When Cable Went Qubist

by Ken Freed.
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The Qube network in the Seventies set the mark for interactive TV, but the business case was a bust.
 

The idea of two-way TV is not new. The interactive TV ventures of today can trace their roots back to an Ohio college town.

On 1 December 1977, the world's first commercial interactive TV service opened for business in Columbus, Ohio. Initially operated out of a remodeled appliance store, Qube offered an unprecedented 30 channels of television divided equally between ten broadcast TV channels, ten premium or pay-per-view channels, and ten channels with original interactive programming. Earning revenues a quarter century ago with mostly analogue technology, Qube became the kind of interactive television network that digital cable operators still dream about today. The problems with Qube was fiscal.

Built by Warner Communications, an aspect of the Warner Bros. motion picture company, the Qube system was generated by the "franchise wars" in the late Seventies. Having seen early the limits of rural markets, having compared the expense of rural cable plant construction to the number of potential customers, cable operators by then had begun penetrating the densely populated cities. As the first round of government-granted franchises came up for renewal in the late Seventies, multiple system operators (MSOs) competed fiercely to control America's urban markets. Anything that gave an MSO some edge over its rivals was worth exploring. Why not try two-way television?

The idea for Qube came from Steve Ross, president of Warner, recalled Paul Dempsey, chief engineer for Qube in Columbus, who today is the executive vp of Pioneer New Media Technologies in Long Beach, Ca., in charge of DVD optical storage devices for industrial applications. "Ross was staying at the Otani hotel in Tokyo in 1975", Dempsey said, "and he'd been impressed by the hotel's closed-circuit TV system, which was somewhat interactive. That hotel system had been built by Pioneer Electronics in Japan, so he asked Pioneer to develop a similar system for cable in the United States." Gus Hauser was the chair and CEO of Warner Cable, and he signed off on it, so Pioneer's response to Ross was deployed in Columbus two years later as the first Qube system."

Dempsey was responsible for turning Ross' vision of interactive television into a technical reality. Appreciate the simple power of that concept and its timing in American cable development.
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Qube Technology

By the mid Seventies, the average 12-channel or 24 channel cable system was great for the 10 to 12 terrestrial broadcast TV stations in most major markets. Broadcast signals were cleaner than ever, especially the stronger UHF stations, but cable clearly presented better pictures than off-air. Cable offered different content than the national broadcast TV networks, some would assert better content. Local cable systems were starting to retransmit satellite feeds from a growing list of programming services, like the Home Box Office movie channel and the ESPN sports channel. Each annual meeting of the National Cable Television Association features booths from new cable channels seeking carriage, price negotiable. For any cable system to carry the full range of programming choices available, it needed 30 to 40 channels. With technologies emerging to expand cable's channel capacity up to 300 MHz of the spectrum and more Ross could imagine using this added bandwidth to take advantage of cable's two-way capabilities. His vision still holds true to today.

Warner already operated a 20-channel cable system in Columbus, an upscale college town, and the MSO was rebuilding the system for 30 channels, which was a fairly large plant for its time, recalled Dempsey. "I'd been working at the Warner system in Florida, and I was brought to Columbus to be involved in the plant rebuild, like a new headend and its interface with the local origination studios, and then the cable network itself out to the curb. Installing Qube meant all these systems had to be modified, and that was a huge project."

Dempsey described the two-way network architecture, Seven trunk lines branched out from the headend, and this structure split into seven levels like a branching tree. Hanging off each trunk amplifier was a network monitoring device, reducing upstream noise being a major concern. What's the point if two-way if the circle does not complete? For a clear "go or no-go status" throughout the cable plant, Qube installed Data General "Eclipse" systems, running network databases, setting the cable parameters for each trunk amplifier through its "BCU" (bi-directional communication unit), a signal monitoring device in the headend computer that managed all the interactions with the set-top boxes connecting into that trunk. A BCU could alert plant engineers if anything went down within the 200 to 400 miles of cable under its control.

The Eclipse system assigned a digital address (like a modern IP address) to each set-top box, controlled through its "BGC" (bridge gate controller). These field status monitors were controlled from the headend, again drawing on databases for direction, performing such actions as routinely polling the boxes on its section of the cable plant to retrieve any pay-per-view selections, for proper billing on the next account statement. By polling periodically instead of constantly, the upstream return path carried limited traffic. This simplified the job of the BGC as a plant gatekeeper, enabling the headend to open one distribution amplifier at a time to communication with any tendril of the cable plant, further reducing upstream noise, helping Qube cut signal errors, perhaps averting a subscriber having complaints about mistakes on the bill.

Qube data traffic on the 8-bit system traveled downstream and upstream between the headend and each set-top box at 256 Kilobits per second (Kbps) , five times faster than today's 56 Kbps modems. The Downstream bandwidth at 250 MHz (within the EM spectrum from 50 to 300 MHz) featured a single 6 MHz data carrier channel centered at 121 MHz, like the core thread in a rope. The remaining 244 MHz of downstream bandwidth transported 30 video channels and 30 audio channels, including 10 Columbus FM radio stations (regenerated from off-air reception of tower broadcasts). Upstream responses from the polled set-tops were returned to the headend at 256 Kbps within a 24-MHz carrier signal (5 to 30 MHz on the spectrum), further assuring subscriber data was reliably received and billed. "Keep the customers satisfied" was a guiding design element for MSOs during the franchise wars.

"The beauty of the design is that we only had to open the data distribution system when the network was polled", said Dempsey, "and each set-top would answer briefly, if only to say 'I'm here.' or perhaps send back tokens from any transactions. The network used bandwidth very efficiently. The entire system of 50,000 subscribers in Columbus could be polled in six second. All the information we needed could be collected from the set-top boxes in six seconds."
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Qube Content

The viewer accessed cube programming with a proprietary Qube remote control, a small box with 18 buttons connected by wire to the set-top box. On the face of the remote were a vertical row of ten white numeric key on the left, five larger black buttons along the right side, and three large white buttons at the bottom.

Start with the three big buttons, which chose the type of channels. The first big button selected ten local TV channels. The second button selected the ten community programming channels, both Qube-produced programs and character-generated information channels (weather, school lunch menus, public events). The third button selected ten premium channels, including the pay-per-view programs, which could be previewed a few minutes before the visit registered as a sale at $3 for a PPV movie. The row of ten buttons were used for selecting among the ten channels in each category, for a total of 30 channels on the Qube system

The row of five buttons were reserved for responses to Qube's original interactive programming. Each of the five buttons could be assigned a meaning at the headend, allowing up to five answers to a question -- at least 'yes, no or undecided'. The headend could poll all the boxes, collect all the responses, and immediately report to viewers the percentages for each of the possible answers.

Dempsey recalled a variety of interactive programming, marked with the logo of a cube unfolding at the seams. "Qube was the first to offer first-run movies on a pay-per-view basis, other than a few hotels. PPV sports events were popular, too, especially Ohio State University football games. We did the first pay-per-view boxing match, for instance, but I can't say who won. That PPV service outlived Qube, by the way, and became the satellite PPV service, Viewer's Choice [now called On-Demand].

"We also produced a nighttime talk show and a morning show, 'Good Day, Columbus'. The studio set for the morning show was in front of this big plate-glass window facing the street, like CBS has today in New York for their morning show, and people would stand outside watching the show go out live. The viewing audience would be asked all sorts of questions, like an opinion poll on some public issue, which was really great when we had local politicians as guests. Another show was 'Qube Consumer', where a reporter would go out and find fraud in the markets around Columbus and then take live phone calls in the studio, asking viewers to respond to questions with their remotes.

"And we had interactive games, like a card game where the five buttons were used to play the hands. We had community auctions, too, where items were sold live by an auctioneer in the studio, each incremental bid made through the remote. The bids were locked in by constantly polling the network. An our subscribers also could interact with us directly through special programs called, "Qube at Your Service", which combined phone calls with questions that viewers would answer on their remotes. We always tried to be as responsive to our subscribers as possible."

Columbus being a college town, Qube had a youth orientation, which generated a lasting legacy. Innovating what today is called "distance learning", Qube viewers could use the PPV function key to register for assorted community education programs, such as guitar lessons taught by an instructor in the Qube studio. Another program targeting children, "Pinwheel," let young viewers use the five response buttons for both educational and fun activities. The "Sight on Sound" show invited teen viewers to select among sets of five rock-and-roll artist, their performances coming from concert footage, promotional pieces from record labels, movie film clips, and broadcast TV appearances.

"We kept attempting new things", said Dempsey, "trying to get a feel for interactive programming. Seemed like everything we did had never been done before, so we did a lot of experimenting. About 100 percent of Qube's interactive content was produced locally in our studios, some of it very elaborate, all of it live. We always had projects ongoing, and the daily schedule was packed."
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Qube Business

With Qube up and running, Warner used the marketing strategy invented by cable industry founder Milton Jerrold Shap, bringing officials from distant cities to see the new demonstration system in Columbus. One look was all it took. Warner Qube franchise bids earned contracts to build similar 30-channel systems in Houston, Milwaukee, Chicago suburbs, and St. Louis suburbs. Warner also won the franchises for a 60-channel Qube systems in Cincinnati, Dallas and Pittsburgh, accomplished by building duel 30-channel systems, doubling up on everything, from dual line amplifiers to a specially designed dual set top box. The 30-channel systems were large for their day, but 60-channel Qube systems were the largest cable plants ever seen before.

Every local Qube system was interconnected to other local Qube systems, and programming was shared nationally. If a national talk show asked a question, the entire Qube network could be polled in seconds, and the poll results were instantly bounced off a satellite to all the local systems, which would superimpose an opaque text "overlay" atop the video. Two programs originating in Columbus went national and still flourish today. Pinwheel grew into a new cable channel, Nickelodeon. Sight on Sound evolved into Music Television, known worldwide as MTV.

Despite technical success and subscriber popularity, Qube was not sustainable as a business proposition. "The franchise wars made Qube more capital intensive than it needed to be", said Dempsey.

Bringing in a competitive bid for Qube was not easy, and the price of system operations made profitability problematic. The interactive technology added to the costs of plant construction, plus building a critical "local origination" studio for producing the live interactive programming, Warner also faced franchise requirements, like any MSO back then, to build and sustain auxiliary "community access" studios where local "community producers" could create their own TV programming -- talk shows, variety shows, documentaries -- all cablecast on the local community access channels. Qube also had high marketing costs from advertising and maintaining a positive public profile, let alone educating the public to the new concept of interactive TV. Another expense was staffing. Qube Columbus, for instance, had 300 employees in such areas as system operations, studio production, sales & marketing, customer service, and business administration. Qube was not cheap.

"The build, by itself, was enormously expensive", Dempsey said. "The Cincinnati and Dallas Qube systems were built from scratch because there was no cable there before, and building dual cable systems for 60 channels cost twice as much. On top of that large capital drain, a cable system could not see any revenues until it began delivering services. Therefore, to be honest about it, Warner Cable would not have been able to keep on going past 1980 if we had not received an infusion of capital from American Express."

To strengthen the business, Warner-Amex Cable brought in Drew Lewis, later U.S. Secretary of Transportation under Pres. Ronald Reagan. He split the cable company in half. The "metro" division managed the cities freshly wired or rewired with new technologies, including Qube. A national division, headquartered then and now in Denver, managed the older "classic" cable systems. To bolster the company's cash position, Lewis sold MTV and Nickelodeon to Viacom in a deal valued at $685m, then he sold the 60-channel Pittsburgh and Dallas systems to TCI (now AT&T Broadband, becoming AT&T Comcast).

Amex cash kept Qube alive as the only two-way cable system in America. After Amex withdrew from Warner in 1984, the Qube systems closed one by one over a decade. The last Qube boxes in Cincinnati were phased out in 1994. Curious timing. Warner was then developing the Full Service Network in Orlando, Florida, speaking of the FSN as something brand new under the sun.
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Qube Lessons

Why did Qube end? Why didn't other MSOs emulate its example? Despite strong evidence of consumer popularity, fundamentally, the cable industry decided that interactive TV was not affordable, not yet, anyway. A better business case in the Eighties could be made for one-way addressability, which ruled until digital cable at last made two-way services affordable almost two decades later.

Qube illustrates how economics rule technology. By 1983, the cable industry had committed itself to replacing its standard converters with "addressable" set-top boxes, which could be controlled from the headend without a feedback channel. A few keystrokes at the headend authorization center would tell a set-top box to display a scrambled premium channel or a pay-per-view program. Subscribers placed an order with a telephone call to a customer service representative (CSR) sitting in a boiler room. Addressability meant foregoing genuine interactivity, but it did open new revenues stream, and it could be deployed affordably. That was enough to squelch more expensive two-way proposals. "Given Qube's financials," said Dempsey, "two way cable was not seen as a viable capital investment.

This perspective is shared by John Carey at Columbia University. "Qube has been described as a great failure because it did not endure, but it was not a failure at all. Half the households in Columbus paid to get Qube usage, and they created a lot of innovative programming, inventing the pay-per-view business. Despite the high subscription rates, however, actual usage was generally low, with exceptions. Some game programs achieved strong interactive participation. Major sports events attracted large audience participation, or when Qube subscribers could choose the next play in a live amateur football game. Qube demonstrated that pay-per-view was viable, if the cost of promoting and processing pay-per-view orders could be reduced. In this sense, Qube was an important media laboratory.

"It may be argued that the principal lesson of the Qube experiment is not that interactive media can't compete with traditional one-way mass media," said Carey, "but that interactive media really must be developed in a viable economic and technical context. Producers must learn to be creative with the new medium. And audiences should not be expected to change their media habits overnight."

Carey said the central problem was money. "It was the same old story for interactive TV. The service cost a fortune to deliver. The Qube set-top box alone cost $200 at a time when cable converters cost $40. Qube equipment at the Columbus headend added about $23 million in construction costs. Economies of scale were not there. Further, there were reliability problems with the equipment, especially in the data transmission upstream from homes to the cable headend. Budgets for Qube programs were very low compared to broadcast networks, and interactivity with low production values really could not compete with network programming. So, looking at Qube in the context of the franchise wars, Warner-Amex used Qube as a marketing tool to help win cable franchises in a number of cities, and once it had those franchises, it let Qube die a slow death."

Dempsey vigorously disputes any claim that Qube was only a Warner sales gambit. "Qube was never a mere marketing ploy to win franchises. It was a serious attempt by a group of very creative people to provide a new kind of TV service. We were doing things back in 1977 that only now are being attempted again with digital services. Qube worked, and it did what it was supposed to do. For instance, we once helped the police track down a house burglar by polling the network for the digital address of the set-top box he had stolen. I think he was arrested while watching TV. And besides, if Qube was not a serious venture, MTV or Nickelodeon or Viewer's Choice would not have grown out of there. There would not have been so many media leaders today who came out of there.

"If it was a failure," he argued, "we would not still be talking about Qube today. Our only problem was that the costs were prohibitive. In every other sense, Qube was a success."
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Article exclusive to Media Visions Journal. (c) 2000 by Ken Freed

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