March 10, 1997

Low-down latencies
By Jane Morrissey

  PC Week InsideSpeed. You can never get enough. And just bolstering bandwidth won't do. For jazzy apps featuring real-time interactions-such as audio and videoconferencing, multiplayer games, and even text chat-all the bandwidth in the world can't make up for delays inherent in the network infrastructure. For them, latency lays low the Internet.

But what a chance for startups that offer a pep pill. Volpe Welty Asset Management, of Alameda, Calif., predicts the market for "synchronous person-to-person interaction" will be more than $8 billion by 2000, from a base of $60 million today. But partner William Welty cautions that those dollars won't materialize until network latencies-those pesky pauses and overlaps-are as unnoticeable as they are on a local phone call.

So far, nobody's offering a total solution. Instead, dozens of companies are building fixes into specific applications. Game maker Mpath Interactive, for instance, is teaming with ISP PSINet to fine-tune game traffic over the Net. VDOnet concentrates on videoconferencing. And OnLive Technologies is trying to solve the problem for audio conferencing. "Everyone's treating the symptoms, not the cause," says Rod MacGregor, chairman and chief technology officer of OnLive, of Cupertino, Calif.

MacGregor isn't complaining, though. There's plenty of upside for OnLive's products-even though they're narrowly focused. Volpe predicts revenues from business voice conferencing alone will grow to $1.3 billion in 2000 from $94 million this year.

No wonder venture capitalists are fawning over OnLive like a gaggle of groupies. The 3-year-old company has already raised more than $50 million from the likes of Softbank Holdings (the indirect owner of PC Week) AT&T;, Intel and Kleiner Perkins Caufield & Byers.

In the business environment, OnLive's products are used for presentations, workgroup collaboration, customer support, distance learning and teleconferencing. The attraction is, "You can have an open mike between half a dozen desks all day at zero marginal cost," says Jerry Michalski, editor of newsletter Release 1.0.

In the consumer space, OnLive has been chosen by ABC Sports, MTV and to bring live voice chat to their Web sites. It's also being used to give avatars a voice in three-dimensional virtual worlds.

OnLive's main product is Community Server, which, when teamed with its Talker browser plug-in, allows as many as 12 users to participate in a conversation. Each server can support 100 users in multiple conversations. That's at least 10 times more capacity than is offered by competitor Vocaltech. OnLive's products work at speeds as low as 14.4K bps but markedly improve in corporate settings with T-1 lines. The company plans to support text chat this year and will add video down the road.

Like many other Internet startups, OnLive decided to seed the market with free software. Since the server became available in November, the company has authorized 5,500 downloads of a free five-user server and 125,000 free clients. While the clients remain free, a 15-user server license goes for $2,200, a 50-user license for $6,400 and a 75-user license for $8,900.

At the core of all of OnLive's products are its multiuser voice technologies. The company offers full-duplex communication, so users can talk and hear others at the same time. The server combines multiple audio streams into one, without decompressing them first, which keeps voice quality high and latency to a minimum. And its voice bridging technology smoothes over the breaks in audio streams. Customers seem pleased. "They advertise it as real time, and it comes across pretty smoothly in real time," says Lawrence Schoen, director of the Klingon Language Institute, which, believe it or not, offers distance learning courses for people wishing to study Star Trek's Klingon-speak.

Observers say OnLive's biggest opportunity lies in the consumer sphere, where Talker helps build a sense of community-and reap ad impressions. On the business front, "no one is screaming and hollering for it. They're wrestling to keep their Web site running," says Mark Hardie, an analyst with Forrester Research. A Forrester survey of 50 Fortune 1000 companies shows that most are sticking to simple animation and audio plug-ins, for now.

Still, OnLive demonstrates there are plenty of opportunities for companies with promising solutions to latency problems. "There's always a crimp in the hose somewhere," says Wade Woodson, general partner at venture capital firm Sigma Partners. And apparently, there's still plenty of seed money for those who can straighten the hose and let the bits-and cash-flow.

  • The bandwidth riff: The market's wide open for startups offering next-generation remote-access technologies.
  • Backbone blues: Ciena has just one product and three customers, but it's making waves with its WDM equipment.
  • Columnist Mitch Ratcliffe says there's only one way to fix the bottleneck: Net welfare

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