For the Cheerleaders, here is a POSITIVE article from USA Today:
Firms team up to jazz up set-top boxes
NEW YORK - Television viewing is such a simple thing to do. It's so uncomplicated that about half of the USA's 65 million cable subscribers don't even use a decoder box. They just plug the wires directly into their cable-ready sets.
But the country's biggest cable and computer companies are betting they can revolutionize that arrangement beginning later this year.
Several recent high-profile deals - involving Tele-Communications Inc., General Instrument, Sony, Microsoft and Sun Microsystems - have accelerated a drive to provide most cable subscribers with a new kind of set-top box that's packed with computer power.
There'll be several models with features built around the equivalent of a Pentium processor. That juice will help TV viewers - most of whom get only 40 to 50 channels on their cable systems now - access up to 200 channels. Most will be able to choose TV shows from an interactive program guide that lets them call up, for example, all the comedies at 10 p.m. Tuesday - and reviews. And they'll be able to select different camera angles for sports events; listen to 30 channels of prerecorded, commercial-free digital radio; surf the Internet; send electronic mail; instantly buy goods and services; and bank.
Some customers could use cable TV connections to make phone calls, and enjoy full-time, high-speed Internet service on their personal computers. Several models of digital boxes also might connect video-game machines, allowing households to play against each other.
"We're talking about changing the cable industry, and the process is more like Star Wars than putting out boxes," Rogers Communications CEO Edward Rogers says.
While most of the news about boxes has involved deals from TCI, executives are converging in several venues to shape the next generation of TV services.
"Time Warner and TCI are the two linchpins in North America," Oracle CEO Larry Ellison says. "And (News Corp. CEO) Rupert Murdoch is the linchpin outside of North America" through satellite services such as BSkyB and Star.
Consumers are key
The dealmakers' enthusiasm is intoxicating. Indeed, Wall Street isn't just counting on the new boxes to revitalize cable - which saw its customer ranks grow a mere 2% in 1997. Investors want interactive TV to transform entertainment and commerce. "To be successful, the demand for new boxes has to be truly ubiquitous," Sanford C. Bernstein analyst Tom Wolzien says.
The theory is that advertisers and service providers would help pay for the equipment - and ensure nearly universal deployment - if they believe a mass audience might buy goods or services via TV. Consumers, inspired by an ad, could aim the remote control at the set-top box and complete a transaction with the flick of a finger.
"We're talking to a plethora of consumer products companies, financial companies and technology companies" that might want to interact with viewers, TCI President LeoHindery says.
Yet several executives warn against euphoric projections.
"Nobody knows for sure how consumers will vote," says Time Warner Cable's chief technical officer Jim Chiddix. "That's the economic engine that drives all of this."
The boxes, which cost about $300 apiece, will be available from cable operators and retail outlets, such as Circuit City and Best Buy, though some operators might opt to lease them. In addition, high-speed Internet access - where available - could cost an extra $40 a month and a new tier of digital channels about $10 a month.
The challenge
The challenge of winning consumers doesn't discourage TCI chief John Malone - cable's top techno-evangelist. He's leading an effort, which includes Time Warner, Comcast and Cox, to pay General Instrument $4.5 billion or more for at least 15 million new-generation set-top boxes.
TCI, which has nearly 14 million subscribers, could get as many as 12 million of those units. "Every TCI customer will be offered them, and within three to four years virtually everyone will have one," TCI's Hindery says. While the company won't force subscribers to take the boxes, he says he can't envision many holdouts. "It's an unbelievably compelling product. . . . The world I'm proposing is of seamless digital video, digital data and digital phone."
The telephone service plans are still embryonic, but potentially dramatic - particularly if
TCI enlists a powerful partner. That's a decision Hindery says he'll make "shortly."
While he won't identify potential candidates, AT&T would be a natural. It recently paid
$11.3 billion for Teleport, a cable-controlled business phone service. And the
long-distance company is preparing to invest $1.25 billion in @Home, a cable-controlled
high-speed Internet service.
Different approaches
Meanwhile, TCI is busily cutting deals with other players. This month, the company designated Sun's PersonalJava as the basic computer language for the boxes and Microsoft's Windows CE as the leading operating system.
TCI also encouraged Sony to pay $188 million for a 5% stake in General Instrument. That alliance might help to sell the boxes in retail stores. "We're not a brand name company, and they're the best in the world," General Instrument CEO Ed Breen says.
TCI is leading the charge for the superboxes, in part, because the computer power will help to stuff channels and services into its low-capacity wires. In 1996, TCI slashed its capital-spending plans while other operators continued to invest billions expandin bandwidth.
As a result, only about 38% of TCI's subscribers are in systems that could easily provide two-way communications via cable.
By contrast, Time Warner, MediaOne, Comcast, Cox and Cablevision Systems could offertwo-way service to 54% to 80% of their customers, according to Salomon Smith Barney. Those figures are expected to rise quickly.
While companies with higher bandwidth are excited about new computer-powered boxes, most still prefer less-expensive units. And they remain especially interested in delivering more entertainment, which they consider far less risky than the shopping and banking services that TCI and others dream of offering.
"We'd rather focus our energies on what we do best," says Kevin Leddy, Time Warner Cable's senior vice president of marketing.
Last year, the company ended its extravagant three-year interactive television experiment in Orlando, Fla., amid reports of software snafus, cost overruns, and lackluster consumer response.
Yet, that humbling experience leads Time Warner to believe that its high-capacity wires - and 1 million high-powered boxes on order from Scientific Atlanta, Pioneer and Toshiba - will enable it to economically deliver a long-awaited service: video-on-demand.
Time Warner will test the service late this year, enabling subscribers to order and watch movies with the same flexibility to stop and rewind that they'd have with a video cassette. The company probably won't begin to offer it commercially until late 1999.
Others might beat Time Warner. "You'll see systems launching with video-on-demand in late 1998," says GI's Breen. "We're in field trials and the technology works."
A slew of potential problems could derail cable's convergence effort. Manufacturing delays, software glitches, pricing problems and an economic downturn, for example, might topple the models that excite executives today.
If that happened, TV would remain simple. But after glimpsing some of the snazzy new services on the drawing boards, disappointed consumers might find that TV is not as much fun.
By David Lieberman, USA TODAY |
