Digital revolution blurs industry lines to consumers' benefit

February 19, 1992|By G. Pascal Zachary | G. Pascal Zachary,Wall Street Journal VVB

The Digital Revolution has reached Glasgow, Ky.

In this small town 100 miles south of Louisville, the local electric utility has installed a two-way monitoring system that can conserve electricity by automatically shutting off water heaters and taking other load-reducing steps.

The same network can deliver video images, news and information. So, in 1990, the Glasgow Electric Board became the town's second cable-TV provider, feeding broadcasts to about 1,800 residents for a fee. In response, the original cable company slashed rates and unsuccessfully asked a court to evict the utility from its turf.

And with the aid of digital electronics, the utility began offering telephone service to some of its employees last year and plans to expand the service to the city's school district. "It's technically feasible and legally doable," says William Ray, the utility's chief.

All this illustrates how the lines are blurring among four huge industries: computers, consumer electronics, communications and entertainment. The relentless spread of digital electronics -- converting information, sound, video, text and images into a single stream of ones and zeros that can be decoded by similar electronic hardware -- is stepping up competition, forcing strange alliances and undermining once-lucrative businesses. Consumers seem sure to get new services and lower prices.

Operators of telephone, television, cellular and satellite systems like digital because it vastly increases clarity and capacity and can improve security. Creators of music, movies, books and pictures benefit because digital allows their product to be transferred readily to a variety of packages and reproduced more cheaply. Makers of consumer-electronic equipment find digital saves money by providing a common underlying technology.

Which industries or companies will benefit most from the invasions of each other's turf isn't clear, however. "You can sit inside one of these industries and think you're immune, but these other industries are coming at you," says Robert Lucky, executive director of research at American Telephone & Telegraph Co.'s Bell Labs.

It sure looks that way. Cable-TV carriers and consumer-electronics makers are buying movie and music producers. Satellite TV and data networks are being launched by a defense contractor, a computer maker and a media company. U.S. telephone companies own cable systems abroad and are itching to buy them at home. Software companies are acquiring images and data for use in their products, and publishers are packaging books in electronic form.

"Everybody is in everybody's business today," says Craig McCaw, chairman of McCaw Cellular Communications Inc., the nation's largest cellular carrier. The free-for-all could redraw the corporate landscape -- if government regulations, industry divisions and technical problems don't bar the way.

Obliterating the rules

Government, which has long tried to separate the fields of broadcasting, telecommunications and information, is relaxing its grip. Last October, a federal court approved plans by regional telephone companies to offer electronic data and shopping services over their lines. The Federal Communications Commission is encouraging phone companies to enter the broadcasting business and cable providers to offer wireless telephony.

However, regulators, concerned about rising prices for cable and the effect of changes on newspapers and other media, still might hit the brakes; already the Senate has passed a bill permitting municipalities to regulate rates for basic cable services. But in the end, "technology is going to obliterate the current regulatory structure," asserts Stag Newman, a strategist with Pacific Telesis.

Industry's failure to get its act together also is delaying the Digital Age. Self-interest has spawned a proliferation of electronic standards, making integration of digital media cumbersome or impossible and penalizing consumers for buying one hardware system instead of another. Already there are competing formats for compact-disk players; disks made for one system can't play on another. And an electronic game designed for Nintendo can't play on a Sega or Atari.

Compressing data

Technical hurdles also are worrisome, though not insurmountable. The most vexing are to find ways to compress data, especially motion pictures and medical images, so that less expensive processing and communications hardware is required. Another tricky problem: what to do with predigital data, mainly text, photographs, film and music. Today, most information products, such as music and newspapers, are translated into computer-readable form during their production. But older material must be converted into electronic form, a process that currently is expensive, time-consuming and not always accurate.

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