The Arrival of the Convergence Revolution

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Not long ago, the world of technology, communication, and entertainment existed in silos: you received Internet service from an ISP, phone services from a telecom company, and music from a music shop. Computer manufacturers made PCs and cell phone manufacturers made, well... cell phones. Those lines are quickly disappearing. Technology, communications, and entertainment are heading toward a major upheaval, and all roads are leading to the Internet.

Today, computer manufacturers supply music and make everything from MP3 players to digital TVs. Cell phone manufacturers are undergoing massive overhauls to produce Internet-enabled handsets and, along with service providers, continue to try to hit the sweet spot for online services via mobile handheld devices. While phone companies begin to offer Internet options, Internet companies are moving in to provide web-based phone services. If you want traditional phone service at home, you can just sign up with any number of companies that offer cost competitive phone services through the Internet. No one, it seems, is standing idle. Studios, publishers, and record labels are realizing the vast potential of the Net and are rapidly moving toward a new digital distribution paradigm that promises to stream massive quantities of content through the Internet in the very near future. And cable companies that once focused only on piping TV shows are bundling packages that conveniently offer Internet phone and high-speed Internet service on a single bill.

Suddenly there are no limits to who can converge their services with the Internet as long as they have content, the pipeline to deliver content, or the technology to convert content. Even utility companies like Cinergy are getting in on the act, having recently introduced high-speed Internet services made available through the three-pin power lines scattered throughout our homes. What is all this diversification and migration about? It can all be summed up as the coming of the convergence era. A landmark moment in which companies are liberating themselves from their past and moving toward a new business model, with the Internet taking center stage.

A number of things are leading to this revolution. Increasingly, everything from voice and music to images (that is, content) is transformed into digital formats. These bits of information are perfectly suited for transmission through the Internet. In the past, slow dial-up speed was the main reason restricting the Internet's widespread use as a pipeline for general content. Not any more. Half of the globe's Internet users already utilize some form of high-speed connection as their primary online vehicle. Once you introduce broadband, the whole game changes: streaming movies and music, conducting web calls, playing interactive games, and a host of other online activities are all up for grabs.

Consider also that globally the primary Internet access point for more than two-thirds of users is in the home, suggesting that the Internet has found a greater place in people's personal and social lives than it has in the workplace. Home is where it all happens. The latest findings from Ipsos-Insight's The Face of the Web 2003 study confirm this; sending and receiving digital pictures scored the highest incidence (72%) among Internet activities, surpassing purchasing a product (64%). Also, greater than half of Internet users listened to music online, one third downloaded a music file, and an equal number of users played an online video game. Moreover, one in four users have already watched a TV show or video stream, and 15% have even attempted a phone call over the Internet.

It is clear that the Internet is no longer simply a means to search for information or exchange emails via PCs. Rather, the convergence market has created exponential online penetration through a myriad of devices and activities that focus on entertainment and communication. Last year ownership of digital household entertainment technologies, personal computers, cellular/PCS mobile phones, and Internet connectivity continued to break records: g lobal Internet use slowed between 1999 and 2000, but last year saw a 7% year-over-year growth in the number of Internet users. DVD players continued to be the fastest selling consumer electronic device, up 60% in the past year. Similarly, household ownership of digital still cameras grew by 34%. Cell phone ownership increased by 30%, while wireless Internet use multiplied by 145%. Home theatre and MP3 ownership also continue to show steady growth and, though other technologies such as game consoles and PDAs stagnated, developments are underway to integrate the Internet in their offering as a way to make inroads on new markets.

Growth in Internet usage and digital devices coupled with the advent of broadband and a host of emerging technologies such as Wi-Fi infuse a vast landscape of integrated transactions that promise to change the way we live over the next decade. Furthermore, with the continuation of Moore's Law, the next ten years will present a much faster pace of technological change than was seen in the past twenty years.

Home networks are already in the making, enabling the convergence of these technologies and activities into a single hub. Gone will be the usual clutter of hi-fis, videos, DVD players, PCs, game boxes, and the like. The networked home will be the place of digital convergence and new systems that link devices within the home will be at the heart of the convergence revolution for consumers in the coming years.

Add it up, and this may be just the beginning of a new revolution!

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