AT&T, OpenTV, others move on interactive TV plans

Two years after groundbreaking deals between technology companies and cable companies, the promises of interactive TV are only marginally closer to reality for the majority of U.S. consumers. That was made clear this week at the Western Show here, an annual confab for the cable industry.

Still, although progress has been slow, there has at least been a steady shuffle toward enabling e-commerce, email and enhanced TV functions--such as on-demand programming and information.

All told, the market for interactive TV offerings is reaching only a smattering of customers nationwide. But the outlook may be improving. Jupiter Communications projects that these services will reach 30 million U.S. households and generate $10 billion in revenue by 2004.

One company the industry is watching closely is AT&T, largely because Microsoft invested $5 billion in Ma Bell to ensure that its software would be used in digital set-tops.

Phil Goldman, general manager of TV platforms for Microsoft, said in a panel discussion earlier this week that his company is "on the eve of large-scale rollouts of advanced digital cable."

"Microsoft has recognized TV as a first-class business opportunity and business platform. We've broken out of 'just the PC' thinking," Goldman said.

With the supposedly bright future for TV in mind, the deals came fast and furious this week. For instance, OpenTV, a provider of software for interactive television, said its software will be available for use on General Instrument's DCT 2000 series TV set-top boxes, and that the two companies will work together to sell OpenTV's products.

GI, the largest cable equipment provider in the United States, also extended its recent equity investment in OpenTV and has warrants providing for the potential issuance of up to 700,000 shares of OpenTV's common stock to GI.

OpenTV's deal is significant because much of the development activity so far has focused on GI's DCT 5000 series boxes, which are only now starting to become available. With a greater number of 2000-series boxes available in cable systems such as AT&T's, the possibility exists for OpenTV to quickly become a significant technology supplier in the U.S. cable industry.

The company has not announced any deals with U.S. cable operators yet, but may have improved its chances. AT&T's plans for interactive services, for example, currently revolve around the DCT 5000, which uses Microsoft's Windows CE operating system. The company could offer a more limited range of interactive services--Web surfing, for instance, would likely be precluded--using Open's software, in addition to a "premium" interactive TV service. AT&T executives declined to comment on the issue.

Liberate Technologies, which has seen its stock soar on a variety of product deployment deals, made a similar announcement with GI, saying that the two companies would jointly market Liberate's software for interactive TV.

Meanwhile, Wink Communications said its software would be deployed on all digital TV set-tops by Insight Communications, the eighth largest cable operator in the U.S., in select markets starting in early 2000. The company's software is also being used by all digital set-tops deployed by Charter Communications in the Fort Worth, Texas area, with more sites scheduled to use the software next year.

AT&T's plans for interactive TV offerings are considered by many to serve as a bellwether for how the cable industry as a whole will react. The cable and broadcasting industries have been looking for ways to boost revenues, and selling products alongside programming is the best way to do that. Whom they will enlist to do that is another matter, although in all likelihood, a number of companies will be involved in this nascent industry, with no one able to dominate.

Meanwhile, Microsoft was already supposed to have started tests of interactive services in two cities served by AT&T's Broadband and Internet services unit, formerly known as TCI, no later than the end of 1999. Now, AT&T executives say they expect that between 300,000 to 500,000 customers should have these services available sometime in the third or fourth quarter of 2000.

It's not entirely clear as to why the trials have been put off. But it's probably less about technology issues and more about how to proceed with the business.

AT&T has been publicly demonstrating the user interface for its interactive TV service for the first time. The interface, or portal page, is a key element in deciphering underlying business decisions that the company is still facing.

For instance, a user can gain access from the portal to a certain basic set of Web sites it has set up content deals with. These are the places customers would go for online shopping and local information services such as news, weather and sports. AT&T has also established a centralized operations center for monitoring and distributing enhanced TV content to its various franchise operations that are dispersed throughout the U.S.

In effect, AT&T has decided to become the gatekeeper to Web content, although David Rudnick, vice president of AT&T's Interactive Offerings Group, said the company may also decide to partner with others to offer access to a full array of Web sites. Potential partners include, but are not limited to, Excite@Home and Microsoft. America Online is also attempting to find a spot at the table, although its efforts have been criticized by cable industry executives here as too heavy handed.

Meanwhile, the competition to supply AT&T with the various components of the service remains heated. Microsoft, in its demonstration of the AT&T TV portal, didn't show the electronic program guide (EPG) section, arguably the most used feature of digital set-tops. The EPG is used to navigate through the growing array of programming. Sources at TV Guide say that's because they haven't provided the EPG application to Microsoft, which is trying to sell AT&T its own EPG that's based on the service it has developed for WebTV. TV Guide already has a contract to provide a co-branded EPG to AT&T, according to the source.

That leaves AT&T in the difficult position of making sure that each piece works together and looks similar, while leaving open the possibility for different sections of the portal to be sponsored--perhaps for a fee--by different companies. In fact, each channel may have to negotiate whether its logo will appear on the interface of the portal, although no such decisions have been made yet, say those familiar with the company's plans.