IMPACT OF THE BELL ATLANTIC / TCI DEAL : Now Comes the Hard Part : Interactive TV Will Be Very Tough to Deliver, Analysts Say

You’re in interactive nirvana.

You’re working the remote control, watching your personalized news channel, looking forward to ordering up “Terminator 8,” maybe thinking of pausing to call Mom and get a look at the flowers you ordered for her on screen. But suddenly--boom!--the screen goes blank except for a cryptic message: “Error 99650001. File not found.”

It’s a recurring nightmare for many of the cable and telecommunications firms feverishly laying fiber and searching out partners, and given the current state of the technology, it may well be reality.

Wednesday’s news of the proposed merger of Bell Atlantic Corp. and cable operator Tele-Communications Inc. has whipped expectations of interactivity to new heights. The idea is to sell all sorts of information, entertainment and communications, whenever and wherever anyone might want it.

The only problem is, nobody can deliver it yet.

Even as a new round of media and telecommunications mergers is supposed to accelerate the coming of the information highway to a neighborhood near you, executives in the converging industries acknowledge that the technology is nowhere near ready for prime time.

In theory, the “perfect information-age marriage,” as Bell Atlantic Chairman Raymond W. Smith describes his company’s planned acquisition of TCI, will combine the cable network’s capacity to carry hundreds of channels with the phone company’s two-way switching skills.

Thus, the merged company should someday be able to empty a cornucopia of movies, shopping, education and so forth into customers’ homes.

But stitching together the necessary skills to connect millions of homes to complex computer technology--let alone making it affordable and easy to use--is an undertaking even executives closely involved tend to talk about in space-travel metaphors.

“The challenge comes in making it all work together on a large scale,” says Arthur Bushkin, who is directing Bell Atlantic’s video dial tone experiment in northern Virginia. “If everyone wants to pause their movie and get a drink at the same time, we have to make sure that doesn’t bring down the network. It’s not unlike launching a spacecraft--these systems are very, very, very complicated.”

The key components of the new infrastructure--huge data storage systems, intelligent databases, fiber optic and coaxial cables carrying compressed digital signals back and forth, and set-top decoder boxes--are all being tested in small-scale experiments around the country. They will continue to be tested over the next three to five years before, it is optimistically hoped, becoming available on a mass scale.

“What we are talking about is building an enormous interactive computer system, a hundred to a thousand times more powerful than any we’ve installed in any office, and making a substantial part of the population the user,” says Jonathan Seybold, a Malibu-based consultant who specializes in new media. “That is a daunting undertaking, and it is going to take much longer than people are currently thinking for this to play out.”

Silicon Graphics Inc. vice president Jim Barton says his firm’s estimate is that it will be at least three years before even small-scale deployment of interactive television is possible. That is partly because of the current cost of the set-top boxes that Silicon Graphics is supplying to Time Warner for the cable firm’s interactive television experiment in Orlando, Fla.

Silicon Graphics’ set-top prototype is based on its low-end workstation, priced at $5,000. That compares to the $200-300 cable firms estimate customers will be willing to pay for a box that will make their televisions interactive.

“Our focus now is, how do we drive the cost down? We have to reduce it by an order of magnitude or more before you can even consider putting it in everybody’s house,” Barton says.

Barton and others are optimistic about reducing costs, citing the history of the computer industry, in which the performance available per dollar of cost has grown many times over in recent years.

But cost is just one obstacle. Another is getting the pieces of the network to communicate with each other, both within one cable or telephone firm’s system and between networks owned by different operators. That will require hammering out standards for compatibility--not an easy task in a competitive industry full of shifting alliances.

“When people talk about the all-singing, all-dancing, high-bandwidth, digital, interactive multimedia highway, what they haven’t talked about is how you do the network operations,” notes Matt Miller, vice president of technology at General Instruments, which is building a set-top box in conjunction with Microsoft Corp. and chip maker Intel Corp. “How do you do all those switches? How do you maintain all those connections? How do you direct all that data? That’s a big ‘how do you?’ This is the biggest unwritten operating system on earth.”

One of the main hurdles lies in masking the complexity of the system to the consumer. The structure of the “full service network” is often compared to the client-server computer networks that exist in many offices today, where one powerful computer stores information that can be accessed on demand by dozens of individual terminals. The problem is, the average television viewer will not put up with--and certainly won’t pay a premium for--the sort of bugs and system failures that are taken for granted in the computer world.

“The Joe Six-pack people that will be the buyers of the products and services we’re seeking to offer are not ready for this,” says Viacom Vice President Ed Horowitz. “Our challenge is to make the technology disappear.”

Craig Mundie, Microsoft vice president of advanced consumer technology, says building an operating system that is easy to use for beginners but not cumbersome to advanced users is more difficult than it sounds.

In the computer industry, software makers have generally compromised on skill level by providing a manual. “The hardest part is probably developing a model for interaction with the system that is almost completely intuitive,” Mundie says. “Clearly we can’t presume that you’re going to go give a course or manual to everyone that watches television to teach them how to change channels. That will be rejected by the consuming public.”

What remains to be seen, if and when all the information superhighway’s technical problems are resolved, is whether the consuming public will accept any of the offerings that get sent over it. Market experiments, such as one by GTE Corp. in Cerritos, have revealed minimal consumer interest even in the interactive features that are assumed to have the most lucrative potential, such as video on demand and home shopping.