Even if there were suddenly a million of one type of set-top box in use, it still would represent a tiny market compared to the opportunity for multi-media titles for the PC. A developer could afford to spend only a small fraction of its R&D on customers with these specialized boxes. Only the very largest companies are able to invest in new applications without concerning themselves about the near-term audience size. We believe that most of the innovation that will occur will be extending existing markets, and that using the PC/Internet market is the likeliest means of extending to interactive TV and the highway. But similar arguments could be made in favor of other computer platforms or even home game machines.
Other software companies are equally confident about their own strategies for set-top box software. Apple proposes to use Macintosh technology, and Silicon Graphics intends to adapt its workstation operating system, which is a form of UNIX. One small company even wants to repurpose an operating system that is currently used primarily in the antilock-brake systems of commercial trucks!
Hardware manufacturers are making similar decisions about which approach to set-top boxes they want to take. Meanwhile, consumer-electronics companies are determining what sorts of information appliances—from wallet PCs to TVs they will build and what software they will use.
The battle among software architectures will play out over a long period and may involve potential competitors who have not yet declared their interest. All software components will be compatible to a degree, the way all of today’s computer systems share certain degrees of compatibility. You can connect nearly any computer to the Internet, and the same will be true for the highway.
There are open questions such as to what extent these platforms will share a personality or user interface. A single common user interface is great—unless you happen not to like it. Will Mom, Dad, Grandma, the preschooler, and the Generation X-er all have the same taste? Must one size fit all in this, the most flexible medium? Here, too, good arguments can be made in all directions, so interface is another area in which the industry will have to experiment, innovate, and let the market decide.
There are other, similar decisions awaiting the judgment of the marketplace. For instance, will advertising play a large role in underwriting information and entertainment, or will customers pay directly for most services? Will you control all of what you see when you first turn on a TV or other information appliance, or will your network provider get some part of your first screen to show you information it controls?
The market will also influence technical aspects of network design. Most experts believe that the interactive network will use asynchronous transfer mode (ATM), but today ATM costs too much to use. If ATM equipment prices behave like other chip-related technologies, they will come down rapidly. However, if for some reason they stay high or don’t drop quickly enough, signals may have to be translated into some other form before they enter a consumer’s home.
A wide range of skills, from a wide range of companies, will be necessary to put the information highway together sufficiently for a mass market to begin. It will be tempting for a company strong in one or more of the necessary disciplines to try to find a way to do every piece and ignite the market all by itself, but I think this would be a mistake.
I have always believed businesses that concentrate on a very few core competencies will do the best. One of the lessons of the computer industry—as well as of life—is that it is almost impossible to do everything well. IBM and DEC and other companies in the old computer industry tried offering everything, including chips, software, systems, and consulting. When the pace of technology was accelerated by the microprocessor and PC standards, the diversified strategy proved vulnerable, because, over time, competitors who had focused on specific areas did better. One company did great chips, another did great PC design, yet another did great distribution and integration. Each successful new company picked a narrow slice and focused on it.
Beware! Mergers that are attempts to bring all aspects of highway expertise into one organization should be viewed skeptically. Much of the press coverage about the highway has concerned just such huge business deals. Media companies are merging and trying different configurations. Some phone companies are buying cable companies. McCaw Cellular wireless communications company was bought by wire-based AT&T. Disney has purchased Capital Cities-ABC and Time-Warner proposed buying Turner Broadcasting. It will be a long time before the corporations making these investments can assess how wise they were.
Right or wrong, deals like these fascinate the public. For example, when the proposed $30 billion merger between Bell Atlantic and TCI fell through, the press speculated about whether it was a setback for the information highway. The answer is no. Both companies still have very aggressive investment plans for building the highway’s infrastructure.
The highway’s arrival will depend on the evolution of the PC, the Internet, and new applications. Companies merging, or failing to merge, is no indication of progress or the lack of it. The deals are like background noise; they keep rumbling along whether or not anyone is listening. Microsoft plans to reach out to hundreds of companies, including movie studios, television networks, and newspaper and magazine publishers. We hope to work with them so that together we can assemble their respective content assets and build applications for CD-ROMs, the Internet, and the highway.
We believe in alliances and are eager to participate in them. Our core mission, however, is to build a number of software components for the information highway. We are providing software tools to a number of hardware companies building new applications. Many media and communications companies from around the world will be working with us and observing the ways customers respond to the applications. It will be critical to listen to customer feedback.
You too will be able to read about the results of the highway trials. Are people gravitating toward new types of multiplayer games? Are they socializing in new ways? Are they working together across the network? Are they shopping in the new marketplace? Are exciting applications you never would have imagined coming along? Are people willing to pay for these new capabilities?
The answers to these questions are the key to how the Information Age develops. Mergers and mania are fun to watch. But if you want to know how the race to build the information highway is really going, keep your eye on PCs connected to the Internet, and on the software applications that are popular in highway trials. At least that’s what I’m going to do.
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CRITICAL ISSUES
This is an exciting time in the Information Age. It is the very beginning. Almost everywhere I go, whether to speak to a group or to have dinner with friends, questions come up about how information technology will change our lives. People want to understand how it will make the future different. Will it make our lives better or worse?
I’ve already said I’m an optimist, and I’m optimistic about the impact of the new technology. It will enhance leisure time and enrich culture by expanding the distribution of information. It will help relieve pressures on urban areas by enabling individuals to work from home or remote-site offices. It will relieve pressure on natural resources because increasing numbers of products will be able to take the form of bits rather than of manufactured goods. It will give us more control over our lives and allow experiences and products to be custom tailored to our interests. Citizens of the information society will enjoy new opportunities for productivity, learning, and entertainment. Countries that move boldly and in concert with each other will enjoy economic rewards. Whole new markets will emerge, and a myriad new opportunities for employment will be created.