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A "killer app"? - maybe and maybe not

By Scott Bradner

Earlier this year I ran into someone who had been part of the infamous Time Warner 1994 video on demand trials in Orlando Fl. 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. The customers could order videos in real time and they had a VCR-like control that could start, stop and rewind the video. The customers seemed to like the result but did not actually use it anywhere nearly as much as was expected. It did not seem to be a cost issue since at one point videos were being offered for 99 cents each but that did not stop these same customers from going out to the local video store 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 Inc and Enron of their new digital video on demand via DSL plans. They announced a 20 year exclusive arrangement where Blockbuster will supply videos and Enron will digitize then and deliver them to servers located near Internet service providers who have DSL-based customers. When a customer requests a video it will be delivered via a video streaming technology from the local server over the DSL link to a special set-top box connected to their PC or TV. The temptation to point out that 20 calendar years is about 140 Internet years is too strong to resist. 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 optimists. They have to assume that the penetration of DSL which is now at about 4% of households will increase dramatically . And will do so in the face of an assumption on the part of many of the ISP partners that were mentioned in the 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." They also have to assume that the DSL speeds in the real world installations will be fast enough to support real time video at a resolution that customers will want to pay for. Further more, they have to assume that enough studios will agree to take part to put together a reasonable catalogue of videos for rent and that their franchisees will be docile enough to not try to compete with the new service.

But most importantly they have to assume that the Orlando experience was an aberration but if I were them I'd feel a lot better if I knew the answer to the question in the first paragraph.

disclaimer: Harvard is in the business of getting people to ask questions but I'm doing so without their prompting.