Cold water hits infopike mania

HOLLYWOOD — For all the hyperbole about superhighways and megamergers, Time Warner Inc. provided a reminder last week that much of the future rides on a bunch of techies wearing white lab coats.

The entertainment giant said March 1 its grand plans to test interactive cable system in Orlando, Fla., would be delayed six months because of a technological glitch. Silicon Graphics Inc., a software maker, and Scientific-Atlanta Inc., a set-top box maker, simply couldn’t iron out all the bugs in time.

Time Warner showed how it easy it is to get wrapped up in what is possible rather than what is probable. If the infopike’s around the corner, “it’s a big corner,” said Kevin Gorey, product manager of video servers at Silicon Graphics.

Superhighway-mania seemed to swell quickly. It got its first boost last May, when the Englewood, Colo., telco US West Inc. bought a 25% piece of Time Warner Entertainment.

But the biggest boost came from the October merger announcement between Tele-Communications Inc. and Bell Atlantic Corp. In the following months, Bell Atlantic chairman Ray Smith and TCI prexy/CEO John Malone went on a virtual crusade, criss-crossing the country to preach the infopike gospel.

Everyone seemed to get into the act. Vice President Al Gore unveiled a major information superhighway policy statement before Hollywood’s powers-that-be. Movie makers announced new interactive divisions and software makers set up entertainment units.

“We raised your expectations,” Gorey said. “But our expectations are very high of ourselves.”

And the media got on the bandwagon too, plastering Smith’s and Malone’s faces on TV shows, newspapers and magazines

“There are cycles to press coverage and we’ve been through the hype cycle. Now we’re going through the cycle where the press casts doubt,” said Mike Luftman, a Time Warner Cable spokesman.

As fast as it was built, the mania seemed to crumble. Coupled with Time Warner’s news was word last month that the TCI-Bell Atlantic merger imploded. Though money, not technology, derailed the deal, those who championed the superhighway were beginning to express reservations.

“The Wall Street perspective of the superhighway is changing,” said John Tinker, a Furman Selz Inc. analyst.

At the Time Warner project, Gorey said the “Oh shit” factor hit. As wonderful as all the possibilities of interactive multimedia sounded, creating them was an entirely different matter. Just as technicians solved a problem, another seemed to pop up.

“It’s like a balloon,” Gorey said. “You squeeze on one end, and it blows up in the other end.”

To be sure, there is little doubt the infopike will be built. It just may take more time than initially thought. During Time Warner’s six-month delay, it plans to refine the technology and line up new services for its test. And it insisted it will meet its new deadline.

“We remain on track to have 4,000 customers on the Full Service Network in Orlando by year-end and the development process makes us highly confident about its success,” Time Warner Cable chairman Joseph J. Collins said in a statement.

And TCI, with partners US West and AT&T, said March 2 that it plans to extend its test of pay-per-view and its more advanced sibling, video-on-demand, in Colorado another six months. The companies want to figure out if customers will buy more than their 2 1/2 movie-a-month average with system enhancements.

And the problems haven’t stopped the companies from touting new efforts. TCI just paired itself with software giant Microsoft Corp., to develop an interactive TV test. The companies plan to test movies on demand, home shopping, and interactive games in “several thousand” homes in Seattle and Denver. This is TCI’s first test of a full service network using interactive technology, said Robert Thomson, TCI’s veepee of government relations.

US West, too, is moving ahead with its plans to test its interactive video technology in Omaha, Neb., next month. The company is currently seeking regulatory approval to set up similar interactive bases in Denver, Minneapolis, Boise, Idaho, and Portland, Ore., in order to roll-out its full-service network once the Omaha test is complete.

For all the confidence the industry has in the technology, there will clearly be more fits and starts along the way. Three of the nation’s biggest software makers — Silicon Graphics, Microsoft and Oracle Corp. — are battling to create an industry standard.

Oracle Corp., the software maker aligned with Bell Atlantic, has taken a completely different approach than Silicon Graphics in designing its system, what’s known as a massively parallel architecture. And clearly, Microsoft will develop a technology different from the other two.

“There are major issues on the software side,” said Zach Nelson, Oracle’s senior director of marketing. “There are technology hurdles. People are choosing different technologies.”

And it’s unclear if any of them can create a system that cable customers can afford.

“Are these services technically viable, at economic prices to the consumer, today? No,” Alan Gould, a Kidder Peabody analyst, says.

Even the type of hardware needed is an open question. It’s unclear whether set-top boxes are the best medium for interactive services.

“They’ve got fundamental problems,” says Joshua Harris, president of Jupiter Communications, the New York consulting and market research firm. “The set-top boxes are not what they’re cracked up to be.”

Harris is one of many leading the charge to have personal computers — not television sets — serve as the on-ramp to the infopike.

“From beginning to end — (video) servers to (cable) boxes — nobody has ever solved any of the problems,” said Mark Stahlman, New Media Associates Inc. prexy. “It’s all unproven technology and it’s all unproven business models.”

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