Broadbands Fate Tied to Services

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The Internet Challenge to Television, by Bruce Owen,
isn't exactly end-of-summer beach reading -- books by economists rarely fit that
role.

But it's an accessible back-to-school-time primer for
those who are still trying to grapple with the role of traditional media in the Internet
era. Amid the daily deal-making cacophony, it's useful to get a long view about where
the bandwidth bonanza fits into the bigger telecommunications/media picture.

Sadly, Owen often leans toward a Socratic style, raising
the possibility that, admittedly, it still might be too soon to answer.

For example, in a chapter about video on the Web, Owen
identifies the trade-offs in bandwidth versus set-top local-storage capability. But he
coolly ducks an answer by wondering whether any company will undertake the set-top
investment.

He writes: "Will the new services made possible by
such investments lead to successes like radio and TV-network broadcasting, personal
computers or FM stereo? Or will it lead to failed or fad services like CB radio, AM
stereo, eight-track tape players, Picturephone, Betamax or Laservision disks?"

You've got to guess the answer. (Hint: Bet on the
former.)

Obviously, the investment question is a challenge -- but
not a barrier -- for the billions of dollars that are pouring into Internet ventures. In
an appropriate warning, Owen notes, "If the Internet does succeed in offering
mass-market services, both it and the capacious new digital-video media will be moving
away from the traditional consumer demand for passive entertainment service."

Oh yes, and, "Interactivity is imminent."

Despite these seemingly simplistic benchmarks, this Harvard
University Press publication does frame the issues in a big-picture context -- something
often missing as we focus on one technology or another.

Pedantically, Owen offers up a chapter on each of the
technologies and systems affecting TV in the Internet age: from digital TV, satellite and
wireless services to cable and telephone competition.

"Cable is in a fight for its life with
direct-broadcast satellite -- an effort that puts pressure to bear on cable cash flows due
to the increased promotional spending and program upgrades," Owen oversimplifies.

Yet despite its shallow shortcomings, The Internet
Challenge to Television
offers countless reminders of where new businesses fit into
the landscape of established ventures.

In a fascinating but understated chapter, "The CB Fad:
A Cautionary Tale," Owen retraces the oft-told tale of how citizens band radio failed
because of its "flawed pricing scheme: Users do not pay on the basis of how much or
how often they communicate, but only on the basis of whether they communicate or
not."

More simply stated, that lesson alone could be worth the
cost of this book ($30, but you can get it on the Web for less!). It's an argument
for usage-based pricing.

Coincidentally, I heard a senior IBM global marketing
executive pick on the CB-radio model a couple of weeks ago. Her point was that customers
bought the radios in the fad's heyday, but carriers quickly recognized the lack of
ongoing revenue streams, so they backed away from the services. As the quality of service
deteriorated, the market for CB equipment evaporated, and CBs all but disappeared.

For those of us who considered CB radio an excellent
proof-of-concept for the cellular-phone era that followed, this argument about service
quality is peripheral. But as an ongoing venture, it is clear that both fee-based content
and delivery are crucial ingredients.

In the Internet age, there is no lack of content suppliers
-- including the user-created content of vanity Web sites and messaging.

Owen does indeed grasp those factors, although often merely
hinting at the possibilities that are now taking shape.

In the fast-paced Internet environment, a hardcover book
faces the futility of being outdated overnight. Many of the Internet companies cited here
were merged out of existence months ago, although a few are still in play today.

But that's not supposed to be the message here: As the
title announces, television itself is going to change, no matter which parts of the
Internet world survive.

In his concluding passage, "High-Stakes Poker,"
Owen ponders "the difficulties that the big cable-television MSOs have been having
with the new technologies." Similarly, as over-the-air broadcasters make the digital
transition, they are "heavily constrained by the political baggage" of
regulation.

Owen builds scenarios that involve more than $100 billion
in capital investment to upgrade the nationwide capabilities to access these
digital-broadband services.

Significantly, this month's murmurings about
broadcasters' losing faith in their digital-TV format (the oft-reviled 8-VSB) are
reminders about the volatility of the digital era. The comprehensive, if occasionally
frustrating, scope of The Internet Challenge to Television is a reminder of how
complex this process will be.

I-Way Patrol book critic Gary Arlen hides his business
books inside a copy of
People magazine while sunning on the sand.

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