Enormous bets are being placed on the building of the information superhighway to Europe’s homes. In the United Kingdom alone, cable companies are spending $12 billion, and BT has announced its intention to respond with a $15 billion investment of its own. But even these sums will pale into insignificance when the European Union starts to use cable operators to introduce local competition in telephony.

Building the information superhighway is becoming the gold rush of the 1990s. A few players—most likely first-mover satellite television companies, innovative cable companies with high penetration in favorable regulatory circumstances, and telephone companies able to transform themselves into cost-competitive service organizations—are likely to hit the motherlode. Others, huge though their investments may be, have no guarantee of success and risk coming up empty-handed, or even facing massive losses.

Deep uncertainty surrounds consumer takeup, competitive threats, the emergence of substitutes, content and product availability, the cost of new product development, regulation, and content and gateway providers’ share of economic surplus. All the same, there is intense interest in building interactive broadband distribution networks among telephone com-

panies, established cable companies, satellite companies, and new cable entrants...