New deals involving Digital Island, Enron and others aim to deliver audio and video to consumers on the Web. The deals mark the latest moves in an ongoing trend of communications carriers launching new technologies to drive greater network use and attract new customers.
Digital Island, a San Francisco-based Internet caching company whose technology aims to speed the Web, yesterday picked up investments from Microsoft, Intel and Compaq Computer to create an audio and video streaming network.
Enron, an energy and communications company, and Blockbuster, the video rental giant, struck their own exclusive deal this week. The two Texas companies will begin delivering movies "on demand" over Enron Broadband Services' new fiber-optic network.
Many software applications and content, such as video, work best with high-speed, or "broadband," connections and therefore demand substantial network capacity, which results in greater revenue for network service providers. As costs fall for simple data transport and long-distance phone calls, communications carriers are looking for new ways to increase bandwidth consumption and generate higher profit margins.
"Video obviously is a bandwidth hog," said Gary Arlen, president of Arlen Communications, an interactive media research company. "If you have a big pipe, you want to fill it up. And video does that."
Zia Daniell Wigder, a director at market researcher Jupiter Communications, agrees. "They're looking at ways to fill the huge pipes they've got," Wigder said.
Communications carriers apparently believe video conferencing is one application that business customers may be ready to embrace, despite the knocks against today's video quality.
"It's still sort of herky-jerky, but it's getting better. There is evidence that streaming video is becoming visually acceptable," Arlen said.
Several carriers already have signed deals in recent months to use video streaming technology.
For example, Ohio-based Broadwing earlier this month launched "multicasting" technology from Yahoo Broadcast across its network. Digital Island recently announced plans to use video streaming software from FastForward Networks, a San Francisco start-up.
Similarly, Digital Island competitor Akamai Technologies is working with carriers including AT&T, WorldCom and Global Crossing to deliver Web-based conference calls and video conferencing. Cable & Wireless, a United Kingdom phone company, in April signed a deal with Microcast for video streaming services.
"When some start doing it, others start too because they don't want to be left behind," Arlen said. "Part of it is grabbing a presence now...Plus, we're living in an increasingly visual society."
Analysts refer to the industry's current phase as a "land grab."
"Everyone wants to get their deals in place so they won't be left behind," Wigder said.
Regardless of the carriers' need to sell network bandwidth, some say the technology still is not ready for true interactive video services on a mass-market scale. Few consumers subscribe to a broadband service such as cable modems or digital subscriber lines (DSL), and even those who do often cannot receive high enough speeds to support quality video streaming or movies-on-demand.
"We're still at the early stages," Wigder said. "I don't think these recent deals mean we're about to see TV-quality video on the desktop PC soon. They're steps in the right direction."