Shaffer, Richard A. "Up Next on Cable: Dial Tone." Fortune. 17 August 1998: n. pag. Online. Internet. 6 September 1998.

Cable Phone's: A Wave of the Future…

In the August 17th edition of FORTUNE magazine Richard Shaffer reports on a new and possibly up and coming communications medium, the cable modem and cable telephony (the ability to make voice telephone calls over the Internet). Shaffer points out, this is just a resurgence of the old notion that computers, communications, and consumer electronics will merge into one all-digital delivery medium such as, coaxial television cables all-ready in use in most American homes.

Shaffer also reports, some believe the introduction of this new all-in-one digital delivery medium will foster in a era of kissing our malls good-bye and wallowing in a online shopping paradise, "mousing and clicking through Yahoo on our way to the New Economy." In contrast, Shaffer feels new technology presents opportunities for economic and social change but that real change is almost always gradual. He continues that history bears this out and suggests we consider the daily newspaper. The newspaper dates from the mid 1700's and is still attracting as much advertising as television, which was supposed to supplant it.

Shaffer believes what will really come from all of this in the near future is higher-speed access to the Internet and increased access to digital video. Shaffer also feels that one day the Internet may become a medium for the masses but until that time it's more like "television before Milton Berle-�a novelty that most people don't yet find compelling." Shaffer reports, yes, we may be entering the Internet era but still the average American spends about 30 hours a year online, compared with about 1,552 hours watching television. However, he points out that everyone uses the telephone and annually Americans spend twice as much for local phone service as they do for basic cable television service. Thus, cable operators would have to carry only about 2% of local telephone service to generate more revenue than they do selling pay-per-view.

Additionally, he reports in some parts of the country such as Orange County, California. Cox Communications has managed to get 17% of household telephone services. He also reports abroad, where telephone service is often worse and competition is weak. In the United Kingdome cable operators routinely divert as much as a fourth of the residential voice business.

In conclusion, Shaffer addresses the issues of power and reliability. He states, it is not difficult or expensive to ensure cable phones work even during a power outage. On-the-other-hand, he adds, Internet telephony and net phones do present a reliability problem. Due to the fact the Internet is a beat-efforts technology; depending on the volume of network traffic, it might or might not be able to complete a call. In ending Shaffer questions the dependability of cable companies citing the tendency of cable companies to be slow responding to repairs and technical difficulties. He poses the question, are telephone companies fit to run the massive telecommunication industry?

Richard Shaffer presented his ideas in a clear and logical manner and backed up his conclusions with concrete supporting statements. Shaffer also touched on several points that are relevant to all aspects of technology. The idea of all computers, communications and consumer electronics merging into one delivery medium is not a new idea. Several years ago there was a new product on the market called Web-TV, which allowed individuals to surf the web and use e-mail. It never caught on, possibly due to the public's insistent belief that televisions are not interactive devices. For whatever reasons, it seems as though technological fronts present what they are capable of producing for widespread use in America and the public and media misconstrue it as something that will, overnight, change the way we live. Mr. Shaffer points out just this. He comments that not only is "real change gradual" but it is also seldom clear in advance which innovations will make the greatest impact on people. He gave an excellent example of this, the invention of the hologram and the transistor which both occurred 50 years ago. The transistor became a multibillion-dollar industry and holograms can be found in gift shops and on credit cards. Additionally, Shaffer uses the daily newspaper, as an example to point out that, for whatever reason, new technology does not always replace old technology and in some cases can complement it.

Shaffer predicts this new technology could have a huge impact if it expanded to encompass a decent sized chunk of the telecommunication market. If cable operators carried only 2% of local telephone service they would generate more revenue than they do selling pay-per-view. Imagine what would happen if cable operators gained 20% or even 30% on the market? The result would be huge changes in the way we communicate. The massive increase in profits would result in a mainstreaming of cable communication technology.

Additionally, Mr. Shaffer reports another advantage of cable telephony technology; it is cheap to add to modern cable networks. This low upgrade cost coupled with the huge potential increase in revenue makes cable telephony a very tempting option for cable operators. Mr. Shaffer continues, stating that the short-term result for cable operators and telephone companies is likely to be rising costs (as they try to outdo each other's new service offerings), falling prices and eventually, disappearing profits. It is important to remember that with the competition and potential merger of cable operators and telecommunication companies' better service and lower prices to consumers will most likely follow.

Shaffer also comments on some major shortcomings of Internet telephony. One is that net phones are unable to operate during an electrical utility outage. Another shortcoming of net phones, in my opinion the largest, is the "best-efforts" network they operate on. Unlike telephones, net phones require constant power and only connect when the network is not crowded.

Reinforcing Richard Shaffer's point that without the reliability and dependability we have grown accustom to with present day phones net phones will never fully takeover the market. What happened to newspapers when televisions were invented could happen to telephones if net phones go mainstream. It is not a matter of one replacing the other. They will create their own separate and complementary markets.