Convergence

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CONVERGENCE

In the field of e-commerce and information technology, convergence typically refers to media convergence, and especially to the combination of television, telecommunications, and the personal computer into a single box that would deliver high-speed Internet access, traditional television programming, and interactive services. However, as of mid-2001, interactive television (iTV) was more vision than reality. Major providers included WebTV, owned by Microsoft since 1997 and re-branded in April 2001 as MSNTV; and AOLTV, which launched in October 2000 following tests in select markets. WebTV quickly gained some 1.1 million subscribers, and then found it difficult to acquire more customers. AOLTV had to convince AOL subscribers it was worth an additional $14.95 a month, while non-subscribers had to pay $24.95 a month for access to AOLTV. Short of iTV, some TV shows—including Who Wants to Be a Millionaire? —offered some measure of interactivity by directing viewers to their Web sites.

Proponents of convergence expected it to develop between 2000 and 2005. Convergence at a technological level will enable voice, video, and data to be transmitted to consumers through a single pipeline. The pipeline may be wired, such as cable or DSL, or it may be wireless. Instead of accessing the Internet from a single box, however, consumers will be able to access high-speed networks from a variety of access points, including PCs, TVs, mobile phones, mobile devices, public kiosks, and home appliances. Technological convergence also is expected to result in further convergence at the business level. The merger of AOL and Time Warner to form AOL Time Warner was expected to help accelerate the convergence of traditional and Internet media. Other telecommunications, cable, Internet, and traditional media companies also would join forces, either through mergers or strategic alliances, to form fewer and larger organizations.

CONSUMERS SLOW TO ACCEPT MEDIA CONVERGENCE

Convergence has been an industry-driven rather than a consumer-driven phenomenon. Companies such as Microsoft and AOL Time Warner have invested heavily in developing iTV platforms. Consumers, on the other hand, have been less than enthusiastic. That reflects the fact that convergence is not simply a technological issue; it also is a matter of culture, lifestyle, and economics.

Televisions and personal computers represent different types of experiences in most consumers' lives. TV is visual with a strong sound component and emphasizes entertainment and news. Watching TV is a passive rather than an interactive experience, except for changing channels. TVs are easy to operate and require virtually no special training or education. Personal computers, on the other hand, tend to be more text-oriented and are highly interactive. They can be difficult to use and require some form of education or special training. They are used with more of a purpose in mind, and their content is geared more toward business and educational uses than entertainment.

Despite these differences, consumers appear to be integrating the personal computer into their home life. A study by the Gartner Group found that more than 44 million people used a personal computer and a television in the same room in 2000, compared to only 26 million in 1999. The study predicted that the number would grow to more than 50 million people by the end of 2001.

OBSTACLES TO CONVERGENCE

While cultural, lifestyle, and economic considerations may have slowed consumer acceptance, convergence had some technological obstacles to overcome before iTV became more widespread. Interactive applications can be offered by any type of TV operator, such as cable, satellite, or terrestrial broadcast. However, iTV also requires a return path, which may be cable, DSL, dial-up, or wireless. With so many different delivery networks, interactive platforms are expected to remain fragmented for many years to come. By the early 2000s, a single standard had yet to be developed.

Another obstacle involved the high cost of cable TV, both in term of the large investment required by providers and the subscription cost to consumers. Since iTV requires broadband technology to deliver interactive services, its penetration in the consumer market is dependent on broadband availability and acceptance. With limited broadband deployment, nearly half of all U.S. television households in late 2000 were without access to the high-speed service required for many iTV applications. As a result, the convergence represented by iTV was only available in select markets.

CONVERGENCE IN OTHER AREAS

Convergence is also taking place in other areas of commerce and technology. An auto industry conference called "Convergence 2000" promoted the convergence of technology and automobiles, including in-car navigation systems, entertainment systems, and always-on Internet connections. Convergence has become more of a reality in the financial services market, as banking, investing, and insurance were consolidated under one roof at some financial institutions.