Feature: Convergence--A Real Bridge to the 21st Century in Telecommunications

The convergence of computer, television and communication technologies will impact our lifestyles in the next century.

After a day at work, Courtney arrives home, turns on the TV set, and quickly examines the home delivery meal specials offered by local restaurants and grocery stores for the day. She chooses the special offered by a nice local seafood restaurant, and authorizes payment from her electronic account. She scans the news headlines for a few minutes and goes to special items from news categories she has pre-selected, then reads her incoming electronic mail, which included a video clip from her sister showing her niece's performance in the school play. While eating, Courtney connects to her virtual university class site to review the lecture notes and check on this week's assignment. She completes her assignment and mails it electronically back to the instructor, and decides to watch last week's episode of her favorite TV series before bed. She selects the TV on demand option on her set, and chooses her show. A dialog box opens on her screen asking if she would like to view the show for free with a few supporting advertisements, or pay the small fee. She decides to choose the free option. In the middle of watching it, a video phone call from her friend Scott arrives, so Courtney pauses the show. She and Scott converse for a few minutes, seeing and hearing each other, and then Courtney returns to the show, starting up where she left off. This scenario illustrates a few of the many types of services that have been promoted by the telecommunications, information, computer, and media industries as they seek to draw the public into the information age.

Video on demand, education on demand, personalized news, home shopping, home banking, telecommuting, and information retrieval are just a few of the many categories of services that can be offered to consumers over modern telecommunications networks. Many are technically feasible today using an assortment of existing technologies. What is unique at this stage is that these services would be offered in an integrated fashion to consumers over a common, high capacity network, built and maintained by a full service network operator.

In the past, we might obtain these services from many separate companies -- the movies on demand from our cable TV company, the personalized news and electronic mail from our online services company, and other point-to-point communications services from our telephone company. Convergence is the term we use to describe this integration of technologies and services. It is a term with multiple meanings, although for many people it mainly reflects the cross industry mergers that are reshaping the communications business.

In addition to this structural industry convergence, convergence is occurring from a technical perspective, as all forms of information and communication are increasingly stored and transmitted in digital form over high capacity networks. Technological and industry convergence in turn foster service convergence, allowing the many applications to be offered as a bundled set by the same company. Telephone companies will offer video entertainment services, while cable companies offer telephone services. It also implies that we can use different services at the same time on the same network; for example receiving an alert that new electronic mail has just arrived when watching a movie. These types of convergence have challenged governments to create enabling policy.

In the past, the rules and regulations for the telephone, cable, equipment, and information industries were quite distinct and uneven. But the new competitive and converged environment requires new policies that do not favor one service provider over another simply based on whether they used to be solely a telephone, cable, or online services company.

Back to Reality

Although the promise of new technologies and services is compelling, the new full service networks will not necessarily be arriving in your neighborhood in the immediate future. Many of the high profile mergers have not yet born fruit, and major convergence initiatives have been postponed. Most telephone companies were heralding their on-demand video services a year or two ago, but have quietly shifted their attention elsewhere. Likewise, most cable television companies, so ready to enter the telephone services market last year, have also backed off from direct competition with phone companies.

There are enormous obstacles to the realization of fully digital, integrated broadband networks offering high speed multimedia, interactive services to home consumers. Here we highlight a few of the major challenges that must be overcome before the so-called information superhighway is a reality.

• First, there are many technical challenges that impede the development of a truly integrated broadband network. Despite the popular and trade press furor, many of the needed technologies are simply not yet ready for full commercialization. Time Warner discovered this when developing their Orlando-based Full Service Network.
• Video servers that can house thousands of digitized movies and TV programs are not yet available in affordable form. The switching and transmission systems that can work with this sort of material are not yet in place. More development is needed for home digital set top boxes that would affordably decode incoming programs and permit easy navigation among the many available services. 
• Methods of electronic payment that are secure and reliable are still being developed. There are also enormous capital requirements that have stymied deployment efforts.
• Conservative telephone company investors have balked at the more than one thousand dollar per home price tag often associated with upgrading the existing twisted pair copper wire now connecting each home to a telephone company switch to higher capacity optical fiber or hybrid fiber and coaxial cable systems. Necessary cable system upgrades are nearly as costly.
• Cable investors look for growth instead of dividends, but the industry borrows heavily against cash flow and the bankers may shy from ventures beyond conventional video distribution where cash flow is uncertain.

It is all the more difficult to convince companies to invest in such large scale systems upgrades in the face of unproved demand for the new services that have been proposed. The history of failed attempts to launch new interactive services to the mass market, spanning nearly two decades, is indeed daunting. Cable TV companies are aware of the relatively low usage of pay-per-view services. Why should cable and telephone companies spend billions of dollars to now offer more movies on demand? Likewise, the market for many other interactive services is also unknown.

Related to market demand is the knowledge that many of the services that could be offered over an integrated network can now be had more cheaply through other means. The 500 channels promised by the cable TV industry has been largely usurped by a dynamic digital satellite services industry. For the moment, they are the ones offering greater choices in programming, without attempting to be your telephone and online information services company as well. Electronic mail, video conferencing, home shopping, distance education and information retrieval are now more readily available over the Internet, connecting through low cost internet access providers, rather than as part of a new integrated offering of a cable TV or local telephone company.