A Revolution in Communications

Head Table Guests

Ed Badovinac, Professor of Telecommunications, Department of Electronics, George Brown College and a Director, The Empire Club of Canada; Gregory Ewert, President, Global One; John Tory, President and CEO, Rogers Multi-Media Inc. and Second Vice-President, The Empire Club of Canada; J. Robert S. Prichard, President, University of Toronto; J. D'Arcy Brooks, Chairman and CEO, Borden & Elliot and the sponsor of our distinguished speakers' table; Thomas Rabilly, Vice-Chairman, Co-Head Investment Banking, Richardson Greenshields of Canada Limited and the sponsor of our head table; Duncan Gibson, Executive Vice-President, Operations Division, Toronto Dominion Bank; Douglas Todgham, Vice-President, The Canadian Institute for Advanced Research and Third Vice-President, The Empire Club of Canada; Ken Troy, President, Reuters Information Services (Canada) Limited; Ken Nickerson, General Manager, Microsoft Network; James Downey, President, University of Waterloo; Ronald McKinlay, Chairman of the Board, Newcourt Credit Group Inc. and the sponsor of our student table; David Edmison, Director, Martin, Lucas & Seagram, Independent Investment Counsel and Immediate Past President, The Empire Club of Canada; and Jeff Dossett, General Manager, Microsoft Canada Inc.

Introduction by Julie Hannaford

On a summer afternoon in a town outside Toronto, 122 years ago, July 25th, 1874, a young man was home for the summer vacation. He was then working in Boston. He had ideas and he was no doubt that day preparing to announce them to his father. He did so on July 26th, 1874, The announcement of this new idea, perhaps because it was so new, did not go particularly well. The young man's father recorded the idea in his pocket diary with no comment except a question mark. He described the idea in two words--"electric speech." The young man was Alexander Graham Bell and it was on November 1st, 1917 in his address to The Empire Club of Canada that he gave us not just the date and birthplace of the idea of the telephone, but also the scepticism that accompanied the launch of the invention.

And so we have one of the earliest recorded commentaries on technological innovation.

Interestingly, scepticism about technology continued well after Alexander Graham Bell's father recorded his own uncertainty about "electric speech."

In 1943, the Chief Executive Officer of what is now one of the world's largest information technology and computer manufacturing firms said: "I think there is a world market for maybe five computers."

Twelve years later, we find the editor-in-charge of business books for Prentice Hall telling us: "I can assure you that data processing is a fad that won't last out the year."

Finally, not to be outdone by the world's largest information technology and computer manufacturing firms, in 1977, the chairman and founder of another very large information and technology and computer manufacturing firm said: "There is no reason anyone would want a computer in their home." If nothing else, these statements do more than record the dissonance between the speed of technological development and the rate at which our imagination can absorb and project change into the future.

These statements also record the challenge that every creative imagination confronts and must surmount in order for innovation to prevail. If our understanding of technology has changed, and it is clear that it has, this understanding is in no small measure due to the imagination of our guest today.

Today, computers, multimedia and networking technologies are being used by tens of millions of people worldwide: to manage and operate their businesses, to educate and entertain their children, and to communicate with each other over vast distances.

We are no longer an audience for the unfolding of the technological drama. Today, we are participants in technological transformation. Smaller in size, easier to use and more powerful than ever before, computers, faxes, laptops and cell phones can be found in offices and homes across the globe. We are transforming the way we bank; the way we invest; the way we talk to each other; and at the vanguard of this transformation is Microsoft, a company dedicated to bringing people and technology together.

Tonight, we have with us a person whose name is synonymous, not only with Microsoft, but with the entire computer technology industry. Very few individuals can claim to have played as integral a role in transforming the way people work and communicate than our esteemed guest. His more than two decades of passionate labour and dedication towards making technology accessible to everyone, has created one of the most powerful and forward-thinking corporations in existence today.

Microsoft's mission remains much the same as when the company was first founded more than 20 years ago: to offer products and services for business and personal use, each designed to make it easier for people to take advantage of the power of personal computing. Today, millions of people worldwide use Microsoft products to create, communicate and share information.

As the largest independent producer of computer software in the world, Microsoft employs nearly 20,000 people worldwide. It has set the standard in the personal computer operating systems and desktop applications markets. Since launching the Windows 95 operating system last August, a product that has set the standard in easy-to-use computing technology, Microsoft has taken on a new leadership mantle, directing its vision and enormous resources to what many consider the greatest single technological innovation since the PC--the Internet. How will the Internet affect Microsoft's future? As our guest himself once said during an interview: "I'm very optimistic about the future. But it is a future full of change and surprises."

Ladies and gentlemen, to share his vision of what tomorrow may have in store for us all, and who may perhaps not like to be reminded of his own words spoken back in 1981, when he said: "640K should be enough for anybody," please welcome our special guest, Co-founder, Chairman and Chief Executive Officer of Microsoft Corporation, Mr. William (Bill) Gates.

It's a very exciting time in the computer business. What I want to talk about tonight is not really the computer business, but rather how the advances in computer technology represent a revolution in communications and how this is going to reshape every business that there is today and even redefine the way we think of entertainment, the way we think of politics and perhaps most exciting how we think of education. Behind all of this there are some real miracle technologies. There is the miracle of the chip. Every two years, according to what's called Moore's law, chips become over twice as powerful and that means that over a period of 20 years, you get a thousand times the power that you had before. And that's without any increase in cost. In fact, the costs come down at the same time. It has changed the character of how we think of computing from being something that large organisations do to something that individuals do. As this progresses, the potential is not just for what Microsoft wrote down when it was started--that is a computer on every desk and in every home--but rather that people have computers in their pockets, computers in their cars, computers of all types. So many computers that you don't even think about them being there in the same way that you don't think about electricity or water as things that have transformed the way we live.

Chip technology keeps driving forward and that's why the pace here is so much faster than with other innovations. Another key technology is optic fibre. The amount of information that we can put through an optic fibre is increasing at an equally rapid rate. And so as you get a state-of-the-art chip and as you get fibre strung between all the different locations that want to communicate, in a sense you'll have unlimited capability and this will create a tool that people will use for any number of tasks. Right now we can see these things coming together because the PC and the Internet are complimentary. The more machines we have hooked up to the Internet the more valuable the Internet is. The more valuable the Internet is the more reason people have to get a machine, to hook it up and use it and receive what we've always called information at your fingertips.

Whenever you have a communications device it goes for a long time not being at critical mass and it's kind of a novelty. When people had fax machines at first they wondered who was going to send them a fax. A few years later everyone was expected to have one. It was very unusual if you gave out your business card and there was no fax number there. Well, the same thing is in the process of happening again. Everyone, I would venture to say, in this room within five years will have an electronic mail address and the ability to get messages from business colleagues and friends across the Internet.

Many of you will even have what is called the personal home page where people who are interested in your hobbies will have an address they can go to to get the latest information. So the Internet has achieved critical mass. A few years ago, I wouldn't have expected that to take place. I think a lot of people were caught by surprise. But that's the nature of a critical mass phenomenon; the minute it crosses over, the results are rather phenomenal. It is the biggest development since the original PC. The investment levels are incredible. The pace of innovation is incredible.

Somebody might come to you and say that the Internet is missing something. It's missing security and that's true, but there are 20 new companies that have been started up to solve that problem, as well as hundreds of existing companies like Microsoft working on it as well. In an almost paradoxical way, the weaknesses of the Internet have become strengths because people are diving in to get rid of them.

The one most difficult thing about the Internet is the speed at which we are all connected together. Within a company, you generally have what is called an intranet network and people are connected together at very high speeds, but when you want to talk to your branch offices, or people who are outside the company, you generally have to go across the phone network and today the speed that you get out across normal lines is 28.8K baud. The number is not important. What's important is that if you're trying to send pages that just have text, it is blindingly fast, but as soon as you start to get lots of pictures, the speeds are almost unacceptable--five to 10 seconds. Now, how can we improve this? Changing the phone infrastructure is very difficult. There is a way we can move up by improving the phone system called ISDN.

In competition with that we have the cable industry using their axial infrastructure to create what they call cable modems. This will give us speeds that are over 10 times faster and really solve the tough problems. They don't necessarily give us high-quality video but they give us everything else. So we are really looking forward to the competition between the phone companies and the cable industry to put that together. Eventually what we will get is the ability to deliver high-quality video between any two points on the planet. With these connections you will be able to watch whatever movie you want to, talk to whom you want, and see whatever lecture you want to see. There will be a bottleneck because even the most optimistic person says that it will take more than a decade before the majority of homes in the United States and Canada are hooked up. The United States and Canada are going to be at the forefront of this, with the exception of a few cities, like Singapore and Hong Kong, where they can take their high density and their very high-income levels and run early experiments. With those exceptions, the U.S. and Canada will be two to five years ahead of every other developed country. Developing countries and rural areas are even tougher and may require technological breakthroughs before they can be hooked up.

Being connected to the Internet is one of those things that's got a crazy momentum, almost unstoppable. Probably in the next couple of years, you'll read a lot about people saying, "Well, was it over-hyped, was there too much expectation?" Although that cycle will take place, what we have here is the greatest change, probably since the phone came along, in the way people do business. An important element to keep in mind is how rapidly the PC itself will be changing. Five years from now, the speed will be a lot greater, the storage capacity will be dramatically greater, and we'll have flat screens that are very large. It won't just be the CRT like it is today; it will be the surface of your desk with lots and lots of information laid out there. We have a lot to do to make the PC easier to work with; make it easier to set up.

There are some great initiatives and good progress that have taken place so it's important not to think about it as something that is standing still. We'll have quite a variety of things that are hooked up. The PC will be the primary one. You'll also have advanced TV sets with new set-up boxes.

You'll have a computer in your car and you'll have something that you carry around in your pocket that hooks up to the wireless network, which we talk about as the wallet PC. It will always show you a map of where you are, give you your schedule and your latest messages. It will even have digital cash or digital tickets. We think of it as the wallet PC because it's a replacement for everything that you have to carry around today. You can even have hundreds of thousands of pictures of your kids to show other people. So there is a lot of change going on in the way we think about computing. We used to think of all these isolated networks. Every company had its own network and you had to go out to communications companies to lease all these lines and manage it yourself.

Well, now we're going to have one global network, based on the standards of the Internet which are things like TCP/IP. We're going to have one way to find information which is to get a page up, read the page and based on what it says, click on things and follow links that will replace the way that we search for files. It will replace the way we do help and it will be the same no matter whether the information is local to your computer or local to your current network or way out on the web. Information that you care about will be brought to you. The documents will all be linked together and it will be very personalised because you will be able to set up what you care about and the way you want to work with information and applications.

The kind of time-frame I've talked about for Internet being pervasive is five to 10 years. There are several places where this will happen even more rapidly. Intranet is the term for simply using the benefits of the Internet and sharing information inside a company and the idea is that if you have sales results, you put them on the network instead of printing them out. People have done that with the old networks, but it was just too hard for people to find the right file, to know the format. If you get confused, whom do you ask? It was too difficult. What you do now is just put a couple of links on somebody's computer desktop and whenever he wants to see the sales data, he clicks on that sales link and right there it describes for him exactly what's new. If you have a question, you click on a little thing that says that's the place to do it and you just type in what you want to know. Document exploration is made very easy.

You can use the current tools used to create documents and get to annotate those documents and view them in different ways. There is a huge payoff here because it's using the PCs and networks that are here today. There is no problem with the speeds because it's the local network. Every company can go in and think about scenarios that make sense for them.

We do many things using the network. When we have a charitable fund-raising campaign, our United Way Campaign, we send around a little mail message that says if you want to give your fair share, here's where to do it; if you want to be done with it, just click here and we'll never bother you again; if you want to know about the agencies and designate to them, then follow these links and find out in depth how agencies spend money, what they've done and what different people think of them. You can get involved at any level that makes sense for you. Even with things like personnel reviews, we send out a spreadsheet with the history information and you type in the changes. It's all done electronically so the amount of paperwork has been drastically reduced and the efficiency of being able to know what is going on is greatly increased. All the information about an individual customer is brought together in one place so everyone who works with that customer understands exactly what we're doing. In other businesses there are great examples of how this can be done. It requires stepping back and thinking about information flow. Technology is no longer a limiting factor.

As we move from inside the company to working with vendors and customers, we get additional scenarios. We get things like conferencing with your lawyer and talking while you edit a contract together or going to your bank and checking your statement, indicating you have some questions. We get information publishing, the ability to make travel reservations and deciding what insurance to buy. Today, when I want to buy an obscure book I go to the web and do a search command. There are many services and I can get the books delivered within 24 hours. Even products that you're not going to buy on the web, like cars, you can see how people have evaluated the latest models, see what they have thought. You can send mail to your friends asking their opinions on the Lexus or the Cadillac or whatever it is you're considering. It becomes a way of making intelligent decisions.

Now I'd like to give you a chance to actually see the web so I'll ask Ken Nickerson to come up and use our latest browser to show you some examples of what the web provides.

Ken Nickerson

Ken Nickerson demonstrated a web browser application showing the wealth of information available in the web about Toronto and Toronto businesses.

Bill Gates

Great, so there's the web as it exists right now. What we want to do is give you a sense of how this is going to improve. Most users of the web today are fairly sophisticated computer users but if you compare how easy it is to get information off the web versus just looking in the newspaper or calling somebody up, it's still a little bit harder to do. One of the fixes we need to make is when you turn on your computer, it's immediately there. Right now, it takes a long time to come up. We need to make sure the computer is out there finding information for you and helping you out by alerting you to things you might care about. Part of this we need to build into the operating system so that there aren't a lot of extra pieces to install and mess around with. Just one button you click on and there you go. Instead of having the pages just sit there, we want them to be very lively--almost like watching TV.

If you're interested in taking out a loan, you can type in what your income is and see what that means. If you see a new tax proposal you can type in your situation and see how it affects you. If you're reading about legislation, the computer will know your zip code and it will show you how your representatives happen to vote on that. You just click to send the mail and say that you agree or disagree with what they did.

In order to activate the web and bring it to life, we have to take programming tools and make them work on these web pages. We also have to let creative people--graphics artists and animation people, who have been working on films--come in and get involved here. In fact, the demand for people who are good at doing design is far greater than the number of people available today. If you are a web designer, a web master, with those skills, you are in hot demand and the salaries of those people are going up. We are building software tools that make that easier and easier. It will never be automatic. A word processor, as great as it is, can't write things for you, but it helps out. It gets rid of those mundane steps so there are a lot of pieces coming together here. For example, if somebody owns a store, a flower shop say, and he wants to offer people the ability to dial in and browse the flowers he has, make orders, and see the status of an order, we want to make that just a few weeks work for him to set it up and he doesn't have to know anything about computers. We are making building blocks that will go in and, because they are high volume building blocks and because they're built on PC hardware technology, it's all going to be fairly inexpensive. So the kind of experience you get on the web will be far better than it is right now. Today, it is a lot better than it was a year ago. The kind of searching that Ken showed you previously, the richness of those pages, it's a step forward.

The next thing I'll ask Ken to show you is a little scenario which has to do with shopping and this is going to assume a few improvements that are coming out in the next year, a little higher speed connection, but I think you'll be able to compare that with what you just saw and see how much richer we expect it to get in a very short time.

Ken Nickerson

Ken Nickerson demonstrated a hypothetical purchase of ski equipment on the Internet showing how a customer can accrue a wealth of useful relevant information targetted to his interests.

Bill Gates

Great. So, we've talked about the hardware improving and some of the things that extra bandwidth will be able to provide. There are some breakthroughs coming in software as well, and these are a little bit tougher for which to predict timing, but, given 10 years, I feel very confident all of these will happen. We'll be able to locate your behaviour and predict other things you're interested in. So, bringing up news will be very straightforward. We'll also be able to understand spoken speech. The computer right now can do a very good job of voice recognition. Demonstrations are good but whenever you get it out and start working with it, it has a hard time, particularly if you are working with a very large vocabulary. It certainly will re-define the way we think of the machines when we have that voice input. Another problem that's been very tough is handwriting input, being able to have a little tablet that understands what you're writing. A few years ago the industry came out with a number of products and they just weren't good enough. But, in a few years I think we'll try again and if that doesn't work, we'll wait another couple of years and try again. People are very demanding about the accuracy of these systems. Even though we're at 99 per-cent accuracy now, that's not enough. I think if we have 99.9 per cent accuracy people will gravitate to it.

A final kind of advance is the idea of the computer watching things. We're going to have little cameras in these computers to do video conferencing and that camera will be able to see when you get up from your PC, when you go back to your PC, who's sitting there. You'll be able to make gestures like scroll up the document you're reading or throw it away. If you gave it permission, when you send mail to someone, you could have it send back a little photograph of their initial reaction to what your mail message was. They wouldn't have to send you any type of response at all.

Having visual recognition really brings the computer into the environment. Even for game playing, you just pick up a little plastic steering wheel and start steering and it sees exactly what's going on there. It will be a very different device from the sort of clunky large thing we think of today.

I think it's important to keep in mind that kids who are growing up today are getting accustomed to having these tools available. In fact, we think the PC is such a great tool that most of the philanthropic things we're involved in have to do with access; making sure it's easy for people to get in and use this in the same way that society decided hundreds of years ago that libraries were a great thing because everybody should have access to books. It was a lot of fun this morning to go to a very impressive library here in Toronto and announce some work we're doing with them. That issue, having access, is only important if you believe as I do, that what we've got here is very potent and to the level of being something that will almost come to be defined as part of literacy. I really have no doubt about that and that's why I think it's great to start engaging government and companies and thinking about how we're going to get these things available. The future I'm describing is not without its challenges. People will worry, not only about the access issue, but about privacy; they'll worry about being left behind; people will worry about rural areas that aren't getting connected up. They'll worry about the kind of material, pornography, or otherwise that might be available through this medium and it's great to have people focus on those issues. I see this as a tool that will be used in education that will allow kids to pursue their curiosity, that will allow business to be far more efficient. I certainly see the positive side to this and feel very lucky to be involved in helping it all come together. Thank you.

The appreciation of the meeting was expressed by John Tory, President and CEO, Rogers Multi-Media Inc. and Second VicePresident, The Empire Club of Canada