Internet Two Arrives Without Much Hype

In late 1999, the historic Internet bubble was driven by the idea that the next era of the Internet, the "video" era, was right around the corner. The collapse of that bubble in 2000 can rightly be attributed to the spreading realization that such an era was not, in fact, arriving quickly. With almost no fanfare at all, and no hype from Wall Street's sell side, that new era of the Internet -- which we have always called the "any movie, any time" era -- has finally arrived.

Internet Two

Near the end of the Internet bubble, sometime in late 1998 or 1999, the concept of "Internet One" and "Internet Two" became popular.

Not to be confused with the current Web 2.0 idea, Internet Two was loosely defined as "the video phase" of the Internet. Internet One, the "text-oriented" phase, had been so explosive that it was mind-boggling to consider the possibilities of delivering video of all kinds directly to televisions.

It is sometimes easy to forget that during the great Internet investing bubble of the late 1990s, most of the non-business Internet users had dial-up access. America Online was the dominant provider of Internet service and Netscape Navigator was the dominant browser.

The technical environment of the great Internet bubble seems incredibly obsolete today, but its explosive, almost overnight, growth, fed grandiose visions of what the next era, Internet Two might be like.

This vision of Internet based video delivered to TVs spurred incredible investment in infrastructure companies, such as Exodus Communications, Metromedia Fiber, Qwest, and many others.

At the height of the Internet bubble, Qwest frequently ran a commercial that showed a weary traveling businessman coming into the lobby of a dreary looking hotel. He asks the very bored desk clerk if they have entertainment.

Without looking up or changing her expression, the still bored desk clerk states:

"All rooms have every movie ever made in every language, anytime, day or night."

This whimsical commercial epitomizes the Internet Two idea.

Qwest was heavily investing in broadband infrastructure to deliver such movies, but the missing piece in the Internet vision was how to actually connect Internet-based movies to the TVs in those hotel rooms.

Ironically, the fact that a telecom company made this commercial long before there was any way also makes the commercial the perfect symbol of the bursting of the Internet bubble.

(This commercial can be found on YouTube by searching for "Qwest - Every Movie.")

In anticipation of the imminent arrival of the Internet Two era, companies like Exodus Communications, Qwest, Metromedia Fiber, and many others, heavily invested in broadband infrastructure nationally -- and globally -- in order to handle the expected heavy data traffic of the Internet Two era.

The bankruptcy of many of these companies can very simply be attributed to the fact that such traffic -- and the associated revenues from it -- never came.

The blame for the failure of Internet Two came to be placed on the so-called "Last Mile" problem.

This idea focused on the issue of how to connect Internet-based video to existing home TVs.

While watching movies and videos on a home computer did evolve over time, sites such as YouTube and Hulu are not really what was envisioned in the Internet Two idea.

We were always skeptical of the Internet Two idea -- or at least of the idea that it was right around the corner.

In an Ahead of the Curve column on Oct. 23, 2000, "The Broadband Future Gets Fuzzy," we warned about how this idea was not coming immediately.  

One of the key ideas we stressed at that time was this:

"Where is the killer app?"

We answered that question this way:

"We have always believed that the killer application for broadband Internet would be on-demand video. Movies, or a variation of them, delivered on request, for a fee. "

In fact, for the past 10 years, we have kept that vision of "the killer app," but despite gradual progress toward it, it did not arrive quickly.

However, the first real implementation of this concept, which works -- and works well -- has now arrived.

This week, we saw the first real implementation of this idea.

The device is called "Roku," a small black box which connects Internet-based movies directly to home televisions. The box itself costs $99. Delivery of movie content comes from Netflix, with their all-you-can-watch monthly subscription service, or from Amazon.com, with a new pay-per-view one-at-a-time movie service.

The movie content from Netflix and is simply an extension of their already existing streaming movie capability. But instead of having the movie streamed to Windows Media Player, RealPlayer, or QuickTime, the Roku box streams the movie to an existing television.

All the Roku box does is provide a link between the Internet (wireless or wired connections) and the television. A Netflix customer queues up movies that they want to watch in the "streaming queue" using their PC.

When you turn on the Roku box, the movies in this queue are presented on the TV screen in a remarkably simple and easy to understand format. Unlike most remotes today, the Roku remote has only a few buttons to control the movie on the screen.

The quality of the movie delivered is extremely good, with high-definition and surround sound supported. In our lengthy exploration of the device, we never experienced any pauses in the delivery of the movie, which we have seen in other online delivery systems.

In addition, we were extremely impressed with how easy it was to fast-forward (four different speeds) and move from one movie to another.

At present, Netflix has more than 17,000 movies available in streaming format. With a DVD library of over 100,000 movies, this means the streaming library is only about 10% of the Netflix existing library, but eventual conversion of nearly all Netflix movies to streaming format is probably just a matter of time.

The Amazon.com interface for Roku claims more than 45,000 movies available on a pay-per-view basis. We have not yet experimented with the Amazon.com/Roku service.

(For more information about the Roku box, see the Roku site at www.roku.com.)

We have been patiently awaiting the arrival of "any movie, any time" for almost 10 years.

With the arrival of the Roku unit, we can now state that this era has finally arrived.

The great irony, however, is how little fanfare and Wall Street attention the arrival of "any movie, any time" has received. The contrast of the actual arrival with the level and type of frenzy such an idea had just 10 years ago is almost amusing.

We will have much more on this topic in upcoming columns, especially the possible impact on companies such as Verizon, Comcast, Time-Warner, Sony, and others.

Comments may be e-mailed to the author, Robert V. Green, at rvgreen@briefing.com