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FISHRGAME
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Feature
Stories -
012005-01
010105-01
Mac
iPod and Wireless Telephone Brands Featured at
Consumer Electronics Show, Las
Vegas
-----Tech
and Telecom Firms Are Sparring Over Bits and Bytes
on the Same Turf
-----Five years ago, a
device in your home with a powerful microchip, a
capacious hard-disk drive and sophisticated
software almost certainly would have been just one
thing: a computer.
-----Today, it could just as
easily be a portable stereo or a video recorder. It
could even be a TV.
-----The once-yawning gap
between computers and consumer electronics is
closing as the innards of home entertainment gear
incorporate some of the key features of
PCs.
-----These days, TVs are
powered by microchips, video recorders store
sitcoms on hard drives, and stereos in the living
room extract music from the computer in the
den.
-----Driving the trend is
the fact that the things that consumer electronics
were built to handle -- music, movies, TV, radio,
phone calls -- have all been converted from analog
to digital.
-----In other words, said
analyst Van Baker at GartnerG2, "they've all been
translated into the language of information
technology."
-----The change has opened
the consumer electronics business to an invasion of
powerhouse brands from the IT industry as well as
by tech-savvy start-ups -- all vying to sell
smarter audiovisual gear, supply a fat pipeline for
programming and deliver a new generation of
entertainment on
demand.
-----What's emerging is a
generation of powerful devices that talk to one
another and, ultimately, may allow people to get
their movies, music, pictures and games wherever
and whenever they
want.
-----Illustrating the
transformation, the five keynote speakers at next
month's International Consumer Electronics Show in
Las Vegas are from companies that make chips,
software, computers and cellphones -- not picture
tubes or CD players.
-----The lineup: Microsoft
Corp. Chairman Bill Gates, Intel Corp. Chief
Executive Craig R. Barrett, Hewlett-Packard Co.
Chief Executive Carly Fiorina, Motorola Inc. Chief
Executive Ed Zander and Texas Instruments Inc.
Chief Executive Rich
Templeton.
-----Nobody is predicting
the imminent dethroning of the king brands in
consumer electronics, such as Sony Corp.,
Matsushita Electric Industrial Co.'s Panasonic and
Royal Philips Electronics. Those manufacturers have
a far better grip on what people want out of their
home entertainment gear than their computer
industry counterparts.
-----But analysts and
industry executives say the new era in home
entertainment demands a different set of skills,
playing to some of the computer industry's
strengths.
-----Chief among them is the
ability to network devices and connect them to the
Internet, said Rob Crooke, Intel's vice president
of desktop products.
-----"Ten years ago, devices
didn't communicate with each other, much less with
the outside world," Crooke said. "Today, consumers
want to access their entertainment anytime,
anywhere. To do that, devices need to be able to
communicate with each other and share content. That
means building common software and standards so
that both ends can talk the same
language."
-----Paul Liao, president of
Panasonic Technologies, which is Panasonic's
research and development unit, said that although
people had been talking for years about the
convergence of computers and television sets, "for
many years they focused on the wrong issue." There
was too much talk about turbocharged TV sets that
could surf the Web and display spreadsheets and not
enough about devices that could take advantage of
the common ground emerging between TVs and
PCs.
-----The focus has changed.
At European consumer electronics maker Thomson, for
example, the new emphasis is on boxes that can pull
music and pictures off a PC or tune in video from
the Internet. And in Japan, electronics stores
offer video recorders that can transmit programs
through a home data network to any room in the
house.
-----"What has been
recognized in Europe and Asia," said analyst
Richard Doherty of Envisioneering Group, a
technology research firm in Seaford, N.Y., "is a
networked world that is never going to be the same
again."
-----Perhaps the most
important of the new skills demanded in the digital
era is an expertise in software -- in particular,
the software needed to process digitized sounds and
images, ship them around the home and interact with
the Internet.
-----"More and more,
consumer electronics devices require not just
experience in high-quality manufacturing and great
industrial design," said Greg Woock, chief
executive of Virgin Electronics, an arm of Richard
Branson's Virgin Group. "They require some really
significant software skills because these devices
are connecting to PCs and those PCs are connected
to sophisticated
networks."
-----For example, he said,
the software on a CD player has to help users
navigate through about 15 songs. The software on
Apple Computer Inc.'s iPod digital music player has
to manage 15,000 songs, "and that requires some
real sophisticated knowledge of user
interfaces."
-----Consumer electronics
companies have software engineers too. But they
don't play at the same level, some IT industry
veterans contend.
-----Anthony Wood, chief
executive of Palo Alto-based Roku and one of the
creators of the Replay digital video recorder,
recalled working with Panasonic's software
engineers after the Japanese company licensed
Replay's technology for its own recorders. "The
techniques they use are 10 years old, in terms of
creating complicated software," he
said.
-----Said Woock, "The
user-interface legacy that the giant consumer
electronics guys have left is the blinking '12:00'
on your VCR that you don't know how to turn
off…. The legacy that Apple has is ease of
use."
-----Liao of Panasonic
agreed that software was "absolutely one of the
keys to success" in the era of the digital home.
"If you look at any of the consumer companies,
including our own, the number of software engineers
has just exploded," he
said.
-----RealNetworks Inc. Chief
Executive Rob Glaser noted that Sony tried to
duplicate what Apple has done with the iPod,
developing its own software for a hard-drive-based
music player. The result, in Glaser's view: "Sony's
is terrible; Apple's is very
good."
-----Some consumer
electronics manufacturers are enlisting the help of
software companies, rather than trying to do it all
themselves, Glaser said. "I think you're now seeing
that they understand that they can't make
world-class products
alone."
-----If the iPod is a
harbinger of things to come in the digital era, the
consumer electronics industry increasingly will be
shaped by companies with a foot in the world of
computers.
-----Market research firm
NPD reported in October that Apple controlled 92%
of the market for hard-drive-powered portable music
players, with runner-up Creative Technologies Ltd.
-- another company with IT industry roots --
holding 3.7%.
-----"Ninety-two-percent
market share, that's not normal," Woock said.
"That's because they got all these things largely
right, and they're the only ones that
have."
-----Among the things that
Apple got right, Woock said, is making the iPod
easy to use. That's been one of Apple's strengths
over the years, but it's not a trait commonly
associated with IT
companies.
-----Instead, those
companies tend to load up their products with
features and power. The result is the kind of
complexity that only a geek can
love.
-----Just as software can do
great things, Liao said, it can also be buggy and
prone to crashing. "So the skill is not just being
able to do the software, but doing the software in
a way that you reproduce the simplicity and the
[reliable] character of hardware," he
said.
-----The companies that win
the battle for the next generation of consumer
electronics will be the ones with brands that the
average buyer trusts and that stress simplicity
instead of power, said GartnerG2's
Baker.
-----As an example, Baker
compared a digital video recorder from a company
such as TiVo Inc. with a "living room computer"
running Microsoft's Media Center software. The
recorder is "simple and it is easy to use and it is
focused" on a limited purpose, Baker said, but the
Microsoft software "is just not ready for the
average consumer."
-----"Get serious, guys," he
said.
-----Analyst Roger Kay of
IDC, a technology research firm in Framingham,
Mass., said Microsoft sold about 1 million of its
Media Center operating systems in three years.
That's not a bad pace compared with TiVo, which had
2.3 million customers after 5 1/2 years of
operations.
-----But Kay said Microsoft
and other IT companies may not fit well into the
consumer market. They're used to selling to
businesses, he noted, and businesses tend to
tolerate less-than-ideal products that improve over
time.
-----"That's totally
different from consumers, who react very badly if
you give them a bad experience to begin with," Kay
said. "The consumer electronics guys get that, and
the computer guys are just learning
that."
-----The invasion of IT
companies also changes the industry landscape in
another fundamental way, analysts say. Instead of
an industry dominated by large, vertically
integrated companies that make their own
components, there will be room for smaller players
that specialize in designing, assembling or
supplying pieces for a finished product. That's
because the many industrywide standards for digital
products provide a road map into the market,
potentially lowering the barriers to
entry.
-----"The nature of the IT
industry is that it's a horizontal one where many
people get to play," Intel's Crooke
said.
-----Paul Semenza, an
analyst at ISupply, a market research firm in El
Segundo, gave as an example the flat-screen TV
business, in which a number of vendors are selling
microchips and other key parts. Other companies are
buying the rights to well-known brand names, such
as Polaroid and Westinghouse, and slapping them
onto products designed and built by low-cost
manufacturers in Asia.
-----"Now, how this all
plays out is a big question mark," Semenza said. "I
don't think the world can support 100 TV companies,
each of which has a slightly different twist on
making a 37-inch LCD
TV."
-----So far, at least, the
traditional consumer electronics companies are more
than holding their own in the battle over
flat-screen TVs. Although Gateway Inc., Dell Inc.
and Hewlett-Packard have all entered the fray,
analysts say their main effect has been to drive
down prices, not to capture large shares of the
market.
-----Bob Scaglione, senior
vice president of marketing at Sharp Electronics
Corp.'s consumer electronics group, said making a
TV set with a good picture wasn't as easy as
throwing together a bunch of parts. "There's a lot
of secret sauce" involved in handling moving images
and delivering crisp, vibrantly colored video, he
said.
-----Sharp is the leading
brand in LCD TVs, controlling more than a third of
the market, Scaglione said. That success, he said,
stems from the company controlling every element of
the production, from design to manufacture to
assembly.
-----That type of vertical
integration was common in the days of picture
tubes. Today, however, consumer electronics
companies often rely on outside sources for the
technologies that are taking the place of cathode
ray tubes, including plasma panels, LCDs and
digital light processing
chips.
-----Still, he said, one
thing the IT industry does well is outsource.
"That's their business, pulling together a variety
of different parts from different" manufacturers,
he said.
-----Liao of Panasonic said
neither approach was necessarily the correct one.
"It's all about who can execute better and who can
really deliver on that strategy." The shift to
digital has dropped the barriers to entry in the
consumer electronics market, he said, but "the more
interesting thing is not, 'Can you enter?,' but,
'Can you prosper? Can you
succeed?'
-----"The hurdles to success
are just as high as ever."
///
020105Will
it be a Wireless Telephone, or will it be a single
Copper wire pluged into your electric wall plug
that will connect your home to the world of digital
entertainment?
----Your
Electric Company's telephone poles, and Telecom
Firms Are Both Competing For Your Dollars spent for
home television/computer
entertainment.
-----In
Aaron Frishman's spare bedroom, setting up a
high-speed Internet connection is as simple as
plugging the computer into one of his bedroom's
electrical wall outlets.
-----Frishman's retirement community in
Manassas, Va., is one of the few spots in the
country where electrical power lines carry data
just as capably as telephone or cable television
wires do.
-----"This is the future," the retired
sporting goods salesman said. "A 3-year-old could
hook it up."
-----Across the U.S., there's a race to
replace the tangle of wires flowing into most homes
with a single, all-purpose connection that can
deliver voice calls, television shows, movies on
demand and high-speed Internet access. Cable
providers, phone companies, municipal utilities and
wireless operators are spending billions to connect
residential customers to high-capacity, fiber optic
data networks.
-----The result: a blurring of traditional
product lines and services. Phone companies such as
SBC Communications Inc. are gearing up to sell
television programming, while cable companies such
as Cox Communications Inc. are luring local phone
customers.
-----Oddly enough, the competition is
heating up even though regulators and the courts
have tossed out key elements of the landmark
Telecommunications Act of 1996, notably the rules
requiring big regional phone firms to share their
lines with rivals.
-----Technology, it seems, is trumping
regulation.
-----Conventional phone and cable providers
that are losing customers at a rapid clip, both to
each other and to satellite companies, see
all-in-one pipes as a way to turn it
around.
-----By bundling everything together, these
companies hope to capture a bigger piece of the
$240 billion Americans spend every year to talk on
the phone, surf the Internet and watch
TV.
-----"It's all about owning the telecom
consumer," said Forrester Research Inc. analyst
Charles Golvin.
-----Consumers are likely to benefit because
they'll be able to play competitors off one another
the way they do now with mobile phone carriers.
They'll just have to be willing to move to
different technologies.
-----Someone who doesn't like his phone
company could turn to his cable provider for local
phone service. Or vice versa. Or, as new pipes
evolve, to satellite, wireless or power-line
networks.
-----"People really don't care about the
technology," said David Pugliese, a Cox cable vice
president of marketing. "They just want competitive
choice, reliability and good value."
-----The basic technology has been in place
for years, built during the telecom boom of the
1990s. Companies laid thousands of miles of fiber
optic lines, tiny strands of glass that carry data
on pulses of multicolored light.
-----Fiber networks transmit massive amounts
of information at the speed of light. They can
carry voice, music, video -- anything that can be
digitized. And when the fiber networks were built,
their backers thought customers would rush to buy
all the new services.
-----But the lines generally ended at
telephone and cable companies' central offices,
with homes connected by old copper wires. Taking
fiber into the neighborhood, the curb or each house
is expensive, but it's finally
happening.
-----Cable and phone companies have an early
lead because they own the rights of ways and
already serve most homes. Cable companies have
spent $85 billion over the last seven years to
improve their local networks. Telephone companies
are rolling out multibillion-dollar plans to do the
same with theirs.
-----"What we're going to have, in theory,
is at least three big players competing against
each other," Golvin said. But, in the meantime,
"what we have today in metropolitan areas are two
giant monopolies dueling it out."
-----Once operating in separate markets,
cable and phone companies are jumping onto each
other's turf so much that they are looking "more
like each other," said Mark Wegleitner, chief
technology officer for Verizon Communications
Inc.
-----Indeed, for the last two years, the
West Coast's top-rated telephone service provider
in the annual J.D. Power & Associates consumer
satisfaction surveys hasn't been a phone company,
but a cable company. Cox has picked up more than
40% of SBC's customers in the cable company's south
Orange County and San Diego territory.
-----"For phone companies, cable firms are
enemy No. 1," said analyst Patrick Mahoney of
Yankee Group, a Boston research firm. "For cable
companies, satellite firms are enemy No.
1."
-----In the future, by the time all the
technologies arrive and the major upgrades are
done, people probably won't even bother trying to
decipher the various broadband pipes coming into
their homes.
Price
will become increasingly
important.
-----Purchased
separately, local and long-distance calls,
high-speed Internet access, mobile phones, live
television and movie programming cost an average of
$182.43 a month in 2003, according to a Forrester
survey.
-----Customers saved money by bundling some
of those services from one company. On average,
Americans spent $135.14 a month last year, a 4.7%
increase over the previous year and a far cry from
simple local and long-distance service that
averaged $34.58 a month in 1983, the year before
the AT&T Corp. monopoly was broken
up.
-----"What is clear today is that consumers
have shown a willingness to increase their total
communications spending over the past several years
based on the added value that mobility -- wireless
-- and broadband offer," Golvin said.
-----On the other hand, as Yankee Group
analyst Kate Griffin said, "Each household only has
a limited amount to spend on telecom."
-----Retired and living on a fixed income,
Frishman, 63, certainly was looking for a good
deal.
-----Every morning, Frishman turns on the
computer in his apartment and starts reading the
online newspaper editions of the Los Angeles Times
and the New York Times. Then he checks the local
weather and the high school and college sports news
from Mississippi. He spends several hours a day in
front of the screen, more if he finds a television
program he wants to watch.
-----"I just bought a monitor with one of
those picture-in-picture features," he said. "Now I
can do computer work and watch the ballgame at the
same time."
-----When he lived in Meridian, Miss., he
had DSL, or digital subscriber line, service from
BellSouth Corp., which meant he had to buy local
phone service from BellSouth as well. In Manassas,
he was able to save money by ditching the phone
company. He uses his broadband connection,
delivered for $27 a month by the city-owned
electric utility, for phone service.
-----Although it works well for Frishman,
broadband over electrical lines can be a difficult
technology to deploy. Power companies generally are
still experimenting and trying to develop good
business reasons to install broadband.
The next
new pipe most likely to reach households is
wireless.
-----In
Reno, Tom Smith is a self-described "huge
proponent" of wireless broadband. He and his family
buy theirs from a local Internet service provider,
Hot Spot Broadband.
-----"My son does quite a bit of online
gaming and commented recently that everything is
faster in multi-player games and that his ping
rates [lag times] have dropped," he said,
noting satirically, "I guess that's the true test
of any connection."
-----Wide-area networks -- either Wi-Fi (for
wireless fidelity) or WiMax (for worldwide
interoperability for microwave access) -- are
cropping up in small towns and metropolitan areas
nationwide.
-----A host of Internet and other companies
are using Wi-Fi and WiMax, separately or in
combination, to provide broadband pipes, primarily
for businesses. The more powerful and less costly
technologies soon will take over most cellphone
networks as well, industry experts
said.
-----Both independent and large
long-distance carriers, all but shut out of
competition for local service on conventional wired
networks, could be back in the game using WiMax
within 18 months, said analyst David Willis at the
Meta Group research firm in Stamford,
Conn.
-----Meanwhile, the entrenched cable and DSL
providers control the game. Larry Hettick, for one,
is "quite content" with his high-speed cable modem
service.
-----Before moving recently from Visalia,
Calif., the telecom analyst for Current Analysis
Inc. in Sterling, Va., lined up Cox cable in
Virginia to serve all his telecom needs: video,
voice and data. He figures that this phone bill
alone will be cut in half.
-----Irvine resident Mark Neckameyer, 61,
also switched all his telecom services to Cox,
saying the top-rated customer service is just icing
on the cake. The cable connection is not only fast,
but it's also reliable.
-----"Anytime I have questions, it's usually
something that I screwed up myself," the retired
accountant said, adding that Cox's phone service
"is a lot less expensive" than SBC's and the
quality is "every bit as good."
-----It isn't easy for some phone companies
to compete. DSL speed fades over distance, and some
houses are thousands of feet from the nearest
central telephone office -- making for Internet
connections that seem barely faster than dialing
up.
-----Verizon is installing fiber optic lines
all the way to Huntington Beach homes as part of
its initial effort to replace its copper network
with super-fast connections impervious to climate
and distance. The fiber connection that Radford
Robinson got recently at his Huntington Beach home
was amazing -- "definitely the future," he
said.
-----It took a Verizon crew 12 hours to
bring the fiber line 250 feet from a backyard
telephone pole to his house and connect both his
computer and his phone system.
-----"DSL was good, but nothing compared to
this," the 69-year-old former owner of an
import-export company said. "It's like comparing a
Model T to a new Jaguar." Even voices on the phone
sound clearer, he added. "There's no static or
fading out."
-----Fiber is expensive to take deep enough
into neighborhoods to provide nearly unlimited
bandwidth, and phone companies are taking that risk
with the hope that they'll win enough customers to
make the new networks profitable.
Satellite,
in the meantime, is still winning
customers.
-----Francine Wheat of Brea isn't sure
she'll ever go back to a wired connection for her
television and movie programs. After 10 years on
cable, she signed up in 2000 with EchoStar
Communications Corp.'s Dish Network.
-----"We had cable that started out at $29 a
month, and the price kept going up," the law firm
office manager said. "By the time we switched, it
was more than $50 a month and we hadn't changed any
service."
-----Poor customer service was the final
straw, she said. "The cable went out throughout the
neighborhood on a Friday, and the cable company
said they would be out on Monday to fix it. All the
neighbors were in an uproar."
-----She now receives high-quality video
with no major problems. "I plan on staying with
it," she said.
-----Until
the local utility starts sending movies through the
power lines, perhaps.
///
Center
Page /
TIMELINE:
Top Stories To Start The Week With:
122004-52
///
ByLines:
Editors Note
Donald
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-----It
just goes to show you, says Troy about the TV and
Film industry -- "NOTHING IN THIS WORLD IS
PERMANENT" . . . so follow the
money -
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take some advice from a dinner-time chat with
"Stonehead" --
Disappointments Are Great! Follow
the Money . . . the Internet and the Smart- Daaf
Boys.
///
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