Twenty years ago, a technological revolution came to an abrupt halt in Pittsburgh. After operating for just over two years, TCI bought the Pittsburgh franchise of Warner/AMEX Cable and announced an end to its interactive QUBE cable system.
Cable in Pittsburgh would continue in the conventional unidirectional way, but what would go dark was the unique capability for local cable customers to send data back to the cable company. The interactive QUBE system had been heralded as the catalyst for a host of new media applications that would transform American society.
The problem was it just didn't make any money.
Interactive TV was about as novel a concept as possible when Mayor Richard Caliguiri declared QUBE Day in Pittsburgh on April 13, 1982. The city was one of the last major markets without an installed cable system of any kind.
Cable TV was rapidly consolidating and the few unconquered markets left were prime targets for the corporations seeking to dominate the industry. The interactive QUBE system was beyond state of the art and proved to be an effective lure. Warner's QUBE Cable won the city's initial franchise over noninteractive competitors.
What Pittsburgh received when fully wired was the most advanced cable system of the time. Beyond interactivity, the new system would have an unprecedented 60 broadcast channels. For those who paid an optional fee, an interactive remote control pad would be supplied that would transform the user into an active, not just a passive, TV watcher. The pad had five extra buttons that could be used at select times to record viewer choices for everything from games, quizzes and tests to a host of applications yet to be thought of. With 256 K of bandwidth it would not be surpassed in terms of sheer connectivity into the home until the advent of DSL decades later.
What would interactive TV mean? Tele-voting, tele-shopping, tele-banking and much more were all thought to be just on the horizon. Tele-banking in particular was thought to be the killer application of the day. The most successful new concept invented by the QUBE system was Pay Per View programming. QVC had its start on the QUBE system and was the true progenitor for the billions in online shopping that would eventually follow.
At the time most of these applications had only hypothetical or limited payoffs, yet the costs to build the new system were substantial and coming due. In the end the system could not even cover its operating costs, let alone the unprecedented capital investment required to build a cable system from scratch. An infusion of cash from American Express would only delay the inevitable. After a few years of large cash outflows, Warner was forced to start selling off its local franchises. The Pittsburgh franchise would be bought by TCI, which had no plans to support the costly interactive capability of QUBE.
Then-TCI Chairman John Malone said succinctly at the time, "We are going to get rid of those Rube Goldberg inventions."
An ironic note to the demise of QUBE was that its rapid fall from grace was hastened not by its own lack of profitability, but due to the losses incurred by another high-tech falling star. Warner had acquired Atari systems the year before. In 1983 Atari lost more than a half-billion dollars, forcing Warner into a cash crunch that doomed QUBE. Cascading financial failures created the money sink that ate up the investment dollars QUBE needed to get off the ground.
An important lesson is that advanced technology and profitability are not synonyms, especially not early in their development. Commercialization of advanced technology is rarely easy. Business acumen is as necessary as a novel product for commercial success. It is a lesson that would be relearned by many a dot-com start-up in the subsequent decade. Some lessons that were learned from the collapse of QUBE were not lessons at all. Many thought the demise of QUBE meant that interactive media of any kind could not be commercially viable. Yet that would be proven false within a few years as the commercial Internet exploded into the economy. Interactive TV was not a bad idea, but it was clearly an idea before its time.
Timing is everything.
Is QUBE merely a footnote in history? Many of the new ideas pioneered on QUBE would outlast the system that created them. QUBE gave birth to QVC, MTV, Pay Per View and Nickelodeon, among others, all of which are highly profitable billion-dollar industries in and of themselves. Interactivity, far from being the commercial bomb at the time, would define the Internet that was only years away from the mass market. It just wasn't going to happen in the early 1980s.
For a moment though, Pittsburgh was on the cutting edge.
How does the region do at fostering innovation? There are many cutting-edge technologies buried in an inventor's closet or sitting on the shelf of a university lab. Bringing new products to commercial market requires the obsession of the entrepreneur coupled with strategic vision. It also requires management skill and professional accounting. Bringing those things together is the hard part. In the end, though, the prerequisite for entrepreneurship is the willingness to take on risk. Risk cannot be taken out of the equation and fostering a climate to encourage risk taking is the ultimate goal.
Fostering innovation on a regional scale may be the most daunting task. Experts first noted a lack of entrepreneurship in Pittsburgh many decades ago. At the height of its industrial output, the lack of corporate diversity, dominated by a few large firms in a narrow range of industries, stifled new business creation. Fewer firms meant fewer outlets to which embryonic businesses could market their products or services. The end result was fewer new start-ups and the loss of the economic growth they would generate. Pittsburgh has changed but it is important that it continue to change.
When the city of Pittsburgh chose interactive cable 25 years ago, it took a risk by not going with the safer conventional cable choice. There will be many more new firms in Pittsburgh. Some will succeed, some will fail, some will succeed only after multiple failures.
Christopher Briem is a regional economist at the University of Pittsburgh's Center for Social and Urban Research.