Tucked away in the North of England, a small and little known firm, Video Networks, has been busy attracting the attention of some of the world’s wealthiest investors. The company is currently trialling video-on-demand and interactive shopping amongst 250 families in the city of Hull but reckons it can offer a cost effective video-on-demand service that will take on cable, satellite and telco operators on a world stage. For the last decade or so we have lived with the promise of true video-on- demand. Imagine being able to sit in your living room and demand any movie you fancy. Imagine being able to shop from your arm chair, bank from your couch. Now the digital era is almost upon us. In a matter of months we will be piped or broadcast hundreds of channels of information. Satellite providers, cable operators, telcos and terrestrial providers will vie for our attention promising different degrees of interaction and a wealth of services. Video Networks, or VideoNet, has entered a risky business but for a small fish in a choppy pond it has ambitious plans. Founded in 1992 the Welwyn Garden City, Hull based firm has fewer than 50 employees most of whom are systems graphics professionals, but it boasts an impressive array of shareholders including Sir David Alliance, Chairman of Coats Viyella and N Brown, Lord Owen former UK Foreign Secretary and Mr Nathaniel de Rothschild. The firm’s founder and Chief Executive Simon Hochhauser is well connected in New York banking circles. In his time he has worked for Lehman Brothers, the New York investment bank. He was also responsible for creating the technology-focused St James’s Venture Capital Fund, part of the Rothschild Group of Companies and for the start-up and development of software company Insignia Solutions Limited (now trading on Nasdaq). So far VideoNet has relied on modest funding of about 3 million pounds but to launch a national service the company will need to raise a further 25 million in a share issue. Hochhauser has plans to take the company public by the end of the year and wants to launch a national service before the year 2000. He claims to have lined up a number of investment banks interested in stumping up the cash in the States. The promise of video on demand reached a peak in the mid-nineties but since then has gone disappointingly quiet. From about 1994 trials began popping up all over the world undertaken in the UK by BT and cable company Westminster cable, in the US by phone and cable giants like US West, Bell Atlantic and Time Warner and in Europe by leading telcos like Deutsche Telekom and France Telecom. For many there were problems with bandwidth and network infrastructures for others there were problems with the economics of making the services commercially viable. One way or another, none of the world’s main video-on- demand trials have ended up as live commercial services and the hype of demanding movies from your living room, and shopping from your arm chair has remained a promise. The lack of decent communications into most people’s home is one of the biggest barriers facing phone and cable companies hoping to offer interactive services. To receive video on demand users need a 2Mb link to the home. This can be received over cable that has been upgraded to digital and readied to receive individual signals, over fibre, over broadband microwave radio systems or over standard phone lines using advanced subscriber line (ADSL) technology. ADSL is a transmission technology that allows a 2Mb video signal to be sent down ordinary copper wires. Some industry watchers believe the technology is due to come into its own in 1998 while others question its robustness for delivering true interactive services. The technology works as an overlay to existing phone lines so that the house will still be able to receive phone calls but by the same token the line will only serve one TV in the house at a time. VideoNet claims that its video-on-demand platform and interactive shopping service will work on any network but its initial success is inextricably linked to the e
ffective roll-out of ADSL. The company’s current service in Hull runs over ADSL and its next great test is BT’s upcoming technical ADSL trial in West London due to start at the beginning of this summer where it is hoping to prove its self on a national stage. We took a hunch on ADSL in 1993 now it is becoming a standard technology in the US, said Hochhauser. Intel Corp, Microsoft Corp and Compaq Computer Corp have recently put their weight behind a new high speed internet initiative over regular phone lines centred around Digital Subscriber Line (DSL) technology which has been backed by five of the largest US local telephone companies. VideoNet’s involvement with ADSL has a lot to do with the unique relationship it enjoys with Kingston Communications (Hull) Plc. Co-owned by the local council, Kingston has the benefit of owning its own local telephone network that connects with, but is not under the control of, BT. It has been an early trialist of ADSL technology. Because of our relationship with Kingston Communications in the UK we are ahead of what’s happening in the rest of the world, said Hochhauser. In the States most work that was done on video-on-demand has been closed down. Here in the UK even BT is climbing down from its once bullish position on video-on-demand. BT has never been a provider of video-on-demand content said a spokesperson. Talking about the telco giants upcoming ADSL trial in West London he said. We are providing the network and we are providing some of the internet services but we don’t manage and provide content. He was cautious about the company’s future ADSL plans. We are running the trial in London for six months and we will evaluate things based on the results of this trial. Although tied up with BT’s plans in the short term Hochhauser says he is looking further afield in the long term. He is keeping a close eye on developments in Europe, the Far East and the States but admits that the firm is presently best geared for operation in the UK. We plan to take our service anywhere there is a network, we are not tied to any one network but we want to prove ourselves in the UK first. he said. VideoNet’s on demand service is refreshingly uncluttered. There are just two parts to it that users need to worry about. They’ll need a set top box, either one that they are already using for digital television or a proprietary one that VideoNet is planning to provide and they’ll need access to an existing copper-wire telephone network which has been upgraded with asymmetrical digital subscriber line (ADSL) modems. Services are delivered straight to users’ TV screens and displayed on a clear 3D graphical interface that depicts a virtual high street which at the moment has a Boots a TSB, and a cinema. In the cinema VideoNet is working towards being able of offer a choice of over 5,000 films. There is also a local video news paper, a health club, pop videos, games, and a karaoke service which Hochhauser says has proved surprisingly popular especially after hours once the pubs have closed. Local newspaper the Hull Daily Mail, part of the Northcliffe Newspaper Group, has established a special media desk to produce content for the service. We’ve invested 360,000 pounds in the last six months, said managing director of the paper Ken Thomson. According to Thomson the paper has received little return in the way of revenue but he lends hope to the fact that Kingston Communications will soon extend ADSL technology to the full 140,000 households within its network. The Hull daily currently offers an Internet service to its customers as well, but it is more excited by the opportunities presented by Interactive TV. Classified ads lend themselves best to VideoNet, said Thomson. The VideoNet version of the paper offers a mix of news sport and features in both text and video form. Video footage is filmed by journalists on location with digital camcorders. Anne Foot senior manager for emerging channels at Lloyds TSB Bank was more cautious about its future involvements in interactive TV. We are keeping all our
options open. BDB and BskyB’s plans have all gone back to later this year nobody knows what kind of services they will deliver. We have invested in the VideoNet trial as it was an opportunity to learn about TV delivery. 99% of households in the UK have a TV and there is an average of 2.4 televisions per house. That is a big mass market proposition. According to Hochhauser Video Networks uses a Digital Alpha platform as its back end server technology but is going to move to an even more ubiquitous platform as the service expands. The company has developed all its own software including its own video streaming system. It plans to announce the name of its set top manufacturer, its hardware provider and the names of some new service providers in the months running up to the BT trial. The beauty of a true on demand service, says Hochhauser, is that people can see the content as and when they want. It is possible to deliver a richness of media that cannot be matched in a broadcast environment. VideoNet’s service has certainly been a hit with the people of Hull. But as the broadcasting world moves from analogue to digital and the temperature rises two questions still remain – will VideoNet’s technology scale and will ADSL prevail?
