There aren’t a lot of investments that are being made foolishly. Over the next decade there will be fundamental change in the way you’ll get information, whether it’s a movie, or news, or interacting with the government and filling out forms. Nobody knows when within the next 10 years it will really kick off. But everybody’s maneuvering because they know’ there’s a certain window of opportunity.
The initial applications will be much deeper than people think. The revenue that can be generated by those applications such as movies, shopping and videoconferencing justifies that big capital investment.
There’s a lot of value to getting out to a lot of homes early. Then again, this is a very layered thing. The person who builds the network is part of it, the company whose software helps run that network is part of it, the branded applications that run on top of it are part of it. The profit coming out of the Information Highway will be split among many companies, and nobody’s sure which is gong to be the most valuable piece. Is it controlling the wiring to the home? Is it making great software? Is it making great movies?
In 1994-95, I think, we’ll see lots of trials. In ‘96 and ‘97 you’ll see the first deployments. Companies will pick communities and offer the interactive systems to all consumers, and they probably won’t have to spend a lot of money -if they want that box they’ll get that for free like they got their cable box. They’ll be able to send messages to their kids’ teachers or find people with common interests or talk about local issues. They’ll be creating bulletin boards about anything they’re interested in. Then in 1998-99 we could get to the point where people say, “Hey, I feel left out if I don’t have this thing,” and a lot of bonds get sold and a lot of ditches get dug and it’s deployed to virtually the full set of today’s cable users.
I think it would be hard to mess it up. I mean the U.S. has some of its best entrepreneurs in small and large companies, and its best technologists, whether on the communication or software levels, are all very excited about this and constantly meeting about it, talking about it and deciding how they can work together. That’s a pretty amazing force that’s at work. There are certain regulatory approaches that would basically fragment the pieces up too much so that nobody had the incentive to get it going to a critical mass, or that would limit the profit so much that you wouldn’t want to move into this new world. But that isn’t likely. Politicians can see the value of this thing happening fairly quickly.
I’m very involved in building these services. Some of these are existing services just offered in perhaps a better form. Take selecting a movie. You can look at all the reviews; you can see what movies your friends are watching, if they want to make that public; you can see what comments they have. You can have any movie right there. I think that’s pretty straightforward. The idea of videoconferencing is a very powerful thing, both on the business side and the consumer side. There will be lots of early failures, but I have no doubt that we will be able to create a system-within the next decade-where people who aren’t connected will really wish they were.
The device we’re talking about here has all the benefits of a TV. It is fairly inexpensive; you can stick it in your living room and use a little remote control to control it. But inside are chips that are even more powerful than today’s PCs. And if you add a keyboard or printer you can do PC-like things. So it’s a device that needs a new name. If I say it’s a PC, people will say, “Oh, that’s for a limited set of people -too hard to use.” If I say TV, people will think it’s just a passive device that doesn’t let you store your preferences or take your pictures and send them up so they can be stored or mailed around to other people.
We call it the TV/PC. I’m sure there will be better names that come along.
We’ve already got this new network technology with digitized movies that we can call up on our screen, and we’re building the software that will make it easy for somebody who has news or has a product they want to put out on the highway. The requirements here for security and privacy and scale are really incredible. just to take scale. Say the president goes on TV and asks everybody, “What’s your opinion on this?” That’s a lot of messages coming in and that’s gotta work. And so this really pushes the state of the art in technology.
Well, anyone who owns a network will want to have lots of traffic across that network, and they’ll just take a percentage of revenues. They’ll want to let lots of people on to it. There will be brand names. Coca-Cola is a brand name; Disney is a brand name. People will gravitate to those brands … and nobody else is allowed to use those names. So in a weak sense, there’s a monopoly. But for any application you can think of there will be many, many people who’ll try and build that application.
Well, look, Malone’s very successful, but his success is buying a lot of cable assets. And he was right; cable is a good thing. He invested in CNN when it had financial trouble. He invested in The Discovery Channel. He invested in a long list of new startup things. As a result of that, the choice that you have on TV now is much broader, and it’s up to the market to decide whether those channels he invested in are good channels or not. He happened to hit some that were very good. So the marketplace is operating out there.
I only know of one competitor who said anything about our price cuts, and that was Novell. Novell is also the one who has done so much political lobbying with, you know, hiring ex-government people and things like that, so they created some noise there as well. Novell is dominant in today’s networking market. Their product controls 70 percent, or something like that, of the networks out there. We are the only company that is in the position to challenge them. And now with Windows NT we’re challenging them. But we’re also offering the product for a lot lower price. It’s price competition, and they’ve complained about it rather than just lower their prices.
The FTC inquiry has been closed. After three years of examining everything they wanted to, they didn’t see anything in that review that caused us the slightest concern. So the FTC inquiry is over. It’s very novel for another government agency to have picked up exactly the same thing and be starting their investigation, but in fact the Department of justice is doing that and we’re cooperating fully with them, so they are coming up to speed on the same thing. Once again we hope people understand that we’re in a very competitive environment and that’s been the key to our success.
