YOUR DIGITAL FUTURE
George's family is home for the night. The office won't need to know his whereabouts, so George unpins the "active badge" that tells his employer's computer network where to reach him. In the family room, he settles in to watch Terminator 6, which the kids have programmed the high-definition "Compu-TV" to fetch over the 500-channel cable system. George hollers to his son, Elroy, to join him, but he has a midterm tomorrow and is hunched over his "electronic book," tapping the screen to get video clips of the body's inner workings as he reads an anatomy text.
George's wife, Jane, is busy, too. After a day of sales calls, she's back in her home office. She grabs her notepad-size "personal digital assistant" and with the push of one button zaps all the day's sales data, contacts, and "to-do" items into her computer. Writing instructions on a screen embedded in her desk, she checks off the tasks she has completed. She then speaks to the computer, telling it to collect all her electronic mail and memos from the office. Now, if she really hustles, she might finish that multimedia sales report in time to join George for a 30-minute "virtual trip" down the Nile. With earphones, special glasses, and motion seats, the Compu-TV will whisk the couple away.
COMING SOON. This home of the future may sound like something torn from an Isaac Asimov novel, and certainly nothing close to it exists today. But five years or so from now, George and Jane's home may be the one next door. Seriously. While many folks are still fretting over whether to trust automated teller machines, a new wave of technology is building that has the potential to alter fundamentally the ways in which we entertain ourselves, educate our children, and get our work done.
The catalyst: digitization. Just as vinyl LPs gave way to digital compact disks in the 1980s, in the 1990s more and more of the information around us will be converted to digital bits, the 0's and 1's that are the language of computers. Everything from the analog waves of telephone calls, radio, and television to the images of movies, photos, and paintings is going digital. Once all this information has been converted to bits, it can be manipulated just like data in a computer.
It's far from clear how this digital flood will be harnessed. But the prospect already portends a dramatic reordering of the computer, consumer electronics, entertainment, and information industries.
MATING DANCE. As information is mixed and matched, some industries will overlap. If they don't overlap, they'll collide. Old industrial empires may topple, and new ones may rise. Says Ron Sommer, president of Sony Corp. of America: "Where a company comes from is less important than where it is going. As boundaries are erased, corporate birth certificates won't count for much." With grounding in consumer electronics, video equipment, and entertainment, Sony is naturally one of the most enthusiastic promoters of the new order (page 64).
But everyone is scrambling to shape the digital future. The computer and consumer-electronics industries are already locked in a mating dance to create the boxes that will manage the digital flow. Will they be like TVs? Personal computers? Video games? Game kings Sega Enterprises Inc. and Nintendo Co. are trying to get an edge on the PC crowd with new video-game systems that use CD-ROM disks (page 34), offering stereo sound and movie-like video of real actors. "We and Nintendo really are the players," boasts Thomas Kalinske, president of Sega of America Inc. "And the rest of them aren't."
Meanwhile, local phone companies, cable TV operators, direct-satellite broadcasters, cellular-phone companies, and even water and gas utilities are battling to be the digital highways into homes, schools, and offices. Publishers, movie studios, and broadcasters are seeing dollar signs in converting vast libraries of books, reference works, films, and video footage into digital cash cows.
But to get at the cash, they must first overcome some major technical and marketing barriers. For instance, there's no standard format for digitizing and manipulating all this information. Given the difficulties of forging standards within any one of these industries, says Intel Corp. President Andrew S. Grove, the idea of easily creating a lingua franca for the digital world is "naive beyond belief."
Even if you can solve that one, the compression technology needed to squeeze those bits onto the digital highways is still evolving. Then there are the most fundamental questions: Who's going to buy this stuff? Why? When? For how much?
BEST GUESSES. O.K., so there are a few wrinkles to be ironed out. But that's not stopping anybody from trying to lay claim to this Brave New Digital World. The motivations are clear: Profits in many of these industries, especially consumer electronics and computers, are dwindling.
The opportunity could be huge. Apple Computer Inc. Chairman John Sculley estimates the size of the digital market at more than $3 trillion by the year 2000. Sculley's tempting vision is based on the assumption that computers, consumer electronics, telecommunications, and entertainment will overlap as they go digital, giving old players new markets. "What's motivating all of us is greed," says Intel's Grove.
So the greedy are charging ahead with their best guesses about the digital future. Time Warner Inc. sees interactive supercable systems that offer 500 channels. Apple, says Sculley, sees a chance to become the software king in a market of new consumer gadgets--a sort of Microsoft Corp. of the digital world. Hewlett-Packard Co. is looking at ways to get into the Compu-TV business. And Sony is laying plans for products that use computing to entertain.
"The '90s are going to be a very confusing period with a lot of silly, distracting, important products being introduced," says Paul L. Saffo, a research fellow at the nonprofit Institute for the Future, a research foundation. "It may be that the winning industries at the end of the 1990s are none of the ones that dominate today."
TEAMING UP. It may also be that no single industry--or nation--will dominate the digital world. Since the risks are high and the territory uncharted, companies all over the globe are racing into alliances. Computer makers, for instance, need help in building low-cost, compact consumer electronics. Inevitably, that pushes them into deals with Japan's electronics companies. The Japanese companies need the knack for digital programming the Americans have.
Even with Japanese partners, computer makers face tough challenges in consumer markets. There are different sales channels, cost structures, design principles, and advertising methods. "I'm very skeptical about the PC guys," says Stephen Reynolds, an analyst with market researcher Link Resources Corp.
So everybody's dealing. Apple has teamed up with Sharp Electronics Corp. and Toshiba Corp. to build consumer products. Tandy has clinched a deal with Casio and GeoWorks, a maker of software. For many months, IBM has been negotiating with Time Warner to collaborate on advanced digital cable-TV technology and is now talking to Tele-Communications Inc., the largest U.S. cable operator, to develop a two-way information system.
Those who have not put ink to paper are talking about it. In the digital world, everyone is out to lunch--talking deals. Sculley spends gobs of time in Hollywood with entertainment types, shuttles to New York for meetings with publishing executives, and flies to Tokyo to negotiate with consumer-electronics companies. Executives from Tele-Communications recently spent hours urging Sony Chairman Akio Morita and other Japanese executives to bet on cable as the ideal conduit for digital programming. Sega says every U.S. computer maker has knocked on its door. And Microsoft Chairman William H. Gates III is everywhere--talking with phone companies, cable companies, Hollywood studios, and video-game makers. Says Gates: "We buy a lot of very nice hot lunches."
Short term, all these lunches may do little more than drive up Bromo Seltzer sales. But while the dealmaking continues, the first products of the digital revolution are emerging. There are multimedia PCs that combine data, graphics, sound, and primitive video. Eastman Kodak Co.'s Photo CD system turns your old snapshots into digital images that are stored on CD-ROM disks and can be viewed on TVs and computers. Philips sells a $799 system called the Imagination Machine, a CD-ROM player that hooks into a TV set to display interactive games and educational programs that mix sound, graphics, photos, text, and, eventually, video. By Christmas, competition will be on the way, starting with Tandy Corp.'s $699 Video Information System. And by mid-1993, the Apple-Toshiba joint venture is expected to produce a multimedia player being developed under the code name Sweet Pea.
HANDHELD OFFICE. More intriguing, perhaps, is a new category of gadgets called Personal Digital Assistants, or PDAs. These handheld PCs are a hybrid: electronic datebook, Rolodex, notepad, and fax machine.
Apple has staked out the PDA turf with a product called Newton. The 6-by-8-inch device, to be built by Sharp, will do calculations, list phone numbers, and maintain schedules and to-do lists. It will also communicate via modem to send and receive faxes or collect data from computers back at the office.
Newton's chief virtue is software that makes it easy for even computerphobes to use. There are no computer files, codes, or even a keyboard. The user just writes plain English commands on Newton's screen. Write "Fax to Mary," and the device automatically looks up her fax number and sends the message.
By the time Newton ships--Apple says in early 1993--there may be all sorts of PDAs. This fall, IBM plans to demonstrate one that will use radio or cellular-phone networks to pick up stock quotes, the latest news, and other data. Sony says it plans one. Tandy, Casio, and GeoWorks are teamed up to build a "personal information processor." American Telephone & Telegraph Co. and Go Corp., a maker of handwriting-recognition software, are working on a "personal communicator" that lets you send written notes. Hewlett-Packard is planning a new version of its 95LX handheld computer that "reads" hand printing.
Other PDAs on the horizon: travel guides that contain maps, restaurant guides, and foreign-language translation, and "My First PDA" for learning math, spelling, and penmanship.
While PDAs are being positioned largely as consumer products, these handheld information tools have obvious business applications, too. Would-be PDA makers are already noodling with job-specific PDAs, such as one under development in Apple's labs that uould put all the specs for a Boeing 747--paper documents that take up 10 feet of shelf space--in an airline maintenance worker's hands. The manual would always be up to date, thanks to periodic updates via telecommunications.
Even books are being transformed by the new digital technologies (page 61). Several electronic book players are due out late this year or early in 1993. These machines will use the huge storage capacity of CD-ROM disks to pack digitized encyclopedia sets, novels, and textbooks into handheld machines. The idea is to have a handy little player that gives instant access to text, illustrations, and, one day, video clips.
The first such product, Sony's $549.95 Data Discman, never caught on with consumers in the U.S. But Sony will try again in September with a machine known internally as Bookman. In addition to presenting text, graphics, and sound stored on standard CD-ROM disks, the machine plays audio disks. And when hooked up to a TV, it can display stored images in 256 colors.
Books are just the first in a series of familiar objects that are candidates for a techno-makeover. Phones, TVs, and even the art on your walls will undergo a digital metamorphosis. AT&T has been working for years on souped-up phones containing microprocessors, memory chips, and software that will give them the power of personal computers. The first such product, due out next year, is the AT&T Smart Phone, which includes a touch screen and programmable keys for functions such as checking your bank balance.
Digitization could also perk up your tired decor. By decade's end, there could be large-format flat-panel screens that hang on the wall, says Stephen D. Arnold, president of Interactive Home Systems Inc., a Redmond (Wash.) company that Microsoft's Gates is backing with his own money. When not being used to beam in those 500 cable channels, the screens could bring art to the masses. With the flick of a few buttons, digitized renderings of famous paintings could be summoned. Depressed? Try a Van Gogh. Or perhaps a soothing nature video. Interactive Home is working on such a system, and Gates plans to use a 46,000-square-foot home he is building as a test bed. "This will be in some homes at the end of the decade," Gates says. "It will be in my home a lot sooner."
BACKBONES. But even billionaire Gates can't buy all these futuristic gizmos until some foundations are laid. The most important is a high-speed digital pathway to zap all this information to homes and offices. The coaxial cable that now carries TV signals may give cable companies the edge in laying new digital highways. Cable has the capacity (bandwidth, the experts call it) to move 1 billion bits of data a second--enough to transmit the entire Encyclopaedia Britannica in about two seconds. To send that same material over regular phone lines takes 17 minutes. Cable companies have also spent millions of dollars installing fiber-optic "backbone" networks between regional transmission centers. These networks are able to move huge amounts of data at even higher speeds to neighborhood switches, where the signal is redirected over coaxial wiring.
But don't count the local phone companies out. For starters, the cable companies lack the kind of computerized network monitoring and billing systems that all phone companies have. Cable operators also have little experience with two-way communications. And a decade of expansion that has eaten up 15% of their capital budgets in recent years leaves them in no financial position to lay fiber that last mile into the home.
In addition to having the right kind of billing systems, network monitors, and switches, the phone companies have deep pockets. Their problem is that their only connection to the home is "twisted pair" copper wiring, which is woefully low-capacity. Even using special chips and software to compress the data, copper wires can transmit only the equivalent of 1 million bits of information a second--not enough for digital video. The Baby Bells have estimated that it would cost more than $300 billion to rewire the local phone networks with high-capacity fiber-optic cable.
`INNATE DISTRUST.' One solution would be collaboration between cable TV and local phone companies. Such a union, says Robert L. Barada, vice-president for corporate strategy at Pacific Telesis Group, would combine the two-way capability of the phone system with the broadband capacity of cable. However, Barada notes, regulatory restrictions on the Bell operating companies rule out such linkups now. Moreover, he warns, the two industries are unlikely to ally, since they're already eyeing each other's basic business. "There is a very deeply felt, innate distrust," he notes.
Another hurdle is compression technology. A Compu-TV won't be practical until video can be compressed by at least seven times the size it now requires. Today's compression still comes up short, but many companies, including Intel and Philips, are working on improving the quality and cutting the cost. E. Jane White, director of educational services for ABC Interactive News, predicts important compression breakthroughs within three years.
So once you have a Compu-TV, what will you do with it? Interact. Forget couch potatoes. Digitization lets you take charge. Trip Hawkins, president of SMSG, a joint venture between computer-game maker Electronic Arts and Time Warner, describes how you could, for example, enjoy an interactive version of Wild Kingdom. Interested in lions? Zoom in, and get a video clip of the lion hunting. Maybe you would like to see the jungle from the lion's perspective. A click on the button, and the camera angle changes to give you a lion's view.
Or try shopping. Tap into a fashion channel, narrow your choices, then replace the model on the screen with an image of yourself to see if that new Armani suit really is "you." If it is, use the remote control to order it. The cable system and your Compu-TV will work out the details. Says analyst Lee S. Isgur of Volpe, Welty & Co.: "Interactivity will result in profound changes in our lives. It will be akin to Rip Van Winkle awakening after a long sleep."
SELECTIVE SOFTWARE. Of course, navigating through hundreds of channels of interactive TV could make programming your VCR seem simple. That's where computer and software makers see their entree into the home--a market where their traditional wares have yet to make a big impact. Apple and Microsoft are both developing software that would aid in sorting through the channels and would come up with just what you want.
For an early glimpse of the power of Compu-TV, check out today's multimedia PCs, which combine text, video, photos, and sound. Multimedia is still the province of computer aficionados--only 3% of PCs are equipped with CD-ROM drives for multimedia software. But new titles are being published daily, and the cost of CD-ROM drives has dropped to about $300, from $700 two years ago.
Hollywood is intrigued by the new technology. There are dozens of projects under way to crank out glitzy multimedia titles for entertainment, education, and the hybrid "edutainment." Says actress-producer Shelley Duvall: "This is the equivalent of the Golden Age of television. And the early bird gets the worm." Duvall, working with a Canadian company, Sanctuary Woods, is producing an interactive kids' game called "It's a Bird's Life." Click on a parrot, and a box appears describing its natural habitat or how it got from the Amazon jungle to Los Angeles. Star Wars producer George Lucas is converting the Young Indiana Jones Chronicles TV series to digital format so he can create multimedia spin-offs such as games and educational programs.
Hollywood's music industry is also in on the act. Teen music stars Kriss Kross and C&C Music Factory have helped Sony develop a CD game that lets you make your own music videos. Songwriter Allee Willis, who is working on interactive CDs, says Hollywood will save multimedia from death by boredom. "This needs to have that warmth and feeling," she says. "And I think it's going to come from artists."
The truth is, no one really knows which person, company, or industry will shape the new digital world. The vision is information anytime, anywhere--the George-and-Jane lifestyle with a Compu-TV in the home, a PDA in the pocket, and an office where computers are as easy to use as phones. But will it really materialize before 2000? Says Dave Nagel, head of Apple's Advanced Technology Group: "Right now, the industry is throwing lots of things against the wall. What will stick isn't clear." The only thing that is clear is that this digital revolution will be televised.HIGH TECH AT HOME
Clockwise, starting with the TV set
COMPU-TV: Interactive TV will likely be the heart of your home "infotainment"
center. It will have the intelligence to pick out the shows and information you
want from 500 cable channels
DIGITAL ART: Flat-panel displays can show artworks, photos, or videos of nature
STEREO: CDs and digital tape are here. Now comes surround sound to mimic the
acoustics of your favorite concert hall, plus video linkups. The system will be
connected to your computers and TV
PERSONAL DIGITAL ASSISTANT:Don't leave home without this handy electronic
diary/date book that also communicates with computers and fax machines from
wherever you are
HOME COMPUTER: It will read your handwriting, interpret your voice commands,
and manage reams of data. And, of course, it's a multimedia whiz that merges
graphics, video, and text
VIDEOPHONE: With improved compression technology, phone lines will handle clear
video images. Microchips will give your phone computing power to take messages
and handle faxes
REMOTE CONTROL (CENTER): To keep track of all these smart machines, you'll get
a superzapper. Advanced "object-oriented" software makes it simple to work
all your digital wonders
Kathy Rebello in San Francisco, with Richard Brandt in San Francisco, Peter Coy in New York, Mark Lewyn in Washington, and bureau reports