Friday, October 20, 2006

When Will We Watch TV Over the Internet?

The amount of change in the computing and technology worlds during my lifetime has been nothing short of dramatic. Computers used to be huge, expensive, ponderous devices that performed only a few functions and could only be afforded by major institutions. I once used an early digital desktop calculator that cost in excess of $1000. My first computing courses were done using punch cards.

I remember the marvel when my brother and I were able to borrow a dumb terminal (that had been excessed from a hospital that closed) that we used to access the college’s mainframe from our home. We dialed in on a rotary phone. When we heard a certain tone, we put the phone receiver into a cradle hooked to the terminal and a login prompt appeared on screen. I could compile 100 lines of Basic code in the comfort of my own home in less than 10 minutes (a task that is instantaneous today).

Today computers are ubiquitous. They are built into every kind of electronic device on the market. Home computers and in-home Internet connections are more common than in-home telephones were six decades ago. I started using the Internet before most people had ever heard the word. Back then it took over 10 minutes to pull down a small JPEG image.

Internet use has expanded exponentially since then, and it has been employed for many new uses. It used to be just email and bulletin boards. Then commercial businesses started to get involved. Soon news and research resources started becoming available. It just went hog-wild after that, so that the Internet has been used for all manner of information transfers.

In the expanding phase of the dot-com bubble, infrastructure companies invested like crazy in building out their systems in order to take advantage of the usage increases forecast by their models. But then the dot-com bubble burst, leaving them with excess capacity. In some ways this was good for consumers. But it was bad for investors, which meant that companies dramatically slowed expansion and improvements. So while other countries have been expanding into gigabroadband, we are stuck with megabroadband.

Megabroadband was pretty wonderful a few years ago, but it won’t get us to the vision of the future, where office productivity applications (word processors, spreadsheets) are served over the Internet at a rate as fast as if they were on your hard drive, and where all of your media (including television) comes through your Internet connection. We need gigabroadband for that, but infrastructure companies still hurting from the dot-com bubble burst have been so cautious that little of that kind of investment has been occurring.

That may be changing, thanks to YouTube and other similar sites. Demand for video streaming over the Internet has grown substantially recently. Nortel’s CIO John Roese said about this (here), "The only reason YouTube didn't destroy the Internet is because there was a bit of a bubble in terms of excess capacity out there." But that excess capacity is rapidly being consumed. So infrastructure companies are starting to feel like they can now safely pursue system improvements. But they don’t want to be burned again, so they will probably move forward with a certain amount of caution.

This follows a basic law of economics. The market will supply what is demanded. People have talked about DVD-quality video streaming over the Internet for years. But the market won’t supply it until sufficient demand exists. Since that is now starting to happen, we can expect to see some of the web-based application and media services that have long been talked about become reality within the next five years. Renting movies on the fly and watching them on your TV without ever having a disc will be reality in the not-too-distant future.

4 comments:

Anonymous said...

The blurring of the lines between media delivery is definitely mind boggling. It won't be long before personal computing, mobile entertainment, and home-based entertainment will be served with the same hardware, from the same online sources.

One of the paradigms that will suffer is that of commercial advertising. We have TIVO at home, and almost NEVER watch commercials - but we also RARELY watch television programs live in real time either.

Networks are going to have to find new sources of revenue, because television advertisers who depend on eyeballs aren't getting their money's worth - and it's only going to get worse from here for them.

One of the companies on the forefront of this movement, a bandwidth optimization and supply company, is called Akamai Technologies. They, and others like them, will lead us into this new frontier.

Doesn't hurt to own their stock either.

:)

Reach Upward said...

Good points on the need to change financing models as we undergo change in the way media is served.

Jesse Harris said...

There's too many powerful interests at play in the IPTV market for it to lift off at all.

First, you have content providers. They live in a magical world where they think it's okay to charge more money to use a less expensive content delivery system. I don't understand that one bit. Most economists will tell you that a lowered cost of doing business should result in lower prices, not higher. It's more proof that they just don't get it.

Then you have the telecommunications cartel. In 1992, they defined broadband as 45Mbps service. Today, they define it as 200K service. That can barely muster a low-quality stream of video, much less a DVD. The biggest scandal is that they were supposed to deliver that 45Mbps to 86% of American homes by this year. In exchange for that promise, the 1996 telecommunications act gave them over $200B in concessions. Now that they've broken this promise, do you think they're going to give the money back? Not likely.

We're caught between clueless content distributors and greedy telcos. Between them, video over the Internet will be supressed until we can't stand it any longer. Thank goodness networks like UTOPIA give us a little glimmer of hope.

~plaid said...

Mormons already do ;)

http://byu.tv/