Is there a tad of hyperbole in all this? You bet, and it’s getting out of hand. Yes, the Information Highway is coming. Eventually it will indeed transform the way Americans work, entertain themselves and learn. But soon? No way. Deep technical and financial potholes lie ahead. Insiders say it could be a decade before the most-talked about information and entertainment services reach most U.S. homes. Even then people may not want them. For all the hoopla in Vegas, investors and consumers alike should take a deep breath and beware. Otherwise we’ll soon be discussing the Disinformation Highway.
It’s easy to understand the euphoria. Hardly a day passes without a big merger or technological breakthrough that brings The Future closer. Bell Atlantic acquires mighty Tele-Communications Inc., coupling phone with cable to create a New Wave media giant. Pacific Telesis announces that it will spend $16 billion to rewire the West Coast with fiber optics, the Info Age equivalent of building California’s freeways. Newspapers and magazines (NEWSWEEK among them) are covering the emerging technorevolution as frenetically as they did the toppling of communism in Eastern Europe. Dizzied by the new possibilities, we tend not to ask inconvenient questions. “We’re talking as if all this is going to happen tomorrow,” says Richard Shaffer of Technologic Partners. “It’s not.”
Building the electronic highway will take years. It requires enormous investments in everything from fiber-optic cable and switching equipment to the TV-top “decoders” needed to decipher the images and information that consumers (presumably) will be dialing up. Big cities will get the new services first; small towns and ruralities might be left out. For how long? Consider earlier “revolutions.” It was 39 years before cable television reached half of all U.S. households; radio took 11 years, color TV 20 years. Says Shaffer: “The era of 500-channel TV won’t come much more quickly.”
Once built, who will ride? The image of Joe Sixpack clicking away at his TV-cumtelecomputer is fantasy says Don Valentine, a leading Silicon Valley venture capitalist. “We don’t need interactive anything.” If you want to order a pizza, he says, you pick up the phone. You don’t punch codes into your personal communicator and “interact” with Domino’s. Valentine isn’t alone in thinking the new markets won’t be as big as the hype suggests. SRI International, a Menlo Park, Calif., research firm, recently surveyed 20,000 households and concluded that even the most popular interactive service–movies on demand–would attract fewer than 2 million consumers over the next five years. Markets for online news and information may not blossom before the turn of the century.
Technical problems could also slow demand. Computer jockeys are used to crashes, glitches, viruses and “incompatibilities.” But picture the Joneses gathered prime-time Saturday night around the Family Entertainment Center, psyched for “Terminator 15.” “Click, click,” goes the mouse. SYSTEMS OVERLOAD, blinks the screen. ‘A couple of experiences like that and it’s back to Blockbuster Video," says Ed Christie at SRI. The rush to the Information Highway is a huge “leap of faith.”
Obviously those building it disagree. “We wouldn’t do it if we couldn’t make money,” says Bob Thomson at Tele-Communications Inc. Sure, he argues, nobody knows what kind of services people will one day be willing to buy. “But we do know some people will want movies, and others will want home shopping. That’s enough of a business to take the risk.” Perhaps so for TCI, a big cable company that will wire 80 percent of its customers (roughly 20 percent of the nation’s homes) into the electronic highway by mid-1996. But what about smaller companies hoping to ride the highway to riches?
Traditional hardware and software markets are fast becoming saturated. Small companies, especially hope to find a niche in “new media”–the programming needed to fill 500 channels. But will the market live up to their expectations? And can they deliver on their own promises to consumers? “There are going to be a lot of disappointments,” says Howard Elias at AST Research in California. Such worries staved hidden at Comdex, of course. The Digital Generation partied. There were chili cook-offs, Hawaii-vacation giveaways. One couple attended in wedding clothes vowing to get married if their software company was deemed “hot.” Was it hype–or a future that is forever?
