Broadband’s Here. Where’s The Content?

With the launch of BTOpenworld and broadband announcements by major telcos across Europe, investors have been increasingly wondering just what it is that will be delivered so quickly. As hardware manufacturers from Nokia and Alcatel to Hewlett Packard and IBM are gearing up to deliver rich, interactive content such as video-on-demand (VOD) and video teleconferencing on a variety of systems, analysts and industry watchers are still split as to who will make the content and what it will be.

UK-based Yes Television and BTOpenworld announced that they will pilot BT Yes Television, to deliver VOD to televisions via ADSL enhanced phone lines in London. And Filmgroup, a film distribution company competing for the same UK VOD audience via its web portal, announced its intention to float on the London Stock Exchange in the second quarter of 2000.

“VOD is an interesting experiment,” said Lars Godell, Analyst for European Corporate Technologies at Forrester Research, “so far it hasn’t taken off in previous trials around the world – there are very serious players interested in producing the kind of rich content the broadband net will need, but many have held back some of their most ambitious plans because of the free nature of lots of internet content and copyright issues.”

Those very issues have been addressed quite a bit recently, and the announcements last week of a joint venture between Microsoft and Xerox in ContentGuard, web-based copyright protection software, as well as rulings against in a copyright infringement suit, may clear the way for more smaller companies to risk investment in production of broadband specific content.

Always On
To be sure, companies such as Bertelsmann and Time-Warner, owners of large film libraries, are looking to explore new ways of exploiting their content in a European broadband marketplace. But analysts differ in their take on where content for broadband will go. While Forrester is bullish on very rich, interactive video-on-demand and other TV-like programming for broadband, Jupiter Research analyst Noah Yasskin believes the opposite is true.

“Primarily, broadband will be an enhancement of existing applications and services as opposed to some sort of TV-like revolution,” said Yasskin, “There will be some richer media, and more possibilities for advertising and video, but we think that more important than the speed is the ‘always-on’ aspect – that’s the real change for consumers.”

Industry watchers agree that a constant connection to the web at a fixed price is a crucial aspect of broadband’s success. “Very clearly this type of service will boost e-business,” said Joeri Sels, telecommunications analyst for Julius Bär in Frankfurt, “It doesn’t matter whether it’s ‘flat rate’ or just a very cheap, reliable fixed-base rate, but the important thing is that the general trend towards ‘always-on’ is certainly in motion.”

Always-on, says Yasskin, will cause fundamental changes in European use patterns, by making it as easy to check the web for basic information like weather and local news as it currently is to check in the newspaper.

Local And Pan-European Content Development
In addition to “always on”, the trick in Europe is to provide international, national and truly local coverage in ways that broadcast television has never been able to, and companies such as Chello (owned by United Pan-Europe Communications (AEX:UPC, Nasdaq:UPCOY), anticipated to be spun off and go public in Europe in the second quarter of 2000), are poised to do just that.

“That’s Chello’s core philosophy,” said a source close to the company, “to provide global but then also very local coverage – so users in Vienna and in Innsbruck would see absolutely different local content.” Chello, BT, France Telekom and Deutsche Telekom are clearly heading in the same direction, as can be seen by BTopenworld’s list of over 50 content providers.

So producing the local content, and therefore competing with US companies such as Atom Films and Digital Entertainment Network is the challenge for smaller European startups, and in that area the playing field is still wide open; small companies such as the UK’s ProteinTV, which won’t go public for at least a year, are very nervous about launching too quickly and getting swallowed, or worse, launching a content product line that will be irrelevant given the as yet unseen realities of the European broadband market.

“It’s more than just broadband video production,” said ProteinTV’s founder and chairman Will Rowe, “It’s about encompassing a complete range of content offerings as well as service offerings – so that we can offer a package that’s above and beyond those of Atom or DEN – the existing us organizations who really don’t have much in the way of Euro-centric programming.”

Analysts and industry experts agree that simply providing rich content is not in and of itself enough to generate interest in broadband. That sentiment was echoed not just by production companies but by ad agencies as well – and while analysts almost universally say that advertising will provide the money that fuels the next generation of online content, agencies are skeptical of projections of ‘gee-whiz’, highly interactive advertising.

“ItE’s too early to tell what advertising content works well on European broadband,” said David Sable, CEO of Y&R 2.1, Young & Rubicam’s agency to coordinate on-line and off-line marketing services, “and in fact, from our perspective, the technology is irrelevant, the challenge is for us to deliver advertising that’s relevant to the audience.”

Some predictions of interactive advertising, such as sports fans stopping the action to change the attire of the players, seems less a likely final application than, say families home shopping on line, taking interactive tours of the home and checking neighborhood services, commute times and school facilities.

Whichever is more realistic, it’s not happening immediately, and the interactivity is not yet clear. But it’s being watched carefully.

“We’re exploring everything,” said Y&R 2.1’s Sable. “Ad agencies and marketers have to understand that the issue here as everywhere is education and entertainment delivered in an interesting way.”

Looking for new applications of broadband technology, analysts see several areas on the horizon, including private and business video teleconferencing, and especially towards consumer-oriented applications such as software libraries and personal application service providers.

While current access speeds are just too slow to really use remote software applications or effectively download cutting edge software, broadband opens the door to all sorts of new areas for consumers, such as video game rental, downloading CD-ROM-type software or entertainment packages.

In Any Event, The Hardware’s Ready For It
While Alcatel and Ericsson work to bring new ADSL-capable products to market, Nokia has demonstrated a prototype version of its sexy MW111, a SOHO (Small-Office/Home-Office) box that offers a combination highspeed wireless LAN connection with broadband internet access that will be released later this year.

BT’s strategy for BTOpenworld directly addresses the problems that users in Germany and France have had with the complexity of setting up broadband on their PCs and have cut deals with hardware manufacturers including Apple, Hewlett-Packard and IBM to pre-install the service on their new PCs.

Whatever the final device – be it an integrated ‘smart’ television set, WAP device or a souped-up PC – to the European residential user the major problem is that they don’t see a compelling reason to upgrade – early adopters see it, but the masses don’t, and won’t until there’s sufficient compelling content online.