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Time Warner to shutter ITV effort

The media giant says it will pull the plug on the world's most sophisticated and costly interactive television system by year's end.

Time Warner (TWX) will pull the plug on the world's most sophisticated and costly interactive television system by year's end, resulting in a small but undetermined number of layoffs.

The so-called Full Service Network, which came to symbolize the integration of cable, computer, and phone technologies over cable, is the latest casualty stemming from the Internet's emergence as a low-cost medium for news, entertainment, and e-commerce.

The network has 156 workers. Time Warner Cable hopes to reassign many of them to other positions within the company, a Time Warner representative said.

Launched in December 1994, the network offered movies on demand, home shopping, and video games to 3,000 to 4,000 homes in the Orlando, Florida, area--the same venue as rival Walt Disney's Magic Kingdom.

The Full Service Network was inaugurated with endless hype, including a hands-on demonstration by Time Warner chief executive Gerald Levin and Time magazine's claim that the network was the "Cadillac of interactive TV tests."

The network's partners included AT&T, Silicon Graphics, and Scientific Atlanta.

Time Warner executives originally earmarked $5 billion for the network over five years, but they have since scaled back. Time Warner wouldn't provide a tally, but analysts estimate that the costs ran into tens of millions of dollars, perhaps closing in on $100 million.

Despite its popularity with many subscribers, the network was plagued by cost overruns, delays, and some technical bugs. Many analysts predicted that the venture was doomed, especially when the Internet emerged as a powerful new way to deliver many similar services.

Time Warner Cable executives say they learned a lot from the experience. The company still plans to offer a scaled-back version of interactive TV called Pegasus. Time Warner also will offer Net access through TV over the network before the project folds.

On the Internet, Time Warner has become a leader in offering high-speed Net access to PCs by cable. Its Road Runner service is being rolled out nationally.

The network isn't the only interactive TV service to fizzle.

About the same time, Bell Atlantic, Nynex, and Pacific Bell joined forces to launch Tele-TV for movies-on-demand, home shopping, and other features. They hired big guns such as former CBS Broadcasting boss Howard Stringer and Hollywood uber-agent Mike Ovitz to help run the venture.

But Tele-TV is laying off half its staff, Ovitz and Stringer are gone, and the venture is focused on one-way digital TV broadcasting in Southern California. Like the Full Service Network, Tele-TV faced cost pressures, but it also was crippled by mergers among the three Baby Bells.

Like the cable TV operators, the telephone companies are focusing their efforts on high-speed Net access, both over wired and wireless networks, which they see as a quicker moneymaking opportunity.