(COMTEX) Cable TV gambles on new set-top box
Cable TV gambles on new set-top box
Egged on by the computer industry, cable TV operators are poised to
spend billions of dollars to equip their networks for a new,
interactive breed of television.
Much of the spending will be on an advanced converter box being
designed with help from Microsoft, Sun Microsystems and other
computer-industry heavyweights. The box will let TV viewers surf the
Internet, play arcade-style video games, pay bills and even hold video
conferences.
The question is, do people really want to do that on their TVs?
Industry insiders say consumers crave more of what television gives
them today: movies, sports and other video entertainment. People also
might be willing to pay for the ability to send and receive electronic
mail on their TV sets. How the public will respond to other services is
anybody's guess.
Nevertheless, the cable industry is starting to deploy thousands of the
boxes, and millions more are on order _ in part because some executives
believe they have to offer interactive services to find out what people
will buy. While many cable operators are moving cautiously, top
executives at Tele-Communications Inc., the Bay Area's dominant cable
provider and currently the nation's largest, say they plan to put at
least one interactive box in every customer's home over the next
several years, starting in 1999.
If the industry keeps its pledge, over the next three to four years the
new boxes could bring consumers an open window to the Internet, a ready
supply of community information, a larger and more convenient source of
entertainment, even alternative telephone service. They could also
bring more of the cable industry's least popular feature: higher prices
for unwanted services, delivered at glacial pace with insufficient
customer support.
''You'd have to say that this represents a gamble,'' analyst Andy Belt
of Renaissance Worldwide Inc. said of the cable operators' move toward
interactivity. ''A good gamble. It's one I'd be taking if I were
them.''
Some analysts say the cable industry is more focused on competition
from satellite TV services than on offering new services. They also
note that TCI and other companies have been promising such services for
years.
Interactive TV has been proclaimed as the Next Big Thing. Cable
operators and telephone companies both launched high-profile
experiments with interactivity a few years ago, but discovered that the
high costs made the services impractical _ a stutter-step that led to a
backlash on Wall Street.
This time, however, some of the largest cable operators are moving
ahead with tests and real deployment of interactive services, even
though they say they're not sure what the public wants. Said John O.
''Dubby'' Wynne, president and chief executive of Landmark
Communications, ''The truth is, we're all struggling, trying to figure
that out.''
Top names in the computer industry have urged the cable companies on,
arguing that high-capacity cable networks are ideally suited for
interactive and ''multimedia'' programming. One of the leading
advocates for interactive TV is the keynote speaker at the Atlanta
convention: Microsoft Chairman Bill Gates.
The advanced boxes are expected to work much as today's converters do,
with viewers using their remote controls to call up conventional TV
programs or interactive services. Although services like e-mail may
require a wireless keyboard, most of the interactive functions are
expected to work with the push of a button.
For example, viewers might use their remotes to display a menu of
services of their TV screens, then with a series of clicks launch an
interactive music service, pick the style of music, choose a music
video and order a CD by that artist.
The industry's last major foray into interactivity came about five
years ago, when Time Warner, Bell Atlantic and others built pioneering
two-way networks for video on demand, electronic commerce and other
advanced services. These trials quickly demonstrated that the
technology wasn't ready _ let alone the public.
Since then, two things have happened: The cost of computing power has
dropped steadily, and the Internet metamorphosed from a stuffy research
forum into a vivid electronic billboard, newsstand and shopping mall.
The trove of material developed for the Internet could help boost the
appeal of interactive TV.
The Internet has yet to reach most homes, however, and it's far from
clear whether people want the World Wide Web beamed onto their TVs. The
demand for devices that allow people to view the Internet on TV is
still being tested, with some critics arguing that Web sites are too
static to match the swirl of energy and motion people expect from TV.
The most popular service, Microsoft's WebTV, has garnered roughly 325,
000 subscribers nationwide since its introduction in 1996. Its chief
competitor, NetChannel of South San Francisco, recently ended its
service for lack of subscribers.
People who surf the Web on their home computers have clamored for the
cable companies to provide high-speed Internet access for their PCs.
Those people are the real market for interactive services, said Jan
Gullet, president and chief executive of PlanetWeb of Mountain View.
''People don't know what interactive TV is; they don't know what they
want it to do,'' said Gullet, whose company makes software to display
the Internet on TV and other devices.
The cable industry has been deploying high-speed cable modems for home
PCs in a limited number of cities, using affiliates like (at)Home Corp.
of Redwood City to provide Internet access at top speeds. That service
has quickly attracted more than 200,000 users.
Cable companies want to push interactivity beyond homes with avid Web
surfers, however; that's why they are putting high-speed cable modems
into new converter boxes, enabling them to bring the Web to anyone with
a TV.
The key, many companies believe, is to give the Web the look and feel
of regular TV programming.
That's the mantra for many of those who are trying to bring
interactivity to cable: make it look like TV. The fear is that people
will be repelled by anything else.
''The thing that they want more than anything is just video,'' said Ken
Morse of PowerTV, a Cupertino company that develops software for
advanced set-top boxes. ''That's the cornerstone of why set-tops exist,
and it will always be the case. ... If we think we're going to change
people's viewing habits overnight, we're sadly mistaken.''
PowerTV, TCI, set-top box manufacturer General Instrument and Source
Media, a provider of interactive services, commissioned a survey
earlier this year to explore what kind of interactivity people might
want. The survey, which polled 600 cable subscribers, found that the
likely market for such services was a little less than a fourth of the
viewers _ not exactly a craze, but stronger than the demand for Cinemax
or Showtime.
The survey found no single ''killer application.'' Instead, it
suggested a package of the six services that generated the most
interest: music video and CD previews, continuous news updates,
Internet access, health reference materials, games, and shopping. It
also found that consumers were willing to pay more for categories where
there was a potential for them to do something, not just get
information.
Two other tidbits from the survey revealed that viewers may not be
ready to stray far from traditional TV. The proposed service that drew
the most enthusiasm would allow viewers to watch one show while
videotaping another _ hardly a leap into the future. Almost
three-quarters of viewers surveyed also wanted interactive services
confined to a separate channel, not layered over their regular TV
programs.
One of Source Media's ventures, Interactive Channel, takes just that
approach. Viewers tuned to Interactive Channel can play games, read
local news and entertainment listings, surf the Web, send and receive
e-mail and order from the J.C. Penney catalog.
At an April trade show for broadcasters, Clinton Wolf, a vice president
at Interactive Channel, said the channel developed a devoted following
during a recent trial in Colorado Springs. Twenty percent of the
viewers tuned to the channel at least once per day, and 27 percent
shopped there at least once a week, Wolf said, adding that the average
subscriber paid almost $24 per month in fees for the channel's services
_ more than the average person pays for a dial-up Internet access
account.
The interactive service that cable operators seem most interested in,
though, is video on demand _ a pay-per-view approach that lets viewers
decide when to watch a program. The service is so convenient that
consumers in the Time Warner and Bell Atlantic trials ordered virtually
all their movies that way, ending trips to the local video store,
company officials say.
The problem was, people didn't order enough movies to justify the huge
equipment costs associated with the service. ''Market trials have been
totally successful in proving that it is a non-commercial product,''
said analyst John Moroney of Ovum Inc.
Equipment costs have plummeted, however, and several operators are
trying again to make video on demand a reality.
''The Internet taught us that we want what we want when we want it,''
said Jonathan Taplin, co-chairman and co-chief executive of Intertainer
Inc., an entertainment-on-demand service. ''Everything else works on
your time schedule but TV. If there's an evolution that digital can
offer, that's it.''
The list of capabilities for the advanced boxes goes on and on. One of
TCI's plans is to offer home banking with Bank of America and Intuit
Inc. of Mountain View, enabling people to pay bills, balance their
checkbooks and even file tax returns on their TV.
The lack of proof that the public is ready for interactivity has some
cable operators hesitating at the threshold. ''We're not of the ilk,
'Build it and they will come,''' said Jim O'Brien, president of Jones
Intercable Inc., the nation's eighth-largest cable operator.
Other top operators are forging ahead. Time Warner is expected to
install more than 1 million advanced converter boxes this year. TCI
expects to install 1 million basic digital boxes, which it is using
mainly to provide more channels and an interactive program guide. TCI
also is the leader of a group of cable operators that announced plans
to buy at least 15 million of the advanced boxes, to be delivered over
the next three years.
If the purchases actually take place, the cable companies will have
invested more than $5 billion to equip their systems for an interactive
future. This spending is on top of the multiple billions being spent to
develop higher capacity, two-way cable networks _ a process that still
has a long way to go.
Noting how much work has yet to be done to prepare cable networks for
advanced services, industry officials counseled patience. Others noted
that the limiting factor for many of the new services is more than the
technology or the cost, it's the cable companies' ability to answer
customers' questions and solve the problems they encounter. And
customer service has long been the industry's black eye.
''Everybody's got to be patient here,'' said Steve Effros, president of
the Cable Telecommunications Association. ''These are extremely
expensive, complicated infrastructures to build. There are all sorts of
battles over standards and what qualities consumers want and how they
should be able to buy them.''
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