Hollywood lights

Computer-generated special effects have revolutionized Hollywood, but this high-tech infusion is the exception in a media industry that, as a rule, remains remarkably low-tech in its communication methods.

In an age of instant communications such as e-mail and instant messaging, the transmission of movie content is relatively pedestrian. And sometimes, that means literally pedestrian.

For instance, special-effects editors not at the site of filming provide input primarily during telephone calls conducted only after receiving their information about the project from a courier, overnight delivery firm or — in the most pressing of circumstances — being flown to the set.

Obviously, each of these options is expensive in more ways than one. While the line-item budgets display one kind of expense, the larger cost of these time-consuming production methods may be that they greatly limit the talent that can be involved in a given project. By providing the industry with a dedicated, high-speed extranet accessible to the entire supply chain for a project, Global Crossing is one of several telecom firms hoping to boost profits by enhancing productivity in the media and entertainment arena through virtual connectivity and wavelength services.

“We've heard from them that one of their constraints is that a human being can only be in so many places at one time,” says Darcy M. Lorincz, vice president of technology and engineering for Global Crossing Media & Entertainment.

As part of the Global Crossing extranet, “a director or producer, who is a valuable asset in Hollywood, can do more. They think the network effect will greatly increase their productivity.”

Though high-speed networks have been around for a while, production houses have not wanted to pay for bandwidth that would be dormant most of the time in the up-and-down media industry.

By offering access to the network as a flexible wavelength service that can be provisioned quickly, Global Crossing and others can attract the considerable — albeit sporadic — traffic from the lucrative industry.

Helping create virtual communities of interest is nothing new — it's the basis of many Internet companies — but the focus of these exchanges on the extranet is not social chat but big business.

Moreover, such a supply-chain-oriented community with a pay-as-you-go business model could affect carriers' future network designs to attract customers, says David Walsh, president and chief operating officer for Global Crossing.

“Creating virtual communities instead of physical ones is where it's at,” Walsh says. “What you're really doing is creating a watering hole [for an industry]. If you get the zebra to show up, the lion will show up, and if the lion shows up, the vultures will show up.”

Extra! Extra!

Walsh should know how such momentum builds. His former company, IXnet, established a financial extranet formidable enough to attract many of the world's key brokerage firms and financial institutions — and, eventually, Global Crossing as a buyer.

The extranet was designed to give financial institutions a cost-effective alternative to connecting via private lines, which can be cumbersome to manage and time-consuming to deploy. For instance, Goldman Sachs had 10,000 lines connecting it to other financial sources, Walsh says.

“The idea was if you could put everyone on one seamless network, you would have just one plug-in and have access to everyone on the network,” he says. “If you could do it, you could get rid of 95% of the infrastructure needed.”

Today, this financial extranet carries 5 million financial transactions worth trillions of dollars daily. And perhaps more important to Global Crossing, it should become a profitable venture by the end of the year.

“We're nearly around the corner, and after that, it promises to be a very lucrative business,” Walsh says.

Indeed, it's getting hard to find anyone in the financial industry who is not on the list of customers for Global Crossing's financial extranet, Walsh says.

But that does not mean Global Crossing is on the verge of becoming a monopoly, says Krysha Jacobs, director of information systems services for the Chicago Stock Exchange.

“Most larger companies are connected to more than one, so many different providers can claim the same customer,” she says, noting that such redundancy is considered desirable in case one provider's network goes down.

“No matter whose network it is, they go down. But I do see the number of private links — point-to-point between two different companies — diminishing as these extranets get stronger.”

This fact also decreases the likelihood of significant consolidation among providers in the space, Jacobs says.

“There may be some, but the fact that we all feel we need more than one connection will allow more of them to survive than it would be in a market where a customer just needs one of them,” she says.

That's show business

That is not the case in the media and entertainment industry where getting even a single connection seems to be a significant task for several reasons.

First and foremost, production-house officials are inherently skeptical about putting content that costs hundreds of millions of dollars to develop on a network, according to Donna Reeves, president of Global Crossing Media & Entertainment markets.

“One of the things that is the same is our ability to manage a very secure network,” she says. “Clearly, what those executives are saying is, ‘That's just an ante to get in the game. Don't even talk to us unless it's a secured infrastructure.’ They really abhor the Internet. They really can't see ever going on the Internet with their content, because that's king for them.”

Global Crossing officials note that the carrier's 101,000-mile network is large enough and reaches the right locations so traffic can stay on the company's network, which is more secure. While this may be the case, it's not a major differentiator, says Ryan Jones, an analyst for The Yankee Group's media and entertainment strategies research and consulting practice.

“Whether that's really significant or not in the way people are trying to attack content today, I don't know. The digital encryption technologies are getting good enough where it's enough of a deterrent that a lot of folks can feel good about [sending content] through other measures, through either leasing lines or through satellite networks.”

Global Crossing isn't alone in the game.

One company that uses satellite technology to augment its fiber optic network in the space is Vyvx Broadband Media, a unit of Williams Communications Services that has transmitted media and entertainment traffic for 12 years.

Arguably the leader in the space, Vyvx claims an 80% market share of live sports transmissions, a 60% share of entertainment transmissions and a 40% share of the distribution of broadcast advertising. It also announced its media extranet in March 2000, says Greg Onyszchuk, vice president of emerging markets for Vyvx.

Vyvx appreciates the business built around the entertainment industry, which has higher standards for transmission than those traditionally found in telecom, Onyszchuk says.

“It's a very different type of content than voice or data,” he says. “There's no such thing as a busy signal in live television. There's no such thing as a packet retransmit. People will change the channel on their television in less than one second of an absence of picture.”

Another notable wavelength service provider is Qwest Communications, which sold 47 10 Mb/s wavelengths during the first quarter of this year, says Mike Perusse, Qwest's senior vice president of engineering and technology. Although Qwest only guarantees that bandwidth will be turned up within 30 days of an order, “in many cases, it can be done in the same day,” he says. While fast provisioning currently is a hot topic, few carriers are able to deliver, Perusse says.

“If you look at those who are actually out there who actually can, there aren't many,” he says.

Going digital

Digitizing media production work makes sense, especially with advances in transmission speeds. For instance, it would take 55 hours for an OC-3 pipe to transmit an hour-long, high-definition movie. It takes just 55 minutes to transport the same file over Global Crossing's network, Walsh says.

And the opportunities to generate profits from participating in the extranet extend beyond savings of time and money.

“For the big studios, once they have access to the community, they will have more suppliers, and more suppliers can get to them,” Walsh says. “And smaller suppliers are telling us, ‘Before, it was too expensive for me to sell to the the big guys. Now I can.’”

So a need exists for large pipes to move files, which will save production houses significant money now devoted to couriers, travel and overnight deliveries. But buying a large pipe only to use it occasionally would be a poor economic choice — a fact media-industry officials made clear during Global Crossing's research prior to launching its extranet, Reeves says.

“They told us, ‘We can't buy telecommunications services in the way you've been coming at us. I need bandwidth, but I need it intermittently. I need big bandwidth, but I can't afford to pay you that full-tilt bandwidth rate every single month.’” Reeves says.

To combat this, Vyvx charges customers by the event — for instance, by the game in sports broadcasting. Global Crossing also offers a pricing structure computed on a per-use basis.

“They've modified their billing structure in a way that's a little bit friendlier to the entertainment industry,” says Ian Olgeirson, analyst with Paul Kagan Associates.

“The key point is that the entertainment industry needs a lot of bandwidth occasionally, as opposed to lots of bandwidth all the time or a little bit of bandwidth all the time.

“Economically, for them to pay for the amount of bandwidth they need to make the service usable 24/7 doesn't work. So what Global Crossing has done is say, ‘We understand the way you'll be using that,’ and adjusted the pricing, which should make it more attractive.”

And if media and entertainment customers find the extranet offerings attractive, so will investors — eventually. Vyvx's Onyszchuk predicts a tenfold growth in the market.

Global Crossing's Walsh is similarly bullish on the outlook for his company's extranet offering.

“The market doesn't want to listen right now, but it will,” Walsh says. “This is a story that's going to get told, and it's going to be talked about for a long time.”