@Home unit developing interactive TV

Already the leading cable modem service, @Home is stepping up its efforts to develop an interactive television product that may be launched as early as the third quarter of 1999, according to executives.

The data-over-cable company will soon hire about 40 new engineers to speed programming efforts on the company's first foray into TV-based Internet access, Jeff Huber, @Home's director of set-top products, said in an interview with CNET News.com.

The new engineering hires would double the number of people currently working on the project--tentatively called @Home TV--and will come on board within the next two months, Huber said.

@Home's move into the set-top-box-based interactive TV market is significant because the industry is only beginning to take shape. Any early-to-market advantage is likely to benefit the Redwood City, California, company--or whoever gets there first--into the next century, when many analysts foresee the set-top box becoming the center of a networked home.

Today's TV sets already are the focus of most home entertainment centers, and coupled with advanced set-top boxes, are expected to become the central nervous system for several in-home devices linked together by Internet Protocol, the standard that shuttles data across the Internet.

A look behind the scenes
@Home has been working on what Huber calls the "navigation shell," the look and feel of the interface. Huber's team wants an "organic" look, free of many hard edges and sharp contrasts that will annoy the eye.

"Instead of taking the Internet and trying to plop it on the TV, we're trying to make it a more seamless product," Huber said, alluding to early criticisms of WebTV's television-based Net access service.

As seen in a demonstration for CNET News.com, users of @Home TV will be able to purchase pay-per-view movies, buy products that appear in commercials, and check which programs are playing on an interactive menu without switching channels. The company expects that video conferencing and telephony functions will be available later.

Additionally, because General Instruments? forthcoming DCT 5000 set-top includes a built-in DOCSIS-compliant modem, users (including @Home subscribers) will be able to surf the Internet and use email while watching television. The set-top box will also support IP telephony. DOCSIS stands for in Data Over Cable Service Interface Specification.

The @Home product is also expected to be available using Scientific-Atlanta's Explorer 2000 box, which is already available.

Huber said one of the advantages of @Home's recent purchase of Excite is the personalization functions the Net directory brings.

"Personal information will cross over from the PC to the TV," he said. "People shouldn't have to worry about user names and IDs."

Huber's team is also working to standardize @Home's PC-based interface with the upcoming TV-based interface.

"The very strong feedback we've gotten from customers is television is not a replacement for the PC, it's a complement," he said.

All eyes on the market
By taking a look at the numbers it's easy to see why companies are anxious to deploy interactive data services on the TV.

Last year 48 percent of U.S. households owned a personal computer, according to Dataquest. But nearly every home in the nation owns a television set; there are about 110 million TV households in North America.

"We want to reach out to the half of America that is on the couch and not using a PC, while still appealing to the technophiles and enthusiasts that will likely be the early users," Huber said.

Microsoft and its WebTV Networks unit have been offering Internet access via the television since the software giant's acquisition of WebTV in April 1997. Although it has its critics, the WebTV service was one of the earliest successful Net-on-TV products and maintains a loyal customer base of 700,000 subscribers.

In an attempt to expand its customer base and delivery options, WebTV signed a deal with EchoStar Communications last month. The deal was viewed as a way for WebTV to speed its data download capabilities.

Analysts said there was a false start on the interactive TV front four or five years ago, when bandwidth the largest obstacle to delivering a dynamic product.

But now there are as many as 40 companies attempting to go beyond WebTV's initial successes and rekindle widespread interest in truly interactive digital television, not just Web surfing on the tube.

Tele-Communications Incorporated, the largest shareholder in @Home, has an agreement with General Instrument to buy 11 million advanced set-top boxes, including the DCT 5000, over the next three to five years. General Instrument has orders to sell another 4 million units to other cable operators over the same period.

GI will begin significant volume production of its DCT 5000 box by the middle of the year, according to Dave Robinson, senior vice president and general manager of digital network systems for GI.

But because the boxes are built with an "open architecture," meaning they can use one of several different operating systems specified by the cable operators, General Instrument's rate of production for the DCT 5000 will be dependent upon the progress it makes with the software integration, Robinson said.

@Home's Huber said the company is working with "optimized" versions of Microsoft?s Windows CE and Sun Microsystems' Personal Java.

Much of @Home's network was developed with interactive TV in mind, meaning only about 20 percent of the company's equipment will need to be modified for the TV-based offering, he said.

Slow to come?
Robinson said DCT 5000-based interactive TV offerings will likely be available in some markets later this year, but larger deployments won't be seen until 2000.

Analysts don't seem to share @Home's optimistic predictions of when truly interactive television will come to fruition; Huber did say, however, that @Home's offering might not hit the market until late 1999 or early 2000.

"Realistically it's a couple of years before we see a significant impact," said Gary Arlen, president of Arlen Communications, a research firm specializing in interactive media. "And it's probably 2004 or 2005 before we see mass deployment."

Much of the early success of interactive TV offerings will depend on the quality of the programming, Arlen insists. "The good part [for @Home] is their owners [the cable operators] can deliver to either screen in the house," he said, referring to the PC or the TV.

While cable companies, and their partners, are well-positioned to lead the interactive TV industry, some analysts say there is little incentive today to develop next-generation television content.

"Cable companies right now are finding incremental new revenues by rolling out high-speed Internet access using cable modems and also finding new incremental revenues by rolling out local telephone services," said Gerry Kaufhold, an analyst at Cahners In-Stat Group. "So, the push toward true interactive programming on cable has been somewhat delayed because there's money to be made in the near term doing cable modems and telephone services."

But within a couple years cable operators will need to focus on new programming options, such as interactive television, to differentiate them from direct-to-home satellite broadcasters' encroachment in the multi-channel video markets, Kaufhold said.

"Interactive television will be most powerful on cable because of their high-speed two-way pipeline, but in the near term there is not a compelling business model, nor is there any compelling competition that prevents them from just going after incremental revenues doing cable modems and telephone service," he said.

Ultimately cable operators will want to develop many different interactive services that leverage their networks and exploit the advantages of a two-way fiber optic-coaxial cable-based system, Kaufhold said, "because telephone companies and DBS [direct broadcast satellite] operators can't do that now."