Rivalries, technologies confuse set-top market

Many cable industry executives in attendance at their annual national convention, as well as officials from the Federal Communications Commission, latched onto railroad metaphors for describing how the infrastructure of the cable industry needs common ways of connecting and sending information.

Standardization, they remarked with great consistency, is the key to future prosperity. But back in the real world of the 20th century, frustrated software and content developers are finding more than a few potholes on the connection road and on-ramps that haven't been built yet.

And while there is a growing list of high-tech companies offering ways to implement interactive services, the content providers--i.e., cable and broadcast networks--are either standing on the sidelines waiting for standards to emerge or placing bets on a potpourri of technologies.

The reality is this: Combining television with interactive services is a still big gamble, but one many are willing to take for potentially astronomic returns.

The lure is inescapable. Interactive television mean networks and advertisers can potentially know more about who is watching (and doing) what, and what they are buying. More-targeted advertising with better response rates has long been a goal in the television industry. And what the industry is banking on are the new digital TV set-top boxes running new kinds of applications and content.

Placing bets on technology
Microsoft cofounder Paul Allen, the billionaire owner of cable operator Charter Communications, predicted in a speech at the convention that digital set-top boxes with increasing power and storage capacity will lead to a host of new applications.

"These advanced new set-top boxes are a whole new platform for applications," he said. "We can't predict what all those [applications] will be."

And therein lies the problem for content developers, who have to place bets on which software and hardware platform to target and on which pipeline to use. These pipelines include satellite, digital subscriber line, over-the-air broadcast, and cable.

Not only that, but content developers have to figure out whether to enhance a live broadcast, offer links from a program to a Web site, or if they want to be placed in, or create, a "walled garden," or virtual mall of interactive content related to programming. And the choice could be vital, because better consumer response to the right technical model means better advertising opportunities and more money.

No single answer
There isn't one answer, either, say industry insiders and observers alike.

"There will be a multitude of platforms and different operating systems for every [cable operator]. By its nature, there are different states of technology being deployed in different areas at different times," in the cable industry, said Hal Krisberg, chief executive of Worldgate Communications, a provider of interactive software technology to cable operators.

However, that's not a scenario content developers want.

Bob Zitter, senior vice president of new business development at HBO, said at a panel discussion this week that standardization of enhancement data and the handling of video-on-demand streams was a critical issue for developers, because they don't want to come up with 20 different screens of interactive content for one show.

Content providers are having a hard time figuring out what to do. Some, such as NBC, are betting on as many different technologies as they can. Others, such as cable network programmer Court TV, are being more circumspect.

"We're exploring all the usual options. Because we dominate our [program] niche, we have an incredible opportunity" in bridging commerce and content, said Betsy Vorce, senior vice president of communications at Court TV. However, "we have to plan for a realistic future. We will figure out what we want to do [in terms of building brand identity] and then decide what technology to use," she said.

In the meantime, the company has allied itself with Yahoo to do chat rooms based on legal issues and Broadcast.com to stream clips of trials to consumers.

A growing number of the film and music studios are letting Intertainer do the heavy lifting of working on what it calls its "broadband programming service." Studios such as Warner Brothers are working with the company, and a number of Disney's operations, including Buena Vista and the Disney Channel, are on board as well. Sony Music just signed on to provide videos for use on the service, although music won't be available for digital downloading just yet.

"We believe the history of interactive TV is just about to be written. What we need is a common language to write to," said Jonathan Taplin, Intertainer's co-chief executive at a press conference.

The need for a common language is important, because Intertainer is developing its service for use over both DSL and cable networks. It already runs on Scientific-Atlanta's Explorer 2000 TV set-top and will be available on General Instrument's DCT 5000 set-tops. The company just announced that they are working on making the service available on Microsoft's "TV Platform," which is basically what used to be called the WebTV platform, but is now being targeted for use in cable set-tops.

Despite fears that Microsoft will be able to come in and duplicate its command over the PC industry by spreading the use of the Windows CE platform, there is also a clear need for standardization, a factor which could aid Microsoft.

But various efforts in the industry mean it's not clear if Microsoft can duplicate its PC success. There are two main standardization efforts which could potentially limit its ability to dictate market trends. One, being worked on by CableLabs, the industry's research consortium, is attempting to set hardware and software standards that would make it easier for content and applications to run on any platform. That effort is progressing slowly, though, leaving room for a company to come in and set a de-facto industry standard merely by getting more companies to use their technology than others.

Another effort may produce results sooner. The Advanced Television Enhancement Forum (ATVEF), whose members include Microsoft, Disney, CNN, NBC, Intel, and many others, is getting ready to license its technology for use in combining Internet content with television programming. In essence, by emphasizing the use of standard Internet technologies such as HTML, content will be easily re-usable on a variety of platforms, including TV set-tops, handheld devices, and PCs. This will have the effect of reducing the control any one company can have on the development of interactive television.

Watching AT&T
But big names could still rule. In the cable industry, at least, AT&T's choice of hardware and software could become a de-facto standard. The company's cable arm, dubbed Broadband and Internet services, has increased clout now with its ability to reach such a large portion of the American public through its TCI and MediaOne acquisitions. Where AT&T goes, other cable operators are sure to follow, say industry insiders.

Some insights as to the company's thoughts on interactive television surfaced at the Cable 99 convention this week.

Laurie Priddy, senior vice president of advanced technologies at AT&T Broadband and Internet services, said in a panel discussion that interactive services is "not about the Internet on TV."

"We have to keep it simple, but take risks," she said, offering up a vision of what she called a TV-centric device where AT&T is still making programming selections, both in video and interactive offerings. There needs to be an easier way of getting consumers used to using the remote to respond to text on the screen, and eventually a keyboard, she said.

By focusing on the TV experience, the company's electronic programming guide becomes a key area of focus. It becomes something analogous to a portal for the TV that aggregates and organizes TV content, and becomes the "first screen" that users will interact with on a day to day basis. What arises from this scenario is that the screen real estate AT&T controls becomes more valuable to content providers if there is only a limited amount. Unlimited access to Internet content from the TV diminishes that control.

Development of something as seemingly innocuous as the electronic programming guide then also becomes an order of magnitude more complex as a variety of components are stitched together--and a variety of companies, each with their own interests, are involved.

AT&T, for instance, is working with Excite@Home, Microsoft, and TV Guide interactive on the EPG for its most advanced new TV set-tops, and all parties want to see their logos placed somewhere on a screen.

"The issue is to not make it so overwhelming it starts to look like a race car," said Priddy.

Another issue: how to meld the program guide with interactive content running on Microsoft's WebTV platform, which has an interface with a different look and feel. So far, AT&T has not decided how to solve that issue, say sources at TV Guide.

Just who will be powerful enough to set standards won't really be known until interactive services start commercial deployment. Until then, there will likely be see-saw battles on many fronts, including real estate on a TV screen as small as 1-inch square.