Riding the airwaves

By Evan Hansen
Staff Writer, CNET News.com
April 23, 2003, 4:00 AM PT

Remember ActiMates?

Six years ago, Microsoft had hopes of breaking into the educational toy market with a line of interactive dolls based on Barney the Purple Dinosaur, Teletubbies and other popular television characters. The toys, called ActiMates, allowed children to play peek-a-boo, sing songs and even join in a show's activities while watching it live or on video.

Unfortunately for Microsoft, the dolls didn't catch on and were eventually discontinued. But the company never lost interest in the technology that made them tick, particularly the use of broadcast signals to pull a gadget's digital strings.

"The magic of software is spreading out to all different devices," Microsoft Chairman Bill Gates beamed at the last Comdex trade show in Las Vegas. "And those devices are connecting in different ways."

Specifically, he was talking about "datacasting"--an inexpensive, decades-old technology that delivers bits of information over radio and TV using the public broadcast spectrum. Today, after years of neglect, datacasting is drawing unprecedented interest from powerful players in the media and technology industries.

Walt Disney plans a major datacasting trial this fall. The company will test a video-on-demand service that will use the broadcast facilities of its ABC network to send hundreds of hours of movie programming in digital form to be recorded on hard drives for playback on TV sets.

A large consortium of media companies that includes Comcast, is backing efforts to create a national datacasting network. The group has poured some $80 million into start-up iBlast, which has inked deals with more than 250 U.S. television stations. The company has launched a video-game service in Los Angeles, San Francisco and a handful of other cities that charges $10 a month, and CEO Grayson Hoberg said iBlast plans to release other services in coming months.

Less-ambitious services have been appearing in limited markets over the past few years. Radio giant Clear Channel Communications announced a datacast service for consumers out of its Cincinnati WKRC TV station in late 2001. And Capital Broadcasting has provided a service called TotalCast over its WRAL television broadcasts in Raleigh, N.C., since 2000.

"Datacasting is one of those best-kept secrets in the U.S.," said Jay Trager, chief operating officer of National Datacast (NDI), a subsidiary of the Public Broadcasting Service that has offered datacasting services since 1988 to Microsoft, TV Guide owner Gemstar-TV Guide International and other customers. "Wireless data broadcasting has gotten a lot of exposure in the past few years, and we're seeing the benefit of that."

The various new plans for datacasting highlight the wide range of potential uses for the technology, as long as some long-standing obstacles can be overcome.

For Microsoft, datacasting could wind up as a surprise competitor to mobile wireless standards such as Wi-Fi and 3G. For Disney, it could become an alternative to cable and telephone lines, as a digital pathway for some niche services in the home.

Microsoft has announced some of the first products based on the company's new Smart Personal Objects Technology (SPOT), which aims to wirelessly connect "dumb" devices such as wristwatches and refrigerators to data networks.

A service called DirectBand due this year will connect watches to PCs so that they can calibrate themselves, download software and wirelessly receive data such as sports scores and stock prices from FM radio signals.

The watches, made by such companies as Fossil, Citizen Watch and Suunto, will include radio receiver chips developed by National Semiconductor. Similarly, Sony and other consumer-electronics companies already include datacasting receivers in some of their products to support features such as automatic clock updates.

"It's about glanceable information," Gates said while explaining SPOT technology at the annual Consumer Electronics Show this year. "You can just set it up to send instant messages so it's like a paging device receiving information from people who want to contact you just on the device--the one device that you always have when you carry it around."

At present, FM radio supports datacasting over so-called subcarrier frequencies, which can deliver information at about 1.5 kilobits per second. That's sufficient for relatively light data needs, such as displaying a radio station's number on an LED screen or sending weather information to a digital watch--but little else. Yet, forthcoming digital enhancements could supercharge radio datacasting, providing feeds of up to 300kbps.

In the last decade, technology improvements and the advent of digital TV have also boosted TV's datacasting capacity, from a few kilobits to more than 4mbps--well above the requirements needed to support Disney's envisioned video-on-demand service.

Entrepreneurs have pursued dreams of broadcasting data over television and radio waves for the better part of three decades in attempts to build a wireless data network on the cheap.

Datacasting would seem to be the perfect solution, as it requires only minor upgrades to existing broadcast facilities at a cost of several million dollars, as opposed to the billions required to build new wireless and broadband infrastructure, and to purchase spectrum licenses.

In essence, the technology involves inserting a data stream into a TV or radio broadcast and receiving it in a way that does not interfere with the primary audio-visual signal. The data can be combined with the audiovisual signal or sent along as a separate part of the spectrum, then transmitted to a special receiver tuned to capture the bits.

The economics seem irresistible: Transmissions can reach millions of people as easily as one, and provide steadily increasing margins as the viewership grows. Internet and cellular phone technologies, by contrast, create additional costs for every new connection.

If datacasting is easy, however, finding a killer application for it has been a conundrum. The technology has been available in the United States for at least 15 years through such PBS services as closed-caption broadcasts for the hearing impaired, but no large-scale commercial applications have ever been built around it.

One reason, according to some industry veterans, is that datacasting can carry hidden costs for equipment such as special receivers. In addition, as a one-way form of communication, it lacks the interactivity and flexibility of today's wireless technologies.

John Abel, former chief executive of failed datacasting start-up Geocast Network Systems and now a senior vice president at lobby group the U.S. Telecom Association, said the technology's lures are dangerously misleading. "I don't think it's much of a technology issue; it's a business issue and a consumer acceptance issue," he said.

He and others note that datacasting's advantages of scale are fast being eclipsed in the mass market by competing technologies, namely the high-speed Internet. In recent months, the number of broadband Net connections to the home have grown quickly in the United States, fueling new, instant information services and high-bandwidth offers such as video.

That success, particularly in digital cable services, may be precisely why Disney is so interested in datacasting. The company has long sought digital alternatives to cable distribution--which is dominated by archenemy AOL Time Warner--that would allow Disney to keep its content firmly under its control.

"Disney has three big advantages in going this direction," Abel said. "One, they have a huge catalog. Two, they don't like the cable companies. Three, they own ABC."

Disney has disclosed few details about its video-on-demand project, dubbed Movie Beam. But at a National Association of Broadcasters lunch this month, where the project was announced, Disney CEO Michael Eisner said the company was planning trials that would deliver video on demand using leftover broadcast bits to deliver up to 100 movies to a set-top box connected to a television set.

Movie Beam, which will be tested this fall in Salt Lake City, is expected to use technology from Dotcast, a company that has worked with PBS's NDI subsidiary. In addition to its efficiencies, Eisner cited Movie Beam's importance in the fight against digital piracy.

"To be blunt, if we don't provide consumers with our product in a timely manner, the pirates will," he said. "But, if we manage this business intelligently, the immediacy and lower cost-base of digital delivery will open up vast new markets here in the U.S. and, especially important, around the world."

Disney's move marks a break with the movie industry, which has been tentatively looking to the Internet to test video-on-demand services. Sony and five other studios launched Movielink last year, aiming to give consumers a way to download movies for playback on PCs. News Corp.'s 20th Century Fox studio, meanwhile, signed a deal with Internet movie service CinemaNow to license part of its catalog for online distribution.

But the success of datacasting video on demand is hardly guaranteed, in no small part because of the additional equipment required to receive its signals. The price of datacast receivers can range anywhere from $50 to $500, depending on who is doing the estimating and whether the movies will be viewed on a PC or TV.

"Distributing receivers is a huge marketing challenge, even with the clout and glow of Disney or ABC behind it," said Gary Arlen, president of Arlen Communications, a research company in Bethesda, Md. "A lot of companies have had ideas of how to try to monetize digital bandwidth for products and services other than TV, but no one has solved how to do that."

Nevertheless, those on all sides of the debate agree that Disney will bring immediate credibility to datacasting and offer the most ambitious attempt ever to harness broadcast spectrum for digital media delivery. Even skeptics of the technology are anticipating Disney's move with keen interest.

"I think it's the right content for datacasting," Abel said. "It's a technology searching for the killer app. Maybe movies are it."