BUSINESS

ALL WIRED UP

The race to build an information highway accelerates

JOHN DALY June 6 1994
BUSINESS

ALL WIRED UP

The race to build an information highway accelerates

JOHN DALY June 6 1994

ALL WIRED UP

BUSINESS

The race to build an information highway accelerates

Ken Nickerson has a university degree in computer science, but like millions of other Canadians, he says that he still does not know how to set the timer on his VCR to tape television shows. As a result, he says, "I've had to schedule my life around two shows-Seinfeld and James Burke's The Day the Universe Changed." However, unlike other befuddled couch potatoes, Nickerson is in an excellent position to do something about his predica ment. Nickerson, 32, is the director of techni cal services for the Canadian division of Mi crosoft Corp., the world's largest computer software maker. And last week, Microsoft and Rogers Cablesystems Ltd., Canada's largest cable television company, announced that they plan to join forces to set up the country's first truly two-way electronic superhighway by 1997. It will allow home subscribers to order up movies and television shows at any time, as well as a vast array of other new services,

and to communicate with one another through both their television sets and home computers. The trick, Nickerson says, will be “to make it simple enough that even my grandmother can use it.”

That is far from the only challenge that Rogers and Microsoft will have to overcome. Although the companies have already invested time and money in the project, several technical obstacles remain. A team of 400 engineers at Microsoft’s world headquarters in Redmond, Wash., has already spent three years, and close to $300 million, developing a computer program that will run both a central electronic “jukebox” of programs and services, and in-home equipment that will be

linked to it. As well, Microsoft chairman Bill Gates and Rogers founder Edward S. (Ted) Rogers, have been discussing such a partnership for two years. (Rogers also is seeking federal approval of a $3.1-billion takeover of Maclean Hunter Ltd., publisher of Maclean’s). On the cable front, he already has fibre-optic lines in place linking the company’s system and two million subscribers, most of them in southern Ontario, that can carry signals to and from such a jukebox. But the two compa-

nies have yet to decide on the design of the “box” that home users will need to control the system or who will supply that equipment. As well, Rogers and Microsoft executives say that even they do not know yet exactly how much services on the system will cost, or who will supply them.

Despite the uncertainties, powerful competitors are already lining up with alternative systems. “This is something we’ve been waiting for: Bill and Ted’s Excellent Adventure,” said Jocelyne Côté-O’Hara, president of Ottawa-based Stentor Telecom Policy Inc., a consortium of Canada’s nine provincial and regional telephone companies. In April, Stentor announced plans to spend $8 billion over the next decade to upgrade phone lines and create a nationwide electronic superhighway of its own that will connect 13 million house holds. Montreal-based Le Groupe Vidéotron Liée already provides home shopping, video games and other services to over 230,000 sub-

scribers in Quebec and 12,000 more in Edmonton on its four-year-old Videoway system—the first of its kind in Canada. Those services are similar to those that Rogers is proposing to provide on its network. Currently, Vidéotron’s system does not allow users to send signals back to the cable company. However, in January, Vidéotron and five partners announced plans to deploy a truly two-way system costing $750 million. It plans to install the first phase in 34,000 homes in Chicoutimi

in 1995, then expand it across the rest of the province by the year 2002.

In addition to competition, Rogers and Microsoft executives concede that they will have to overcome growing public skepticism about the information “hype-way,” as many critics have dubbed the recent deluge of grand-sounding announcements about proposed

new services. In the latest of several U.S. mega-deals, Electronic Data Systems, a computer services company based in Dallas, announced last week that it plans to merge with Sprint of Shawnee Mission, Kan., which provides long-distance phone services, to create a $25-billion-a-year giant. However, other U.S. ventures have already gone awry. In February, Bell Atlantic, of Philadelphia, one of the largest U.S. phone utilities, and Tele-Commu-

nications Inc., of Denver, the nation’s largest cable television company, called off a proposed merger, blaming concerns about possible overregulation of information highways. But Colin Watson, president of Rogers Cablesystems, said that his company’s deal with Microsoft is for real, and that the two companies have the technology in place.

Certainly some sample features of the new system that Watson and Nickerson demonstrated at Rogers Cablesystems head office in Toronto last week are impressive at first glance. Using a handheld remote unit, Nickerson flicked through services developed by Microsoft that are already available in the Seattle area near

its headquarters. By moving an electronic pointer on the television screen, similar to one controlled by a handheld mouse on a personal computer, Nickerson called up a map of the state of Washington that indicated the location of state camping grounds. Clicking a triangle marking one of the grounds, a brief video appeared that showed some of the scenery in the park. At the side of the screen, there was weather information about the park and an electronic reservation service for campsites.

Despite the advanced capabilities of the proposed new electronic superhighways, communications executives concede that a large portion of the early business will consist simply of viewers calling up movies and other television shows on demand. Current pay-per-view services offered by Rogers and other Canadian companies only broadcast a limited number of programs at specified times. The new systems, however, will allow viewers to choose from a central library of hundreds of movies at any time, and pause or rewind a film just as they would a videotape. The price would be comparable to renting a movie at a video store.

The key component in the new system is a high-speed modem, a device that owners of personal computers now use to send and receive information along telephone lines. Most modems currently in use can transmit long documents, in the form of a digital signal, in a matter of seconds. But sending and receiving pictures takes much longer. As for moving images, Rogers’ Watson says jokingly that, “you’d be dead by the time you got the whole thing.” But a new generation of modems will soon be widely available that are 1,500 times faster than most current models, and will likely cost about $200 to $300. Rogers and Microsoft, in turn, are developing another home “box” and software that would process those digital signals for television, as well as other software needed to link a personal computer to the system. Watson says that Rogers and Microsoft want to develop a box that would cost under $500, but have not decided whether they would sell or rent it. He was equally vague about user charges for the system. “We haven’t thought this through,” he said.

Vidéotron executives declare that they have the jump on their competitors because they already have a kind of interactive network in place. Vidéotron charges $7.95 a month for its Videoway system, which offers over 200 services, including stock quotations and information on shops and restau-

rants. Among other things, it also allows viewers watching a baseball game to switch between several camera angles using their handheld converters. But Videoway is not fully interactive. Vidéotron actually transmits signals from each camera, and the viewer essentially is flipping between several channels, rather than sending instructions back to a central computer. However, Vidéotron executives say that, as they set up their new interactive system, they have a far better idea of what customers want than any of their potential competitors. As well, they have already lined up several partners in their consortium who will provide services on its new network: the National Bank of Canada, Canada Post, Hydro Quebec, Loto-Québec and the Hearst Corp., which will provide business directories. Said Carmelo Tillona, Vidéotron’s vicepresident of strategic development. “We’re three to four years ahead of everyone else.”

■ Rogers cable system control room: tapping into a central electronic ‘jukebox’ with hundreds of feature films

Stentor, by contrast, is a recent entry, but also potentially the most powerful competitor. However, the consortium’s $8-billion Beacon Initiative consists largely of upgrading the nation’s telephone line network so that those lines can carry multimedia signals. Beyond that, Côté-O’Hara says that the telephone companies will leave it to others to provide services as well as equipment for home users, although it will

invest in so me of those ventures.

But Watson and other cable executives claim that Stentor has a hidden agenda. Telephone companies are currently excluded from canying television signals by the Canadian Radio-television and Telecommunications Commission, leaving Rogers and the other

cable companies with local monopolies. But

the telephone companies have applied for permission to provide television signals on their new network. Watson argues that would allow them to build a second information highway when only one is needed. And he says that the telephone companies, which are much larger than cable companies, could use profits from their local phone service monopolies to subsidize cable operations and drive their competition out of business. Indeed, in April, Rogers filed a lawsuit against B.C. Telecom Inc. over an agreement that the telephone company has to provide both telephone and cable services over its fibre-optic lines in the new Concord Pacific condominium development on Vancouver’s former Expo 86 site at False Creek.

But Côté-O’Hara says that “the new technologies have made several industries overlap.” And she added that consumers should have a choice. “We’re saying there will be many alternatives,” she said. “You could go to Rogers and the telephone company and get a competing price and service.” Whatever system prevails, what Canadians will choose to do once they are on it, besides watch Seinfeld or their favorite movies, is still anyone’s guess.

JOHN DALY