ONLINE TECHNOLOGY: Gaining cyberspeed

Website developers are technologically able to add interactive graphics, audio, and full-motion video to catalogers’ Websites-but are consumers technologically able to appreciate such features?

Catalogers and Internet professionals don’t think so-at least not until fundamental issues such as limited bandwidth (the capacity to carry information) are resolved. Fortunately, consumers will have access to new technologies such as cable modems, digital subscriber lines (DSLs), and interactive television by 2001, thereby allowing catalogers to begin providing value-added enhancements to enrich the online experience of visitors and ultimately boost online shopping.

But ironically, the same technological advances that can help a cataloger grow its business can also hinder it. For instance, while many catalogers have been able to goose sales with their Websites, some sites that are rich with interactive graphics can actually turn off prospects who lack the computer equipment and bandwidth to properly receive the enhancements. “We really try to keep our graphics to a minimum without being negligent in our company mission,” says Sam Young, director of marketing at outdoor equipment cataloger U.S. Calvary. “If we have only 15 minutes of the consumer’s time, we want them to see as much as possible.”

Speeding up More than anything else, bandwidth will determine the look of catalogers’ Websites in 2001. Internet Shopping Network (ISN), the online computer and general merchandise catalog arm of the Home Shopping Network, hopes to add more video enhancements, larger pictures, and animated graphics to its Website once consumers get up to speed. “We have to be on top of the technology so that when consumers are ready, there will be no limitations on speed or use of graphics,” says Ken Neibaur, vice president of marketing.

Today most consumers access the ‘Net through 14.4 bits-per-second (bps) or 28.8bps modems. According to San Jose, CA-based online research firm Dataquest, today only 15% of U.S. households use faster access technologies, such as cable modems, digital subscriber lines (DSLs), and 56K modems, but by 2001, 80% will.

Also by 2001, 86% of PCs will be equipped with a 56K modem, compared to little more than one-third this year. “This is the fastest adoption of modem technology we’ve ever seen,” says Lisa Pelgrim, senior analyst at Dataquest. “The $100 price [for a 56K modem] is incredibly cheap, and it should come down even further.”

Not all Internet service providers (ISPs), however, have upgraded to handle the 56K speed, so some consumers who are equipped with 56K modems must still access the Internet at the lower speeds. And it wasn’t until February 1998 that the online industry agreed on a technology standard for the 56K modem. Apparently, not every 56K modem worked with every ISP.

Beyond the traditional modem But catalogers are looking beyond 56K modems to the more powerful cable modems and DSLs. Cable modems use existing cable TV lines to provide speeds 100 times faster than those of standard modems.

The immediate problem with cable modems is that the service isn’t offered in many areas. What’s more, all cable modem users in the same area share the same segment of bandwidth. So when the number of subscribers increases, access to the Internet becomes much slower. Cable operators expect a 3%-5% cable modem penetration this year. “It will be a few years before consumers have cable modems in their homes,” says Alan Breznick, new media editor at Cable World magazine. “In 10 years, about 10%-20% of homes should have cable modems.”

DSLs are reportedly nearly 30 times faster than the modems available today. This technology converts an existing phone line into a dedicated digital line. And because each line is unique, users don’t share bandwidth as do users of cable modems. Local phone companies, however, are slow to introduce DSLs due to lack of customer demand and the need to install special equipment in each home. And only a few ISPs can support DSLs today.

“The only way the paradigm of electronic commerce will shift is when the cable, phone, and computer manufacturers converge their technologies,” says Marco Pescara, vice president of direct marketing and catalog operations at Maumee, OH-based food cataloger/retailer Hickory Farms.

The telecommunications industry is developing a technological standard for a “light” version of DSL that wouldn’t require the installment of special equipment. Technology manufacturers including Microsoft, Compaq, and Intel say they will introduce hardware supporting DSL by the end of the year. And America Online and GTE Internetworking are testing a DSL service in five markets, charging $49.95 a month plus an installation fee.

Dataquest’s Pelgrim predicts that U.S. households with two phone lines will soon take advantage of bonded modem channel technology. Bonded modem channels allow consumers to combine their two phone lines when accessing the Internet-essentially doubling the bandwidth. And if users get a phone call while they’re online, they can take the call without getting off the Internet. Once the call is finished, bandwidth is again doubled.

Ultimately, catalogers need to research how sophisticated their customers are before adding fancy graphics and interactive features, since customers might not care for or have access to the latest innovations. “We don’t make decisions based on technology,” says Hickory Farms’ Pescara. “Instead, we offer what our customers want in the way they want it and then test technology against that.”

More than 84 million U.S. consumers expressed interest in accessing the Internet through non-PC devices such as Internet TVs and screen phones, according to The Consumer Demand for Internet Appliances Report from FIND/ SVP and CyberDialogue. Of those expressing this interest, 32% said they’d like to view Internet content through their TVs.

Internet television devices take many forms, including network computers, set-top boxes, and TVs with built-in computing capabilities. Nearly 98% of American homes have a TV, while 40% of homes have a PC-and only half of the homes with a PC have Internet access, according to Cable World magazine.

“At this stage, the Internet TV business is not dominated by one industry sector or company. A number of partnerships and alliances between manufacturers, computer companies, content developers, and telecommunications companies should lend a great deal to the success of the medium,” says Jennifer Doyle, author of the Cowles/Simba Information report Interactive Entertainment: 1998. And cable and telecommunications companies such as Comcast and TCI are bundling Internet access in subscribers’ monthly plans, hoping to accelerate Internet TV penetration. Simba predicts that by 2001, nearly 2.8 million subscribers will receive Internet access through cable or telephone lines, compared to the 238,000 in 1997 (see chart, p. 167).

And because of consumers’ familiarity with television, some catalogers believe Internet-access TVs will attract more consumers to their Websites. “Interactive TV won’t change what we do to our Website necessarily, because content is just delivered in a different way,” says Ken Neibaur, vice president of marketing at Internet Shopping Network. “But it will make it easier to attract and sell to older consumers because of their comfort with the TV vs. a computer.”

But it’s hard to build critical mass for a product that most consumers are unaware of. “It’s an evolutionary acceptance, but once prices come down, demand will take off,” says Alan Breznick, new media editor for Cable World.

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