SERVICE BUREAUS AND CABLE TV STATE OF THE ART AND PERSPECTIVES

A TALK GIVEN TO THE ORGANIZATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT, PARIS.

SEPTEMBER 25-26, 1974

The idea is intriguing. The concept of moving information to people, rather than people to information, has inspired the already fertile imaginations of computer specialists, sociologists, economists and futurists of every profession. Like many breakthroughs in concept, the idea of providing sophisticated broad-band two-way communications networks for our cities is one that has been talked about for at least half a decade. However, it remains primarily a laboratory curiosity because to date there is insufficient social or economic pressure for governments to act, or private enterprise to invest. I believe, however, that there are pressures building that should lead to a serious consideration of some form of Wired City experimentation in the late 70’s. In the industrialized countries, these pressures will be such that gradual implementation of some of the many applications forecast will become a reality in the 1980’s and 1990’s. I will outline some of the reasons for my belief that the Wired City is getting close to reality. First, however, to ensure that we are all talking about the same thing, I will briefly describe the situation in Canada and the state of the technology.

BROAD-BAND NETWORKS IN CANADA

As has been pointed out on many occasions most cities, at least in the West, are already ‘wired’ to some degree. A switched voice grade communication system exists already. What we are looking at when considering the Wired City is the evolution from such relatively primitive systems to extensive broad-band networks that could provide for a wide range of sophisticated telecommunications services. Canada is already an extensively ‘wired’ country. Bell Canada projects that by 1978 there will be some 8.9 million telephones, or approximately 1 for every 2.75 people. This switched network, while quite up-to-date, has the usual limitation of the band width of a pair of unshielded copper wires. As we all know, this is barely adequate for relatively simple data transmission with bit rates being usually restricted to 2400-4800 bps. When you examine the range of services that might be desirable (as we shall in a moment), it is clear that only a coaxial cable, or similar transmission facility, could possibly meet the band width need. To put this in perspective, I might mention that the type of coaxial cable now being used by cable TV companies has a capacity of about 300 MHz. One television channel takes about 6 MHz, indicating that one would have to have an information-carrying capacity of somewhere in this 300 MHz range to allow for multiple television channels, audio signals and the range of new services we will be discussing. To contrast this once again with the present switched common carrier network, we should bear in mind that the latter was designed for voice traffic and low band width requirements in the 4 KHz area. Needless to say, it was the desire to improve the quality of television signals in urban areas that first led to the extensive coaxial cable networks that now exist in Canada. Notwithstanding the attempts by the Canadian Government to encourage Canadian broadcasting within our borders, it was clearly the desire of Canadians to pick up American channels that led to the rapid growth of Cable TV in our country. With a population of 23 million people and 4,500,000 TV sets, the number of subscribers on cable today is over 1.7 million, or 38% of the TV-viewing market. The remoteness of some of our cities from the U.S. border encouraged the development of large antennas which could pick up the remote signals and relay them through the cable network into homes. By contrast, in the United States, with a population of 220 million people, there are 75 million TV sets, but only 8 million subscribers resulting in a penetration of about 11%. Clearly, the reason for this lower percentage in the United States is the range of choice already available to U.S. viewers off the air. However, a rapid growth rate is anticipated in the United States because of the increase in the number of colour television sets which require better transmission of signal and the difficulty of receiving good signals in crowded urban areas with large buildings which tend to block the transmission. I understand that the new World Trade Centre in New York acts like a giant reflector for TV signals causing ‘ghosting’ problems for those who do not have cable. However, in Canada, as in the United States, this extensive coaxial network is at the present time used for virtually nothing except the improvement of TV transmission. There are several reasons for this. The first is technological. The network at the moment is essentially a one-way system, i.e. it is a point-to-multipoint broadcasting system rather than a switched two-way network. This does not completely restrict its usefulness but does mean that investment must be made in the network before any advanced applications could be tried. The second reason, however, is regulatory. In Canada, the Canadian Radio-Television Commission, which is the body that regulates cable television, has to date restricted its thinking about the more advanced use of cable to a rather narrow definition of its terms of reference under the Broadcasting Act. I might mention here that SDL’s recent attempt to purchase one of Canada’s leading cable television companies was turned down by the CRTC in July on the grounds that “the Commission considers that permitting the ownership of a cable undertaking by a company operating in the field of computer services would be premature.” This decision by the CRTC has embroiled that organization in considerable controversy, for many like ourselves felt that the union of a cable company and a computer services organization would be the best possible way to move from discussion into action. I might point out that this has not discouraged us, as even if we are precluded from ownership of a cable company, we are not precluded from developing applications for this field and marketing these through existing cable organizations. No doubt, one of the important considerations in the CRTC decision was the role to be played by common carriers who feel they should have an exclusive right to any type of transmission that does not fit within the limited definition of the word broadcasting. We argued that the common carriers were, in fact, restricted, by definition, to the medium and were precluded from influencing the message, i.e. SDL’s interest was in providing the products, while the interest of the common carriers should be restricted to transmission. We understood that our ownership of a cable company would not allow us to invade the area of the carriers by providing a switched point-to-point facility and our belief was that many of the potential applications could be handled quite adequately on a point-to-multipoint basis. I will not dwell on this regulatory problem as this is a Canadian situation, but it is important to recognize that the jurisdictional questions may have a lot to do with the speed with which the Wired City may be implemented in Canada and elsewhere.

WHAT PRESSURES FAVOUR THE WIRED CITY APPROACH?

We may or may not agree with all the conclusion drawn in “Limits to Growth,” but there is little doubt that the factors identified as being the dominant ones in our long term economic planning are going to be population growth, limitations of resource availability, pollution, availability of capital, and sufficient sources of energy. The problems that a Wired City should solve involves all of these. One of the most publicized benefits supposedly resulting from having a wide range of information services available to individuals wherever they may choose to live is the reduction of urban congestion. As populations grow, the only solution may be to decentralize these populations into satellite communities, perhaps along the line of Taby near Stockholm. Individuals could live and work in these communities and still get the information necessary for their jobs and otherwise communicate readily over video phone like networks as long as the information moving capability were large enough.

As far as resources are concerned, as I will describe in a particular example, electronic media could easily replace many of the things now printed on paper and the elimination of hard copy could save one of our major natural resources.

The concept of mass transportation for moving people to get them where their minds are needed leads to increasing problems of pollution, at least as long as fossil fuels are extensively used. One might conclude that there is electromagnetic spectrum pollution by changing to an extensive use of broadcast medium, but some of this is helped by the use of cable, whether coaxial, fiber optic, or other, as these networks allow one to bend the signal to wherever you want it to go with little if any electromagnetic radiation or leakage – another reason for going the Wired City route. As far as energy is concerned, it seems generally assumed that it takes less energy to move information than it does to move people. However, I have not seen any definitive studies on this.

The final question is that of capital, and here it is less obvious that the Wired City is as efficient as other methods. The present investment in the switched voice network in Canada is probably in excess of $7 billion dollars. However, estimates of wiring major Canadian centres with a switched coaxial cable system exceeds $70 billion dollars. As Canada at the moment is wrestling with the need to provide capital in the amounts of $5 billion dollars apiece for pipeline, oil sands, and other natural resource projects, the economics of such a sophisticated system will have to be examined in great detail before Canada would embark on such a project as being the best use of its capital. However, assuming that the capital can be found, the concept of an information-rich society allowing people to improve their quality of life in part by decentralizing where they live has certainly got attractions. It is easy, however, to talk in the abstract. It might be more useful to examine several particular projects that SDL is examining for possible joint development with institutions in these fields. Some we have concluded have good potential, while others have hidden problems.

IN-THE-HOME EDUCATION

This particular application illustrates the latter and brings out many of the points discussed above. For example, we are all aware of the limitations of computer-assisted instruction. This was supposed to be the cure-all for many of our educational problems. A more realistic view now indicates that it may help but must be used as an addition to, and not a substitute for, other forms of education. The theoretical reasons for wanting to combine CAI with a cable communication network are as follows: many of the advantages claimed for CAI in terms of user-controlled education would be enhanced by being available in the home, e.g. the learning pace can be set by the student and older students need not be embarrassed by being in classes with their juniors there is an assumption that, if Toffler is correct, we may all have to re-educate ourselves several times during our lifetime in our fast-moving society. This makes continuing education one of the major problems to be faced by any industrialized nation many courses, but not all, could be taught by a combination of two-way interactive instruction combined with extensive use of film and assisted, of course, by a computer terminal. There is no reason for a student to travel to a ‘brick and mortar’ type of institution to get this kind of instruction. in many of our cities, weather problems mitigate against travel during the winter, transportation is time-consuming, pollutes, uses energy, etc. In addition, crime in the streets may become a real impediment to people returning to downtown educational institutions for evening courses presumably, if the user can select the time at which a program is shown, he will more likely be able to complete the course, for many people cannot tie themselves to a fixed time two nights a week All of these advantages seem to make education a good initial project for the Wired City. In fact, SDL had no difficulty in interesting Carleton University and Algonquin College in Ottawa in participating in projects to test the possibilities. However, as we investigated this further, we began to get indications that, while many surveys showed a demand for educational TV, when the programs were actually offered, they were not being used. There also seemed to be an upper limit on what people would pay for a particular college course. One survey indicated that only 2% of the adult population would be willing to pay $50.00 for a course. The economics were certainly of concern to us. A second problem was the cost of suitable terminals for a sophisticated system. A simple terminal could be added to a TV set allowing for minimal two-way communication for perhaps $50-$200. However, full alphanumeric terminals are substantially more expensive than this, and would probably prove to be the real impediment to in-the-home education for many years to come. I have gone into some detail on this application because it is typical of one of the many on the attached list which may seem attractive, but may be economically unsound. This is particularly true when one examines the real cost which is that of providing appropriate program material.

TELE-SHOPPING

By contrast, another application we examined was that of in-the-home shopping. Here, the situation is quite different because there is a strong economic push on the part of large merchandisers to find a more effective way to sell their product. Standard advertising on television violates a fundamental rule of good salesmanship, which is, to close the sale at the time the sales presentation is made. If a householder was able to order the product as soon as the desire had been created, the sale of that product should be increased substantially. In effect, such an operation would really be an electronic mail-order catalogue. First, consider the difficulties with the present catalogue sale operation as it exists in North America. Catalogues are very expensive to produce and, of course, waste incredible amounts of high quality paper. Catalogue distribution is difficult, with little way of ensuring that the catalogues do reach people who will use them. Further, catalogues are very static. They cannot be updated readily, they are not very effective sales tools because they are static, and the most critical problem of all is that it is not possible in these days of rapidly-rising prices to update catalogue prices easily. It is not a well-known fact, but many catalogue prices of necessity are determined 10-12 months in advance, which may mean that sales from a catalogue are a losing proposition by the time the catalogue is produced. Think, in turn, of putting such a catalogue in video form over a television set. The customer could call for an index, select the category of items in which he is interested, and then have the various items presented in a dynamic form, e.g. if one were looking for an electric saw, the picture could show uses of the saw as well as simply a static picture of the item, thereby encouraging the sale. When the customer sees the item he wants, he could order it merely by indicating the code number, colour, etc., on a simple terminal which would relay the information to either a service bureau computer, or possibly one belonging to the merchandising company and the computer would, in turn, arrange for the shipment. This, I might add, is once again a pollution-saving and energy-saving process, for it is far more efficient for individuals to order in this way and have a single delivery system deliver the unit than it is for each housewife to get into a car and drive to a shopping centre.

Associated sales could also be promoted. For example, if someone has just ordered a saw, the electronic catalogue could suggest attachments, such as a sander or buffer head, for the unit. Needless to say, this also completely cures the problem of price updating as this could be as dynamic as necessary. Without going into any further detail on this interesting type of application, it was SDL’s conclusion that such in-the-home services on a private enterprise basis had more likelihood of immediate success than something such as in-the-home education, even though the latter might have much greater long-run benefits to society.

It should be noted that this type of application could have been handled quite easily with a one-way cable communication system. The actual placing of the order could have been done by a phone call to the supplier. This slightly less automated type of system was tried, in fact, without the benefit of television in a fairly successful test in Toronto. A restricted number of customers were allowed to use their touch-tone phones to order items from the catalogue and a voice answer-back system was used to check the details of the order. This tended to confirm our belief that a market exists for such commercial systems at the present time.

NATIONAL CONSIDERATIONS

I have singled out only two of an endless list of possibilities. The electronic newspaper has an attraction to SDL because, once again, the production of large newspapers use substantial natural resources and yet much of the paper goes unread. A user-selected electronic method of scanning news items and printing on a facsimile printer only articles that are really of interest has got definite possibilities. Electronic mail has similar attractions. There is hardly an industrialized nation that is not having a major problem with moving information through the postal service. It is doubtful whether one can get enough postal carriers to deliver the mail for much longer, and the cost will continue to escalate. A form of transmission of handwritten information, such as is commonly practised in factories, would solve many of these problems, although one might speculate that a recorded voice message could substitute for this in many instances. Electronic mail, however, concerned SDL because this did appear to get us into an area of point-to-point transmission which we more properly believed could be the function of a common carrier. Because of SDL’s extensive work in medical records, we believe that the ability of a doctor to call up medical information from a centralized databank on a patient’s home TV set would immeasurably help in the treatment of patients in the home, emergency patients at a hospital, and other such applications. Once again, we tended to approach this area with caution, as the question of individual privacy loomed large in this type of data bank. In any ease, all of these applications must now be examined in terms of the return on investment to the country concerned. For example, an in-the-home education project can only be examined in terms of what a country is trying to accomplish with its entire educational program, e.g. what balance does a country want in terms of improving the quality of life through avocational training, as opposed to increasing national productivity through vocational education. In-the-home education may prove to be a very expensive answer. When examining an application, such as Tele-Shopping, a country should be very aware of the problems that could be created by pushing the advertising system to its logical limit- An electronic catalogue with instant impulse selling could create artificial demands which will put further strains on our natural resources. As many people have pointed out, Keynes tended to forget the supply side of the equation, and our major problem for the latter part of this century may be to meet the demand rather than create more demand.

SOME CONCLUSIONS

The technology is here to create Wired Cities. However, this is really a technology looking for a problem. On the surface the advantages seem great, but the costs of implementation are high, and the return on this investment should be looked at very carefully. As a private company, SDL is interested in applications that will have a reasonably short pay-off. It is for this reason that we believe applications, such as Tele-Shopping, have an attraction in the North American market. However, basically the Wired City needs a crisis. There was nothing like the energy crisis to finally give the impetus to go after geothermal power, solar energy, thermonuclear energy, and other sources. A sharply increased growth in population will lead to many projects to get better production of nutrients by capturing their value early in their development cycle, e.g. direct use of vegetable protein rather than converting it to animal protein through raising cattle. The information industry, which is being projected by Drucker in the “Age of Discontinuity” as being one of the major industries for the latter part of this century, has, by and large, not yet faced such a crisis and, therefore, even the industrialized nations are taking their time bringing about the Wired City. Despite its inevitability, this is the major reason for the relatively slow rate of development.

In Japan, where urban density, pollution, lack of natural resources and other problems, are far more urgent than they are in North America or even in many parts of Europe, there is a growing emphasis on developing an information society. Dr. Masuda and his associates have seriously proposed this as the main thrust of the Japanese economy in the decades to come and is, in fact, their only answer to many of their problems. No such crisis exists in the most western countries yet.

Certainly, the Wired City is no answer for the developing nations. I expect that, in reality, most of the applications will remain sufficiently low on people’s priority lists that only experimental projects will be undertaken even in North America for the rest of this decade.

As the economics of most projects are doubtful in the near term, I expect that only where a country wants to move forward as a matter of national policy will there really be extensive development of a switched broad-band network. The best short-run solution for private firms will be to select certain applications, such as Tele-Shopping which could be handled by existing cable companies and existing technology. This should at least provide within the country a body of expertise with some experience on limited two-way communication with the home. This is the approach that SDL will be taking in the latter part of the 70’s.

A SURVEY OF POTENTIAL APPLICATIONS IN THE WIRED CITY

Projected Dollar Value of
the Market in North America
Services in 1989 (in millions)

1. Plays & Movies from a Video Library 2829

2. Computer-Aided School Instruction 2047

3. Cashless-Society Transactions 1810

4. Person-to-Person (paid work at home) 1713

5. Computer tutor 1414

6. Adult Evening Courses on TV 1131

7. Correspondence School 943

8. Dedicated Newspaper 849

9. Answering Services 743

10. Computer-Assisted Meetings 707

11. Household Mail & Messages 707

12. Secretarial Assistance 707

13. Shopping Transactions (Store Catalogues) 584

14. Banking Services 566

15. Grocery Price List, Information and Ordering 566

16. Special Sales Information 354

17. Consumers’ Advisory Service 354

18. Daily Calendar & Reminder about Appointments 292

19. Legal Information 285

20. Weather Bureau 228

21. Newspaper, Electronic, General 200

22. Past and Forthcoming Events 130

23. Fares & Ticket Reservations 124

24. Message Recording 106

25. Index, All Served by the Home Terminal 106

26. Library Access 95

27. Bus, Train and Air Scheduling 79

28. Access to Company Files 46

29. Restaurants 35

30. Mass mail and direct advertising mail 0

The above table was quoted in an article in ‘THE FUTURIST’ in October 1973 by Paul Baron, President, Cabledata Associates, Inc., Palo Alto, California.

BIBLIOGRAPHY

This list is intended to be selective rather than comprehensive. It provides recent references on each of the major topics discussed. Many of the books or publications are from Canadian sources and should be readily obtainable.

GENERAL

Department of Communications, Government of Canada

These reports are available from Information Canada, Ottawa.

1. Multiservice Cable Telecommunication Systems The Wired City, Study 8 (d) 1971

2. Report on the Seminar on the Wired City, Study 6 (d) 1971

TECHNOLOGY

3. H.E. English (Ed.) – Telecommunication for Canada, Toronto, Methuen 1973 Pgs. 256-292

REGULATORY CONSIDERATIONS

4. H.E. English – as above for Canada.

5. Cable: Report to the President 1974. The Cabinet Committee on Cable Communications Available from: The U.S. Government Printing Office covers U.S. policy recommendations

6. Analysis of the Relationship between the Functions of the Common Carriers and those engaged in Broadcasting. Study 1 (d) 1971. Department of Communications, Government of Canada Available from Information Canada.

7. Policy Statement on Cable. Released by CRTC on July 16, 1971. Available from the Canadian Radio-Television Commission, Ottawa.

APPLICATIONS IN THE COMMUNITY

8. H. Sackman and B.H. Boehm (Ed.) – Planning Community Information Utilities AFIPS Press 1972, for a review of Telepurchasing and other new services.

9. J. Dakin – Telecommunications and the Planning of Greater Metropolitan Regions. University of Toronto Press 1973

APPLICATIONS IN EDUCATION

10. R. Adler and W.S. Baer – Aspen Notebook: Cable and Continuing Education. Praeger Publishers, New York 1973

11. J. Shafer – Education and Cable TV: A Guide to Franchising and Utilization. Eric Clearinghouse on Media and Technology Stanford University 1973

12. Cable Television and the University – Proceedings of the Conference in Dallas. Educom, New Jersey 1974

SOCIAL CONSIDERATIONS

13. J.M. Guite – CATV Technology for Citizen Feedback to Government. Background paper for the Canadian Computer/Communications Task Force 1971 Available from Information Canada.