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'Net Insider:

'Net Insider: A killer application? Maybe and maybe not
By Scott Bradner
Network World, 07/31/00            

Earlier this year, I ran into someone who was part of the infamous Time Warner video-on-demand trials in Orlando in 1994. Even after all this time, he seemed a bit confused by the experience.

According to him and others that I've talked to over the years, the technology worked fine. Customers could order videos in real time and they had a VCR-like control that could start, stop and rewind the video.

Customers seemed to like the result, but did not actually use nearly as much as was expected. It did not seem to be a cost issue, because at one point, videos were offered through the service for 99 cents each. That did not stop these same customers from going to local video stores and renting videos at more than $2 a pop. The person I talked to did not have an explanation as to why people would do this.

What brings this conversation to mind is the recent announcement by Blockbuster and Enron of their new digital video-on-demand via DSL plans. They announced a 20-year exclusive arrangement through which Blockbuster will supply videos and Enron will digitize and deliver them to servers located near ISPs that have DSL-based customers. When a customer requests a video, it will be delivered via a streaming technology from the local server over the DSL link to a special set-top box connected to the customer's PC or TV.

It is tempting to point out that 20 years is equivalent to about 140 Internet years. It seems a bit of a reach to assume that any Internet-related company would have enough staying power to be the right partner over this period of time, but I guess Enron and Blockbuster are optimists.

They better be. They have to assume that the penetration of DSL, which is now in about 4% of households, will increase dramatically. They have to assume it will do so in the face of a belief on the part of many ISP partners mentioned in the Blockbuster/Enron press release that DSL-based Internet service is for businesses, not residences. For example, Bell Atlantic says in its advertisements that DSL is for "business customers only."

Blockbuster and Enron also have to assume that DSL speeds in real world installations will be fast enough to support real-time video at a resolution that customers will want to pay for. Furthermore, they have to believe that enough studios will agree to help put together a reasonable catalog of videos for rent and that Blockbuster franchisees will be docile enough not to try to compete with the new service.

Most importantly, Blockbuster and Enron have to assume that the Orlando experience was an aberration. But if I were them, I'd feel a lot better if someone could explain why those people in Florida continued to go out to video stores.

Disclaimer: Harvard is in the business of getting people to ask questions, but I'm doing so without the university's prompting.

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