INTRODUCTION



Take your pick. Choose the label that suits your style. Confusing?

If you're a Hollywood/New York/Atlanta executive controlling a library of leverageable copyright, you want a fibre optic, broadband highway that will deliver Video on Demand (VOD) to a redlined client base. If you're a wired under-30s male, you want a service that delivers MUDs and MOOs, and maybe some VR. If you're a music fan, you want increased bandwidth on the Net so you can use MBone to hear the next Stones concert, like you read about in Wired. If you're a new media artist you want to use it to display your latest JPEG-format work. If you're in advertising, you don't care what it looks like or what it delivers. What matters is that it's new, it's interactive (whatever that means), and your clients love it.

Confused?

What does the InfoBahn mean to the independent producer? What's important: bandwidth, ADSL, video dialtone, ATM switches, video servers, convergence, navigators, smart agents, hits, digi-cash? Is the information highway the most exciting innovation since Gutenberg -- or just a lot of hype? Exciting -- or confusing? At your fingertips in 2, 5, 8 years? Or already here?

If you're not confused by now, you must know something that nobody in this, or any parallel universe, knows, because although everybody has their own spin on what, how, and when the InfoBahn will be, as the old Hollywood cliché goes, "Nobody knows nothin'."

This report won't answer all your questions. It may not even answer any of them. What it will attempt to do is give you an overview of some of the opportunities that are out there now, or will be out there in the coming years. Most of these opportunities will require retooling of skills and adaptation of concepts. Delivery systems are going to change, production methods are going to change, and the very nature of what we as independent producers, or content providers to use the new jargon, produce is going to change. But take heart, the fundamentals of content will always be important. As Scott Sassa, the 35-year-old president of Turner Entertainment Group puts it:

"Good movies are made by good storytellers ... just like there are only so many Monets and so many Picassos, there are only so many filmmakers who can make a Citizen Kane or a Gone With the Wind and capture the imaginations of tens of millions of people. Not everybody can do that. Really great artistic talent is not a commodity. It's always a scarce resource." - Wired, March 1995.

Storytelling, that's what we do. The only problem is how to set up our campfire in the middle of a highway -- that's under construction.


THE PLAYERS

Canada has two big conglomerates competing for control of the InfoBahn.

Stentor Telecom Policy Inc. is a consortium of Canada's nine regional telephone companies plus their wireless and satellite affiliates. It was formed in 1992, and is essentially a restructuring of the former Telecom Canada. In April 1994, Stentor announced the Beacon Initiative, which is an $8 billion dollar investment over ten years to enhance and upgrade local and long distance networks with fibre optic cable and an additional $500 million to improve switching capacity and connectivity.

"Stentor envisages a national information highway that is capable of carrying voice, text, data, graphics and video services to and from all Canadians, and that provides universal access to basic and advanced communications and information services through a network of many networks, owned and operated by different service providers." - Stentor Mission Statement, The Information Highway, Oct., 1993.

In March, 1995, at the CRTC Hearings on the InfoHighway, Stentor president Jocelyn Coté-O'Hara promised $50 million to support Canadian culture. $30 million of that fund will be spent on "Canadian programming, with special emphasis on multimedia products." $10 million will be spent on R&D of facilitating technologies, navigation gateways, and testbeds, and $10 million will be spent on training in multimedia technologies. The expenditure of this $50 million is conditional on a favourable outcome for Stentor of the CRTC InfoHighway decision.

Within Beacon is an auxiliary company called MediaLinx Interactive Inc. MediaLinx is a multimedia company with $250 million to invest in the production of interactive applications and services. According to its press material, it is not a production fund, but works as a partner with other production, distribution, or broadcast companies. More specifically they are working with organizations to develop content. MediaLinx is headed by Fred Klinkhammer, formerly of IMAX and First Choice. As this report was being written, Atlantis Communications appeared to be the the only film or TV company to have made a deal with MediaLinx. Atlantis is supplying content for MediaLinx's VOD trials.

Rogers Communications Inc. is a media conglomerate with assets in cable, telecommunications, broadcasting and publishing. It recently paid $3.1 billion to buy Maclean Hunter Limited. This acquisition made Rogers the biggest multimedia company in Canada. Rogers also owns a part of Unitel (a long distance service provider) and Cantel (a cellular service provider), although it has announced that it may divest itself of its stake in the money-losing Unitel.

Like Stentor, Rogers is determined to have a piece of the InfoBahn action. (Actually both probably want all of the action.) Its plans call for spending $100 million over five years upgrading facilities and networks to provide households with "interactive electronic networks of the future."

"This digital revolution will in the future give individuals the power to create, select and transmit their ideas to anyone. Instead of simply being passive consumers of mass-produced images, we will someday be able to reach out to mass markets -- or markets of one. We will be able to talk back to anyone who wants to listen, make images for anyone who wants to see."
- The Rogers/Maclean Hunter Merger, 1994

Rogers committed itself at the CRTC-Maclean Hunter hearings to a major VOD trial within 12 months.Their plan is to offer VOD to 400 homes in the Toronto area and 400 homes in Ottawa, starting in the first quarter of 1996. This is a $6.4 million dollar project that Rogers regards as a "preliminary launch into interactive TV services."

Rogers also is a major supporter of Toronto's FreeNet, a not-for-profit Internet service provider. Rogers supplied physical space and communications lines to link the FreeNet administraion staff and file servers to CA*net.


THE GAME

Both Stentor and Rogers are committed to spending millions of dollars to finance their participation in the InfoBahn, and the competition between them is fierce. There are huge potential profits to be made. Although beyond the scope of this report, a mention should be made of the basic conflict between them.

Stentor's position is that since the cablecos have been allowed to enter the telephone business by offering cellular and long distance services, it is only fair that the phone companies be allowed to enter the broadcast/cable business.

Roger's position is that the telcos are 10 times bigger than they are and therefore they represent unfair competition. In their recent submission to the CRTC's InfoHighway hearings, Rogers called for a seven-year moratorium on allowing the telcos into the cable business.

Added to this inter-company warfare are some basic regulatory issues that will affect how the InfoBahn is allowed to operate. Telephone services are regulated under the Telecommunications Act. Cable operations are regulated under the Broadcast Act. What happens when you deliver television signals over a phone line? How should it be regulated? Should it be regulated? If VOD services are regulated under the Broadcast Act, will they be subject to Canadian Content Regulations?

Also a major consideration with both companies is the degree to which they should be allowed to both control the digital networks, and control the content accessible through these networks. The phone companies have traditionally been a common carrier, having no control or responsibility for content. If they move into the cable/VOD industry, that will change.

The CIFC's position on these and other issues affecting the InfoHighway can be read in their two submissions to the CRTC, CIFC Submission, Phase I, CRTC Public Hearing 1994-130, and Oral Presentation to the CRTC on Convergence and the Information Highway. Both of these documents are available through the CIFC office or online at the CIFC's Conference on EM online (more about accessing that later).


THE DIGITAL ELEPHANT

"Living next to you is in some ways like sleeping with an elephant. No matter how friendly and even-tempered the beast, one is affected by every twitch and grunt." - Pierre Elliott Trudeau, 1969

When the Rogers/Maclean Hunter merger was before the CRTC, Rogers argued that Canada needed a large media company to ward off the advances of the transnationals. Rogers's $3.1 billion takeover of Maclean Hunter is dwarfed by some of the deal-making that has been happening in anticipation of the InfoBahn. In February 1994, Viacom, which already owns MTV and the Blockbuster Video chain, paid $10 billion for Paramount. Why? Leverageable copyright. Paramount along with its television and film studios owns the rights to 880 motion pictures. Time Warner is involved through its various affiliates in cable, broadcast, magazines, film, television and music. Its annual revenues are $18.4 billion. 25% of Time Warner is owned by U.S. West, one of the Regional Bell Operating Companies (RBOC). Together they are running the Full Service Network in Orlando, Florida, a home shopping, VOD, infotainment trial. In 1994 Bell Atlantic, another RBOC, tried to buy out TCI (Tele-Communications Inc.) for $33 billion. TCI is a cable conglomerate that also owns 20% of Turner Broadcasting, which owns the world's largest film library with 2,800 titles. Meanwhile TCI is partnered with Microsoft in a multimedia/VOD trial in Seattle, Washington. In Canada, the Montréal-based Seagram Co. Ltd. recently bought film and television conglomerate MCA Inc. from the Japanese electronics giant, Matsushita. The deal was reported to be worth $5.7 billion. Seagram already owns a 15% share of Time Warner worth $2.2 billion. These and other media transnationals such as Rupert Murdoch's News Corp ($9.5 billion in annual sales) and Germany's Bertelsmann AG ($13.9 billion in annual revenue) are the companies that will ultimately control the shape of the Info Highway.


"These new international conglomerates are already large enough to dominate the Canadian marketplace without effort. Small Canadian companies will not be able to compete even for local audiences, let alone the attention of the rest of the world.... Canadians will lose control of the means to describe themselves."
- The Rogers/Maclean Hunter Merger, 1994

Interesting to note is that Rogers, despite its nationalistic stance at the CRTC, when faced with developing software for its own VOD projects opted not for a Canadian partnership, but instead made a deal with Microsoft for its Tiger software, a Windows-based, media server that, according to Colin Watson, president of Rogers Communications, will turn a television set into a "digital jukebox".

One of the fundamental, economic, driving forces behind the development of the Info Highway, both in Canada and the United States, is the potential billions of dollars to be made from VOD. A recent estimate by the California, consulting company Paul Kagan Associates forecasts a revenue expansion for VOD from $181 million in 1994 to $4 billion in 2004. The movies that will make VOD work, are the blockbusters, the films that have proved they have legs from success in theatrical release. The release of these movies is strictly in the hands of the Hollywood, or Tokyo, moguls. VOD is supposed to replace the corner video store. At the moment pay-per-view doesn't get those releases until they've been in the video store for 30 to 90 days. Where will VOD fit into this release chain? There are those who feel that if a faster release to VOD doesn't happen, then the new release market will continue to be dominated by the corner video stores, and all the millions spent on VOD trials will have been wasted.

We have resisted the physical proximity of the United States for over 125 years. Culturally there has been a constant battle against the influx of American books, music, movies and art. Now we have a new medium to fight over -- the InfoBahn. How long will we be able to resist the digital elephant?


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