Today information is the wellspring of great fortunes, much as land was a century ago. And today information of any kind-words, images, voices–can race along electronic “superhighways” at the speed of light. After years of hype about what the “digital future” would look like, the future has started to arrive, heralded (as it always is) by an unmistakable sound: that of money hitting the table. Whenever significant technological change emerges from the research labs, it comes to the marketplace on the back of major investments. And when that happens-and it is happening now-the face of the American commercial landscape changes irrevocably, unpredictably and often cruelly.

Today information traveling at lightning speed is crashing through the fencing on the corporate frontier, breaking down the barriers that segment huge empires: computer companies and phone companies, cable systems, movie studios and media conglomerates. All now find themselves drawn into an uncertain world, threatened by powerful new competitors. “These are going to be the range wars of the 21st century,” says Avram Miller, vice president for corporate business development at Intel Corp., “and not everyone is going to survive.”

Today’s wars are fought over tiny strands of high-strength glass, called fiber-optic cable, and the pulses of light that they transport. Whoever controls these information pipelines and whoever figures out how to use them to deliver something valuable to a society that consumes information voraciously will get very, very rich. Men like John Malone, the fiercely driven chief executive officer of Tele-Communications, Inc., the largest cable television company in the United States, seem likely to be masters of their own destinies. Others-little-known entrepreneurs, artists, teachers-are harnessing new technology, too. All are busy inventing the future. The stakes are high and carry great risk. What falls under the rubric of interactive media" is complex and changing rapidly. Innovations that seem a sure bet now can easily turn into tomorrow’s “vaporware.” Those who wager wrong could lose millions, “and many will,” says Laura Rieman, a principal at U.S. Media Group, a San Francisco-based investment boutique.

In just the last six months, companies ranging from Japanese video-game maker Sega to computer-chip powerhouse Intel and MCA, the Matsushita-owned film studio, have sought partnerships to position themselves for the interactive future (chart, page 41). But last week came the most significant move yet: Time Warner Inc., the entertainment and publishing giant that owns the country’s second largest cable television system, announced an alliance with US West, one of the so-called Baby Bells spawned by the 1984 breakup of AT&T. By investing $2.5 billion in Time Warner Entertainment, US West chairman and CEO Richard McCormick bet his firm’s future on one of the most forceful advocates of the interactive future -Time Warner CEO Gerald M. Levin.

Announcing the deal, Levin glossed over its more prosaic benefit to Time Warner: $1.5 billion will go to pay down the company’s still mountainous debt of $16.3 billion. Instead he talked about the integration of technologies that he said will change “the very nature of television.” Viewers will contentedly “interact” with a box in the living room: ordering whatever programming they want, when they want it; shopping for virtually anything they need; checking bank balances to see if they can afford what they just bought.

It is a compelling vision-both for couch potatoes and those who would harvest them. How compelling? Just two months ago, sitting on the same panel at a conference on “interactivity” in California, were TCI’s Malone, former Paramount and Fox Inc. chief Barry Diller (who now heads an interactive home-shopping network in which TCI has invested), Microsoft chairman Bill Gates (the most powerful figure in the computer industry) and Apple Computer CEO John Sculley. The executive firepower was arrayed for one reason: as Malone put it, “It’s going to be very hard to draw a line and say this is where the computer industry ends, and here is where the communications industry begins.”

To those who take advantage of collapsing boundaries go the spoils. There are 92 million households in the United States. Nearly all have televisions and phones, and 25 million have personal computers. All, someday, will be linked to an “information highway” that is now under construction. For Arthur Bushkin, an executive at Bell Atlantic Corp., the golden goose is in her nest. “This is not about the $25 billion cable market, or the $12 billion videorental market,” he says. “We’re talking about hundreds of billions of dollars.”

The relevant question, of course, is, how soon? If the Clinton administration has anything to do with it, the answer is, as quickly as possible. Concerned that the United States could fall behind technologically, Vice President Al Gore has called the “data superhighway” the “most important marketplace of the 21st century.” He ardently promotes a scheme to build a nationwide fiber-optic networkeven if it requires taxpayer money. But even without government assistance, big firms are finally starting to wire the nation. TCI is spending $2 billion on a national fiber-optic cable network, while Time Warner, with US West’s aid, will pour $5 billion into a fullservice interactive system.

For all the swelling enthusiasm, there remains one matter that companies still need to attend to: creating products and services that people actually want, at affordable prices. In the United States today, the lone system for interacting with TV programs-Interactive Network, Inc., based in Mountain View, Calif.–charges$199. Not bad, but that’s just for the control device. Then there is a basic monthly charge of $15, which allows viewers to play along with game shows like “Jeopardy!” or predict the winner of the Kentucky Derby. Competing for prizes requires additional payments.

Would consumers pay an additional $30 for movies on demand, and $10 more for instant access, say, to financial market information? Over time that adds up, and if you want movies on demand, it’s still very easy-and cheap-to run to the local video store. Intel’s Miller says that when true interactive television systems are introduced, they will have to be priced to sell. “We do anything else,” he concedes, “and there just won’t be a market.”

The second hurdle, soon to be overcome, is ease of use. Dazzling technology may give engineers great satisfaction. But, says Olafur J. Olafsson, president of Sony Electronic Publishing Co., “most people when they come home and plop in front of a television don’t want to interact with anything but the refrigerator.” If the smart boxes are too complicated, the business could resemble the personal-computer market, a smaller target than the truly mass television market. And given the huge investments companies are now beginning to make, that would be a disaster.

The warning is not going unheeded. On April 27, Intel, the huge computer-chip maker, teamed up with Microsoft, the most powerful software firm, and cable-equipment manufacturer General Instrument Corp. to make a controller that will basically be a hand held personal computer, enabling users to manage the vast amounts of information that will someday come pouring in over a 500-channel interactive network. General Instrument is already linked to TCI, which could provide an easy market when the device is ready. Meanwhile, other software makers are also feverishly working on new operating systems that will do all the work for us. If one of them gets there before Microsoft, then a new Microsoft will be born.

But when? “Are we going to have a front-page article in The New York Times in 1994 saying that 50 percent of homes in the United States have access to fiber and can use interactive TV?” asks Southwestern Bell senior vice president James Kahan. “I think not. It will take seven to 10 years to see how it develops.” But develop it will. The array of companies now throwing considerable sums of money at the interactive future simply guarantees it. The core includes those who will provide programming and information, like the Hollywood movie studios and videogame makers like Nintendo and Sega; media companies (NEWSWEEK started issuing discs for Sony’s interactive CD-ROM players in March); computer-industry players like Intel, whose powerful chips could run the smart televisions of the future, and, finally, the phone and cable companies.

Appearances to the contrary, last week’s Time Warner-U S West deal did not signal peace in the bitter rivalry between cable operators and phone companies. Both want to be the gatekeepers in the new information age. “This is not a truce, it’s a declaration of war,” says Goldman Sachs analyst Robert B. Morris III of the Time Warner deal. “Those who believe that cable and telephone industries are not on a collision course should think again. Time Warner will be competing with all the [local] telephone companies but U S West.” The only other giant cable player for the phone companies to tie up with is Malone’s TCI, which has reportedly talked with AT&T about a possible alliance.

Beyond that, war it will be. The phone companies’ advantage is their penetration into America’s households–nearly 100 percent to cable’s 60 percent. But the cable companies are increasing their fiber-optic capacity more swiftly, and fiber is a superior vehicle for moving greater amounts of data back and forth across a network. Local phone companies may have to spend billions of dollars to upgrade their networks to stay competitive. And that, conceivably, could lead to more “pipeline” than any given region needs.

Those in the best position to take advantage of the future may be those who had the least to do with creating it: Hollywood’s movie studios. Technology is now in in Hollywood-so much so that the Apple PowerBook has displaced the personal trainer as a status symbol. And no wonder. With all the talk about 500-channel systems, the need for programming–any programming–is desperate: “57 Channels (and Nothin’ On)” is not only a Bruce Springsteen tune, it’s today’s dreary cable reality.

Most studios understand that the future is theirs. Says Peter Guber, Sony Pictures Entertainment chairman: “This is still a talent-driven, story-driven, melody-driven [world]. It’s no good for Sony to become a telephone company.”

For others, though, the future is not nearly so clear. Companies large and small will live or die based on the decisions they make in the next decade. Time Warner, U S West, Microsoft and scores of others have begun what the range warriors of the 19th century called the “long drive”-a perilous push across uncharted territory. Not everyone is going to make it. Those that do could change everything.

MEDIA AS A COMPUTER SMORGASBORD-AND YOU GET TO VARY THE RECIPES. CUSTOMERS CONTROL WHAT THEY SEE AND CAN TALK BACK TO THEIR MACHINES.

LETTERS, NUMBERS, SOUNDS AND IMAGES ARE REDUCED TO A SEQUENCE OF ZEROS AND ONES. WITH COMPUTERS THESE BITS ARE ENDLESSLY INTERCHANGEABLE.

DATA LIKE VOICES OR TEXT CAN BE REDUCED TO PULSES OF LIGHT. THESE ARE TRANSMITTED ON CLASS CABLE; COMPUTERS TURN THE FLASHES INTO IMAGES.

QVC, TCI, LIBERTY MEDIA December 1992

Hollywood veteran Barry Diller buys into video-marketer QVC, part of the powerful TCI-Liberty empire.

TELE-COMMUNICATIONS, INC., GENERAL INSTRUMENT December 1992

The nation’s largest cable operator announces that it’ll use digital technology developed by General Instrument. The first stop toward 500-channel TV.

3DO, MCA, AT&T, TIME WARNER January l993

Big corporate investors put $15 million into software tycoon Trip Hawkins’s 3DO, a firm planning to build an interactive disc player.

HAUSER COMMUNICATIONS, SOUTHWESTERN BELL February 1993

A Baby Bell buys two cable systems in the Washington, D.C., area. Part of the effort to blend phone and cable lines into a full-service network.

SEGA, TIME WARNER, TCI April 1993

The Japanese video-game maker teams with the two biggest U.S. cable operators to create the Sega Channel. By 1994, Sonic the Hedgehog is expected to be a TV personality.

MICROSOFT, INTEL, GENERAL INSTRUMENT April 1993

GI reaches out to the software and microchip giants to help develop a cable converter box with personal computing power.

AT&T, TCI

Industry buzz predicts an alliance. AT&T has 80 million customers, few regulatory limits and key central switching stations. TCI is determined to rule the future.

U S WEST, TIME WARNER May 1993

This Baby Bell buys a quarter of the conglomerate’s entertainment division. Together they have customers in 43 states; on paper, a formidable partnership.