How consumer electronics users drive telecom today

For anyone in our industry who still believes the telecommunications world revolves around Supercomm, where the carrier selects the best technology to deliver the services it thinks are correct, down to the consumer, it’s time for an update. These days, telecom’s most important conference might just be January’s just-concluded Consumer Electronics Show, held in Las Vegas. CES is where the world’s great vendors of consumer “customer premises equipment” come to sell cool devices to the retailers that offer them to the consumer.

What are some of the major trends going on in the consumer electronics world? The biggest one is “convergence.” Not the convergence of TV and telecom or voice and broadband, but the convergence of Silicon Valley and entertainment; the personal computer and traditional consumer electronics industries. Companies that have traditionally been one or the other are finding new markets in each other’s backyards, and they’re not just looking over the fence at their neighbors, either. They are mounting full-fledged invasions of one another’s’ turf.

Accordingly, PC suppliers like Apple and Microsoft may still be touting computers and operating systems, but now they’re positioning them as the digital hubs and foundation components of the new home media center. By the same token, the traditional consumer electronics companies continue to enhance what are, effectively, headless computers for home entertainment (they’re called set-top boxes). If you’re not convinced that there’s a war on, this CES will be remembered for the battling keynotes. Just as Sony’s Kunitake Ando made the in-your-face declaration that the TV is already the consumer media platform of the future, Bill Gates was showing that it’s the PC.

A second trend is the integration of product lines. Today’s consumer electronics are not uni-functional devices just for the TV or the Internet or your favorite music, or for photos of your best friends and family--it’s for all of them.

One type of product integration is to unite the functions of several previously stand-alone products within one. The Go Video player from SonicBlue combines the DVD player (which also plays CDs) with the VHS VCR. SonicBlue is also the company that bought one of the major PVR suppliers, ReplayTV, last year, placing SonicBlue on a trajectory to make them an “everything player” company; one that makes devices that record and play any digital media. Many consumer electronics and cable TV suppliers are on similar trajectories.

Then there’s product line integration. Philips makes everything from TV set-top boxes, high-definition television sets, media encryption technology, media recorders and players, and much more. Thomson Multimedia, owner of the RCA brand, offers a broad lineup that extends throughout the media delivery ecosystem, from the studio, through the head-end and the network, all the way to the consumer’s eyes and ears. Plus, whatever these companies don’t develop themselves, they will license or acquire from others--and if they can’t do that, they buy or create start-up companies.

A third consumer electronics mega-trend is connectivity, anytime, anywhere. Although the winner of the 2002 “Best of CES,” Moxi Digital, maker of the Moxi Media Center (a set-top box that distributed TV and Internet content throughout the home and had an integrated PVR), crashed burned and was acquired by Paul Allen’s Digeo (an arms dealer for Mr. Allen’s Charter Communications), it was the harbinger of many devices to come. Most consumer electronics and computer companies are introducing and/or actively developing and testing devices that carry this functionality and more to every corner of the digital media consumer’s home.

Have you noticed that Microsoft is now offering 802.11 wireless network gear? At this year’s CES, the company announced new communications-based applications that depend upon little-used parts of the FM radio band. Add this to Microsoft’s many other digital media and networking initiatives, extending from its Windows Media to its continuing pursuit of middleware for interactive television, and we see one of the world’s most powerful technology companies absolutely dependent upon networking and telecom in order to make its technologies successful.

The last major technology I’ll discuss in this column (though there are others, such as interactive electronic games) is the emergence of high-definition TV as a serious solution. Now, there’s HDTV programming and most major TV service providers, both cable and satellite, are delivering this programming. The cost of HDTV sets has come down dramatically. TiVo is supporting HDTV. High-speed communications is needed to deliver HDTV to the home.

What do all of these trends have in common? They all derive a major portion of their value from telecommunications. Given that premise, what forms of telecommunications are fundamental? Simply two: wired and wireless. Sounds straightforward, but it isn’t, and as we have seen by examining the trends, the closer you look, the blurrier the lines seem to get.

One way to untangle this mess is to think about these applications as being either location-based or independent of location. Watching TV, for instance, is a location-based activity, best served by a wire. We have TVs in the living room, the den, the bedroom and maybe in the kitchen. Once in place, few people move their TV from one room to another unless one of them is on the fritz. Other activities are much less location-dependent, using a base station that communicates with wirelessly connected devices, like a telephone (in-home wireless), a PDA or a laptop computer.

These days, if it’s digital, wired networking means Ethernet, while wireless computer and mobile device networking means 802.11, and many of the new consumer electronics and personal computing devices leverage both. Certainly, the major carriers have begun to take giant steps by launching 802.11 services and accelerating the deployment of DSL. But it shouldn’t stop there. The telecommunications and consumer electronics industries therefore have a golden opportunity to become synergistic, not just reactive to one another. And as HDTV gains momentum, cable and satellite will be bandwidth-challenged (while VDSL can have plenty of bandwidth).

But what about you skeptics? I know you’re out there. If you’re still not convinced that the telecom industry is of fundamental importance to the consumer electronics industry and vice versa, think of it this way: It’s not that the need to communicate has changed; it’s that how we communicate and what we communicate with has changed, fundamentally.

All consumers are driven to satisfy the needs in their lives and to live their dreams. In today’s culture, so many of the ideas and inspirations that move us toward fulfillment are expressed with and through electronic media, and the most successful consumer electronics ease the way for people to see and hear and communicate ideas using video, sound and text, when and where they want it. But unless consumer electronics users are to resign themselves to isolation (and they won’t!), telecom itself is fundamental. If telecom (i.e., our industry) doesn’t assume a leadership role, it will be forced to follow.

And in stark contrast to the “good old days,” when the telephone company knew what was best, it’s time to listen carefully to these communications consumers. It’s not just about bundling wireline and cellular services, it’s all about being the glue for today’s media-driven lifestyles. Whether they know it or not, these media-savvy consumers are telling communications carriers exactly what to do.

Steve Hawley is principal consulting analyst of Advanced Media Strategies. He may be reached via his Web site, www.tvstrategies.com.