy of $US 40 million. By 2000, it's predicted that advertising will generate about $US 2.6 billion for Internet content providers. International Data Corporation reports in a study hot off the presses that: "The number of respondents who plan to purchase good and services through the Internet (63.8%) suggests that commercial use will dramatically increase."

What's made the difference is the advent of the World Wide Web and navigators like Netscape that make it a painless and thoroughly pleasurable experience to "surf" the many thousands of individual sites put up by all manner of commercial enterprises, organizations, centres of learning, interest groups and individuals. No longer is the Internet an arid, text-only environment full of arcane, coded messages: the WWW has made it into a graphic-rich, audio and video-enhanced experience more fascinating than anything you're likely to find in an evening in front of the television. In fact, one recent study reports that, in households where both television and the Internet are available, more time is spent on the Web than watching TV.

And in coming weeks and months new software is promised by Netscape, Adobe, Macromedia and other providers that will further enhance the WWW experience with better video, real-time audio, improved animation, better text short another quantum leap in what designers can do to enhance content on the Net. This can only further inflame interest from both advertisers and users.

If all of this is causing worry among the big commercial on-line service providers like America On Line, Prodigy and Compuserve, and it is, where does it leave the cablecos and telcos with their much ballyhooed but still distant dreams of a broadband Information Superhighway?

One is tempted to say, "nowhere". Certainly, the drive of these common carriers to become content providers would appear to be at risk. America On Line and Compuserve are facing a relatively straightforward competitive challenge from the WWW that is based primarily on cost: the WWW is free or very inexpensive for the typical user whereas AOL and the others charge time-based fees that can add up to a jarring wallop at the end of each month. One can see how, without too much dislocation, they can reduce fees by increasing advertiser revenue, and focus their marketing on the specialty services their many subscribers have grown to rely on for information and entertainment. They have an established market presence and elbow room in which to compete with the Web on cost.

The telcos and cablecos, as "newbies" building infrastructure and services and creating a market, will face high capital and operating expenses, which will almost certainly preclude subscription rates competitive with Internet access fees. In fact, it seems unlikely that cableco and telco broadband services can be made available for subscriber rates much lower that current cable fees.

Nor are they likely to be able to provide content which will justify their high subscription rates.

The problem for the telephone and cable giants is that there is very little in what they propose to provide with their fibre optic, broadband superhighway that can't already be done on the Internet using ordinary telephone lines. The only area in which a broadband pipeline is clearly superior is in providing video. But for a great many of the services most valued by on line users, video isn't very important; text, graphics, still pictures and audio do the job just fine.

Even in the case of news, it is not difficult to imagine a kind of Internet CNN which uses only very limited video but far outshines conventional television news services thanks to hyperlinked text, random access, deep archives, brilliant graphics, audio reports, hot links to other Internet news sites, absence of intrusive ads, and so on. Television is not the perfect medium for news. Neither is the newspaper. But the Internet, which combines the best of both of the older media, may well be, even in its current state of technical development. (In fact CNN went online on the Web earlier this month and wes instantly pronouced "a keeper" by reviewers.)

And who needs full motion, high-definition video for home banking, or distance education, or medical advice, or government services - some of the other services proposed by the cablecos and telcos for their broadband networks? In some cases, distance education for example, media savants like Neil Postman have argued convincingly that video is actually a detriment, causing inexorable trivialization of content.

Only in one area of clear consumer interest do the proposed broadband networks have a hands-down technical advantage over the internet, and that is movies-on-demand. The internet simply does not have the capacity to carry much bandwidth-hogging full-motion video, not is it likely to anytime soon. The Information Superhighway, on the other hand, has more than enough to service any level of demand that can be reasonably expected.

One wonders, though, given competition from cable movie channels, conventional TV, satellite TV with its "near on-demand" movie service and video stores, whether movies-on-demand is not a very thin thread on which to hang so expensive an undertaking.

It remains a matter of great strategic importance for Canada to ensure that a broadband superhighway gets built as quickly as possible, and Ottawa can be expected to see to it that the job gets done. Furthermore, the only players capable of completing the task quickly are the telephone companies and the cablecos.

But these communications giants may be deluding themselves in believing that they can play a major role as content providers, as well as common carriers pipeline builders and managers. Unless they are able to somehow restrict outside access to their broadband networks and it is unlikely in the extreme that government regulators will permit such restrictions there is nothing to stop the tidal wave of content which is the Internet from simply migrating to the broadband pipeline once it is in place. And not just migrating, but simultaneously upgrading to provide all the video-enhanced features possible with more bandwidth.

These Internet services will by then be fully-developed, well-entrenched, familiar and abundant, as well as inexpensive if not free. It will be very difficult for johnny-come-lately telco and cableco content providers to compete, however much money they throw at the challenge.

For Stentor, Rogers, Videotron, Shaw and the other putative builders of the Information Superhighway the future would appear to be less glamorous and more routine than was supposed in the heady days of last summer's Info Highway hype-fest. In terms of content, the Internet is where the action is, and the cablecos and telcos don't even have a foot in the stage door.

© 1996 Wade Rowland

credit: Wade Rowland is a journalist, author and media consultant active in online information applications. He is a partner in Blue Cat Design, a pioneering Web design house specializing in Internet marketing and strategic planning. He can be reached at the Blue Cat Design offices or via email.

Other articles written by Wade Rowland:

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