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Entertainment On Demand

Good news for all you couch potatoes: If Myrio Corp. has its way, video-on-demand will soon be available over your household telephone line. Using set-top boxes on our TV sets, we’ll be able to watch digital television channels, buy pay-per-view programs, rent the latest videos, play interactive games and surf the Web at high-speed. And all this entertainment could come bundled together with our local and long-distance telephone service.

Myrio’s ultimate goal: to transform phone companies (both Baby Bells and independents) into entertainment-on-demand providers. And Myrio has a fighting chance at making all this happen.

For one, the company just received $20.5 million in a second round of funding. And its top execs are high-tech industry veterans, formerly with companies such as Microsoft, AT&T Wireless, Alcatel, Terabeam and Advanced Radio Telecom.

Myrio’s President and CEO Robert Manne (pronounced “man-e”) has over 30 years experience as an executive officer and entrepreneur. A VP at General Signal Corp. for 18 years, Manne developed that company’s worldwide sales, product management, training and service organizations. We caught up with Bob at his office at Carillon Point in Kirkland.–LS
Seattle24x7: Bob, how would you describe your breakthrough in DSL technology?
Manne: The typical DSL service that we’re all clamoring to get into our homes now is called GLite, which means it has a maximum transmission speed of 1.5 Megabits per second. Myrio is using Full-Rate ADSL, which transmits at 8 Megabits per second. So that allows us to deliver all these services at once: digital videos on demand (streaming at 3.2 Megabits); digital TV channels (streaming at 3 Megabits); phone service (via a sideband, so that’s almost insignificant); and high-speed Web access.

Seattle24x7: That’s a lot of bandwidth!
Manne: That’s the magic of Myrio. The copper line is capable of this. All you need is a TV set-top box attached to a Full-Rate DSL modem.

Seattle24x7: Let’s start at the beginning. How is the content delivered to you?
Manne: It comes in via satellite. We have a dish on the roof here in Kirkland, but the telephone companies [Telcos] also have dishes, so they can get content delivered directly to them [like cable companies]. The content is digitally encoded; Myrio software takes it from the Telco’s central office and streams it out to the home.

Seattle24x7: Is there anything proprietary about the transmission of that signal?
Manne: We’re using open standards as far as Internet protocol, but there’s a lot of intellectual property that surrounds the method of delivery.

Seattle24x7: You’re providing the telephone company with the same
entertainment as the cable company?
Manne: We’re converting a telephone company into an entertainment company. In July 2000, we said to the phone companies: “Look, we can offer you 100s of channels so you can compete directly with the local cable company. Second, we’ll bring you the new hit movies, so you can compete with the local video stores. Third, your customers don’t need a computer to surf the Web; they can do that through their TV set.”

We’ve taken a very complex bit of technology, and we’ve simplified it so that the average person will find it easy-to-use.

Seattle24x7: Do you think the phone companies will be able to provide
reliable service?
Manne: They have pretty positive brand recognition and reputation when it comes to delivering voice. None of us can remember the last time we didn’t have a dial tone. They must protect that reputation.

The fact that we’re delivering the service over existing copper wires via an individual Virtual Private Network connection means quality of service. This setup doesn’t slow down when all the neighbors hook up simultaneously. In addition, we’re providing the phone companies with marketing consultation and actual advertising, in order to help them market this product.

Does a Myrio-delivered program have the same quality as cable TV?
Manne: We’re delivering DVD quality. When a consumer presses a button to rent a movie or surf the Web, they create their own “virtual private network” straight back to the central office.

Seattle24x7: So you’re using IP for point-to-point delivery within
the telephone-company architecture?
Manne: Correct. Since we use open architecture, we are able to migrate that IP solution to all kinds of new potential services in the home. For instance, you can address everything from your heating and air conditioning system, to your security system to your coffee pot. The fact that we’re already delivering an IP technology enables these things to be future potentials.

Seattle24x7: How are you acquiring the entertainment content?
Manne: We have a business-development group that’s signing contracts with the studios, so we can get access to a studio’s new hit movies each month, and also to their library, which we then offer to the Telcos as part of our total solution.

Seattle24x7: So, if there’s a Title Fight in Las Vegas available as a pay-per-view event, you’ll negotiate your own deal with the promoters?
Manne: It’s a case-by-case basis. Currently, we don’t have that special event or pay-per-view capability built in. That will be done in the first quarter of this year.

What about Enron’s deal with Blockbuster to deliver videos-on-demand via Enron’s broadband network?
Manne: We have been the first to market with a full deployment. There are streaming-video companies, content providers and hardware providers. But no one else, at this point, has actually done a complete deployment. We have an end-to-end solution that the Telcos want. Everything from the equipment, to the streaming software, to the training, to the customer-premise equipment. And then, we even help the Telcos market this product.

Seattle24x7: How many employees do you currently have?
Manne: We now have 88. When we came to Kirkland in February 2000, we had just five.

Seattle24x7: Are you hiring, and what kind of folks are you looking for?
Manne: We’re using this latest round of money to continue our international deployment, build out the brand and develop new products. So we’re looking for programmers, developers, network engineers, designers and some more sales and marketing people.

Seattle24x7: What kinds of resources or infrastructure products do you procure?
Manne: We’re continuing to certify other companies’ hardware to make sure it works with the Myrio solution. We have already acquired, and are in the process of installing, our financial systems, and our customer-management software.

Seattle24x7: How many clients do you now have?
Manne: Our first commercial contract was with Livingston Telco [in Texas], to deliver digital TV. Initially they acquired 42 channels of that. We deliver to them 20 new hit movies each month, so they can provide video-on-demand, and we give them high-speed Web access delivered directly to the TV set.

That was the initial deployment. Since then, we’ve negotiated two new contracts. One with our beta site in Nevada, and the other one in Oklahoma. In addition, we’re negotiating with several phone companies in Washington state, one in Oregon, and some discussions are going in North and South Carolina.

Seattle24x7: Interactive TV has been a buzzword for some time. What makes you think the public is: a) ready; and b) excited about participating in this kind of medium?
Manne: “Interactive TV,” as it has been defined in the past, is [for example] if you were to click on Jerry Seinfeld’s suit, and go to a website to buy it. We don’t see that as a big market at this point in time.

We believe people want entertainment delivered to their homes; not necessarily just a shopping experience, or being able to do a poll, or answer a question on a particular detective show. We’re trying to bring them the experiences that they’re already getting. We want them to be able to rent movies with a strong convenience; we want them to be able to see all their special pay-per-view events without leaving their home, or even having to make phone calls. We want them to be able to surf the Web on their TV sets.

Seattle24x7: What about the integration of a TV broadcast with the Internet? Isn’t that the old model of interactive television?
Manne: There are two exceptions that we truly believe in. One is the interaction on sports. Clicking on a sporting event on TV to get player stats. The other one is children’s issues, what we call family-friendly and family-interaction. Those are two exceptions to interactive TV that we do believe in, and we’re working with companies to deliver those kinds of experiences.

You’re redefining interactive television.
Manne: We’re niching it down to where the action is.

Larry Sivitz is the Managing Editor of Seattle24x7.
Myrio Corp.
3500 Carillon Point
Kirkland, WA 98033
P 425.897.7200
F 425.897.5600

Founded: 1999 (4Q)
Funding so far: Series A $5.0 million (12/99) and Series B $20.5 million
Major Investors: NeoCarta, AHVP and Ridgewood Capital
Other Investors: CC Communications and GVNW Consulting.
President CEO & Director: Robert E. Manne
Senior VP, Operations: Mark Marinkovich
VP, Product Management: Timothy P. O’Brien,
VP, Finance: Mark Rowe
VP, Corporate Development: Hillary A. Avenali
Sr. VP Sales: Ron Bixler,
VP Business Development: Ray Young, Sr.
VP Strategic Development & Legal Affairs: Susan Preston