US West plans TV-based Web services

The local phone firm, which is waiting approval for its merger with Qwest Communications International, today plans to announce it will incorporate some of its newest Net access services into a bundle of products that combines the telephone, TV and the Internet. The menu will range from a new televison-based Internet service to a new "broadband" portal.

With the new offerings, US West is looking to tap customers who have yet to embrace the Internet, according to company executives.

"This targets users that don't have PCs, but see a lot of reason to be on the Web that they didn't a few years ago," said Joe Zell, president of US West's high-speed data division. "The fact that 50 percent of homes don't have PCs doesn't mean that 50 percent isn't interested in the Web."

The company is preparing for stiff competition from AT&T and other cable companies that expect to begin offering their own set-top television, Internet and telephone packages sometime next year. Satellite companies also are making inroads, as Echostar plans to unveil an enhanced group of TV services in 2000. DirecTV has teamed with America Online to develop a satellite-based set-top box that would compete directly with Microsoft's WebTV.

All the telecommunications firms are vying for a piece of a lucrative pie. Forrester Research estimates that interactive TV services will generate $11 billion in advertising, $7 billion in commerce and $2 billion in subscription revenues by 2004. TV program guides are expected reach 55 million homes and create $3.2 billion in advertising revenue in the next five years.

Like other local telephone companies, US West hopes to shore up an eroding local phone base by selling as many customers as possible on its high-speed Net services.

"This really helps them out," said Brad Baldwin, an industry analyst with the International Data Corporation. "They have strong competition coming from the cable companies, particularly AT&T."

US West's offering, named WebVision, allows users to surf the Internet and get email through their television. The set-top service, which incorporates software from Liberate Technologies, uses digital subscriber line (DSL) to connect to the Internet. DSL is a high-speed technology that allows voice calls and Internet transmissions to share a single phone line. Although the industry has been touting interactive TV services for years, so far customers have yet to take to couch surfing.

After suffering lackluster sales, Microsoft had to refocus its WebTV strategy, highlighting the service's ability to enhance TV viewing with new features, such as the ability to pause live broadcasts. Executives say WebTV should finally reach 1 million subscribers by the end of the year.

US West's Zell said that the market for interactive TV devices has changed since WebTV first hit the scene in 1996. Interest in the Web has increased dramatically, and new technology allows users to surf the Net at high speeds, he said. Current WebTV offerings only allow users to connect to the Net through a dial-up connection.

Analysts agree that the time is ripe for interactive TV devices; Microsoft is going to spend a lot of money on marketing this holiday season.

"Interactive TV services is an area that's gathering a lot of momentum. I think this Christmas, with the WebTV push, that it's going to put the issue in people's minds," Mark Snowden, an analyst with Dataquest, said in an earlier interview.

US West also plans to unveil a new broadband portal, where customers with high-speed Internet connections will be able to download games and educational videos, and ultimately download movies or music videos on demand. This portal service is currently in trials in Denver, but US West plans to introduce the service on a wider basis next year. The company also plans to offer integrated messaging services that allow users to check email or voice mail or receive faxes through a PC or telephone.

Other local phone companies are following with similar broadband packages. SBC Communications is selling an inexpensive device that allows consumers to check email but not browse the Web at large. Bell Atlantic is testing Internet call waiting services that identify a caller while a user is online.

Yet US West has been one of the fastest among the local phone companies to deploy DSL technology. The company also has deployed a version of the high-speed service in Phoenix that allows cable TV-like services, including up to 160 television channels, to be transmitted through telephone lines.

For all the experimentation, analysts say it may still be too early to tell whether consumers will adopt the new technologies. "They're trying hard, but the industry as a whole is still in its infancy," Baldwin said. "This is just beginning to happen now."