The Great European Multimedia Gamble

Battlegrounds are unlike those in the US The right perspective may be short term and tightfisted Above all, protect your core business Enormous bets are being placed on the building of the information superhighway to Europe's homes. In the United Kingdom alone, cable companies are spending $12 billion, and BT has announced its intention to respond with a $15 billion investment of its own. But even these sums will pale into insignificance when the European Union starts to use cable operators to introduce local competition in telephony. Building the information superhighway is becoming the gold rush of the 1990s. A few players - most likely first-mover satellite television companies, innovative cable companies with high penetration in favorable regulatory circumstances, and telephone companies able to transform themselves into cost-competitive service organizations - are likely to hit the motherlode. Others, huge though their investments may be, have no guarantee of success and risk coming up empty-handed, or even facing massive losses. Deep uncertainty surrounds consumer takeup, competitive threats, the emergence of substitutes, content and product availability, the cost of new product development, regulation, and content and gateway providers' share of economic surplus. All the same, there is intense interest in building interactive broadband distribution networks among telephone companies, established cable companies, satellite companies, and new cable entrants across Europe, and especially among: * Fresh-build cable companies building new interactive entertainment, information, and communications networks such as the combined local cable television and telephone services being set up in the United Kingdom with investments from US telephone companies. They are geared toward achieving revenues from existing technologies such as cable TV and local telephone services, as well as providing the means to deliver future services such as near video on demand (NVOD), video on demand (VOD), and broadband online information services incorporating full-motion video such as Europe Online or Delphi. * Cable TV companies upgrading their existing networks. In Belgium, the Netherlands, and Switzerland, for instance, most homes have already been passed by cable TV, and cable operators are investigating network upgrades that would allow them to offer telephony, NVOD, VOD, and broadband information services. * Satellite TV companies such as the Societe Europeenne des Satellites (Astra), upgrading their infrastructure to digital services with 450- to 500-channel capacity, and service providers such as CLT, Canal Plus, Nethold, and the Kirch Group racing to deliver a host of new pay television services. * Telephone companies seeking to defend their revenues and exploit their networks to provide entertainment and information services. In the United Kingdom, BT is conducting one of the world's biggest trials of ADSL (asymmetric digital subscriber line) technology, which allows entertainment to be delivered via the existing copper-pair network. The company has also announced a $15 billion broadband program to be implemented as soon as a regulatory restriction is lifted. * Wireless telephone companies seeking to compete directly for current fixed-line traffic. Fixed wireless - a technology providing a wireless link to a building's internal wiring, but avoiding the expensive switching costs associated with mobile telephony - is being pushed by Ionica as a direct alternative to BT or the cable telephone companies. Although questions remain as to its line quality versus fixed line and its viability in full-scale deployment, the economics of wireless telephony appear to be attractive. The countries of Europe have very different starting points. At one extreme is Belgium, with cable companies that are fully built out, independently owned, and poised to enter the telephony market; at the other is Italy, where less than 2 percent of homes are passed by cable. …