AT&T's depredations in the cable space — should they be regarded with alarm,
celebration, or cool detachment, of the sort appropriate for appraising the potential of
what promises to be a long campaign? To answer that question, we’ll have to speculate
as to AT&T’s motives. One thing is for sure: AT&T isn’t amassing its
resources and staging its mergers so it can provide cable TV programming. So just what is
AT&T up to?
Let’s consider a couple of AT&T’s recent moves. About a year ago,
AT&T acquired TCI for $48 billion. And now, AT&T proposes to buy MediaOne for $58
billion. No doubt AT&T will propose additional acquisitions of cable companies.
If and when the latest merger is achieved, AT&T will have access to 16 million
subscribers. It will, moreover, become the largest cable operator in the nation. But,
perhaps more important, AT&T will be able to provide local phone services, something
AT&T has been interested in doing for years.
AT&T will actually realize some of the potential of the Telecom Deregulation Act.
Of course, AT&T may provoke competition for itself in another arena. That is, the Baby
Bells and RBOCs will no doubt complain to the FCC, insisting that they be allowed
reciprocal access to AT&T’s bailiwick — the long-distance market. All this
could mean more competition all around, which could result in lower costs for consumers.
(We’ll see.)
AT&T’s ultimate aim is to get into your home, and cable will be the means to
this end. Just think: If you take the average monthly fee for cable access to the Internet
— $45 —and multiply it by the 16 million subscribers AT&T will have with
this merger, you come up with a gross figure of $720 million per month! Of course, this
assumes that all 16 million customers will sign up for Internet access. (I should point
out that only about 29,000 of AT&T’s current 10 million cable customers are using
broadband services.)
In any case, AT&T’s interests aren’t limited to becoming your ISP,
providing Internet services to your home. Sure, a hypothetical $720 million per month is
nothing to cough at. Ahem! But AT&T is well aware that providing high-speed data
access to the home will enable AT&T to provide enhanced services such as cable
telephony, unified messaging, interactive TV, and multi-media content.
THE THIN END OF THE WEDGE: THE SET-TOP BOX
In addition to the MediaOne merger, AT&T recently announced an agreement with
Microsoft whereby Microsoft would provide the digital set-top boxes for AT&T’s
cable customers. As part of this deal, Microsoft invested $5 billion in AT&T stock.
AT&T’s plan to utilize “cable telephony” (CT) technology is one of
the more interesting aspects of this merger, since this will directly affect both the CTI
and Internet telephony industries. CT will enable home consumers to receive and make
telephone calls from their set-top boxes running Windows CE. Thus, several interesting
applications using cable telephony in the near future are plausible.
For example, I can foresee being able to shop online over my TV set-top. And, if I were
to have a question about any of my orders, I imagine I could click a button to initiate a
call to a call center agent. This call would utilize voice over IP (VoIP) running over
cable or “direct” voice over cable telephony technology, all from the comfort of
my living room couch. E-commerce at its best!
ADVANTAGES AND DISADVANTAGES OF THE SET-TOP BOX
I should point out that there is a fundamental problem with using set-top boxes, such as
WebTV, to access the Internet. The television set is a “shared resource” among
family members. Even though the latest surveys show that the average home has two
television sets, it’s all too common for family members to argue over the remote
control and which program should be selected. If you add Internet capabilities to
television, that will only increase contention over what is being viewed on the television
screen. If we use Windows-CE embedded into these set-tops, do we really want a BSOD (Blue
Screen of Death) in the middle of watching The English Patient? OK, maybe we won’t
mind that. But still…
On the other hand, AT&T and Microsoft are not known for making many blunders,
especially when it involves billion-dollar investments! The key here is that the
television is still the “king” when it comes to capturing the attention of most
Americans. Sure, there will be some contention over TV utilization, but let’s keep
things in perspective. Look back 25 years ago. Back then, who ever heard of a family with
more than one television? If demand requires it, and if the applications are worth it,
then consumers will purchase a second, third, or even fourth television for their home.
One of the benefits of set-top boxes for accessing the Web is that a computer is not
required, and non-computer-literate people can connect themselves to the Web in a matter
of minutes. Not to mention a decent TV is less expensive than a computer.
I should point out one other advantage of set-top boxes. This one concerns surfing the
Web. The advantage is that with set-top boxes, I can start surfing right away. With a
computer, I have to wait at least two minutes for my computer to boot-up, followed by
about 30 seconds to establish my dial-up connection. Many times I need to look up just one
small piece of information on the Web. Still, I am forced to turn on my computer, endure
the wait, and then (tidbit secured) turn off the computer. How much easier such a search
would be with a set-top box. This difference alone would be enough to make me want to go
out and buy a set-top box!
WHAT WILL DRIVE THE ACCEPTANCE OF SET-TOPS? APPLICATIONS!
So there is certainly a market for these devices, particularly for the more
mature consumers, as well as the “gadget” collectors and early market adopters.
But what about the bulk of the younger audience? What will convince them that set-top
boxes are useful? Compelling applications that run on the device.
If the set-top box is just about being able to “surf the Web,” the technology
won’t impress younger consumers. They can surf the Web from the computers that have
already absorbed hundreds, if not thousands, of their investment dollars. The applications
that will attract and drive mass-market usage of set-tops will include GUI-based telephony
applications, standards-based video conferencing, fast Internet access, e-commerce,
Internet telephony, centralized billing, and more. Just to give an idea of how the
aforementioned technologies might work in the future, take these hypothetical situations:
GUI-Based Telephony Applications: PC-as-phone dialing from the TV, speed
dialing, unified messaging, voice mail, one number follow-me, and more — all from a
set-top-enabled TV.
Video Conferencing: Now from the living room (or wherever a set-top-enabled TV
is placed), consumers can initiate a video phone call to their mom, dad, grandma, wife,
etc. Embedded into the set-tops would be standards-based video cameras that would utilize
the H.323 standard. Take this a step further, and you can foresee this technology being
used by teachers to educate students (distance learning) utilizing T.120 for the
collaborative computing process and multi-casting to transmit video to all the students.
Sorry kids, no more snow days off!
Fast Internet Access: For videoconferencing, Internet telephony, and other
bandwidth-intensive applications to work, adequate bandwidth is crucial. Cable and most
likely DSL in the future will provide that bandwidth to these set-tops.
E-Commerce: As I stated previously in my column, e-commerce will flourish once
set-tops are adopted in the market. Another future theoretical situation: I’m
watching TV, and a commercial comes on, say, a Sports Illustrated subscription offer. I
can either run for a pen to write down the 800 number, or (more interestingly) simply
press “Buy” on the remote control. With the “Buy” option, the product
would be automatically charged to my account with AT&T’s cable Internet access
bill. Not only that, but the product would be delivered to my address without my having to
fill out my name, address, or any other information, since the set-top will already have
that information stored in a “cookie” or other means. The possibilities are
endless.
Internet Telephony: Besides video conferencing, users may just want to make a
normal phone call using VoIP. Imagine being able to take an incoming phone call from your
television set. The television can display the caller-ID information, and you might even
be able to set call rules that would let you handle callers based on their identity.
Centrex-Like Services: Even more impressive is that now cable providers can
provide local and long-distance service via cable, completely bypassing the local phone
company. Essentially, in the near future, the small office/home office (SOHO) will be able
to use its cable connection along with multiplexing technology to acquire multiple phone
lines that would transmit voice over cable.
A demuxing device on the customer premises will demux the data signals traversing over
the copper back into two, four, eight, or more voice channels. Thus, AT&T and other
cable providers will be able to provide Centrex-like voice services utilizing cable
telephony technology.
Currently there are several products which enable Centrex-like services over
“copper” phone lines utilizing DSL. Companies such as Vina Technologies,
Flexion, and TollBridge Technologies are a few examples. They utilize broadband, whether
it’s DSL, cable, or both to bring voice lines to the customer premise. One drawback
of multiplexing voice channels over cable is that unlike DSL, it’s not a dedicated
bandwidth line. It’s shared with your neighbors, so this technology may be limited in
the near term until guaranteed bandwidth issues are resolved.
Centralized Billing: Being able to view your phone bill, cable bill, and any items you
purchased on the Web all on one centralized bill displayed on your set-top TV is an
intriguing option, an application that may help drive set-tops in the future. If you have
a query on one of the billing items, you can initiate a VoIP call to the appropriate call
center. Also, you have a centralized place for managing your account, allowing you to
enable or disable various enhanced services, such as caller-ID, voice mail, and three-way
calling.
BACK TO AT&T’S WHEELING AND DEALING
Much of what I have stated in this column is purely speculative. So, to get more grounded
in reality, I’m eager to know exactly what AT&T’s near-term plans were for
cable telephony technology. As part of my effort to inform myself about AT&T’s
plans, I participated in an interview with Michael Armstrong, chairman and CEO of
AT&T.
One thing Armstrong confirmed is that the recent acquisitions were inspired by
AT&T’s telephony-oriented ambitions. He also confirmed AT&T’s commitment
to set-top technology, stating “We’re announcing a model cities program
(starting in 2000). One is a large city, one is a small city around 50,000, and one city
is a multi-vendor environment, to drive the interactive TV environment.”
In response to a question about the FCC looking into the recent AT&T deals,
Armstrong stated, “In terms of regulatory review, I think there’s been a lot of
focus on the fact that AT&T now has with MediaOne and TCI on the old attribution rules
between 25 and 35 percent of consumers that we can now reach. There’s not been much
focus on another issue: that we’ve got a big job ahead of us on the other two-thirds
of the country.”
“And I think most of the analysts and some of the reporters understand that the
purpose of this huge investment on our part is to compete, to be able to offer a suite of
services to consumers that’ll permit us to come up against the local exchange
carriers. We’re in all states. We have 61 million consumer customers. It’s a $21
billion stream. It’s got very fine margins. So our long-distance business is
something that we want to convert to ‘any distance’ across the land. And to do
that we’ve chosen broadband at the heart of our strategy.”
CTI’S PLACE IN ALL OF THIS…
With all this hysteria over broadband and the recent mega-mergers in the telcom world,
I’m excited to be a part of the telecom industry. While the CTI industry itself is
only one part of the whole telecom spectrum, CTI’s importance in driving the latest
telecom innovations cannot be understated. CTI is, after all, about providing intelligence
and enhancements to any telecommunications device, whether it’s a traditional phone,
an IP phone, or a Windows-CE based set-top box.
It will be interesting to see whether these set-top boxes will be limited to being just
another method for home consumers to surf the Web, or whether they will evolve, acquiring
advanced CTI functionality, such as cable telephony, enhanced services, Centrex-like phone
services, e-commerce, and the other types of functionality I mentioned earlier. While I
don’t profess that CTI will be the main motivation behind consumers buying these
set-top boxes (surely, high-speed Internet access and convenience is the primary reason),
CTI will certainly have its place.
Tom Keating is chief technical officer and executive technology editor for TMC. He
welcomes your feedback. To contact him, send your e-mail to Tom Keating .
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