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ITV Blossoms Beyond Top 2

11/26/2000 7:00 PM Eastern

As the cable industry wrestles with hardware, software and content questions related to developing interactive TV, it's become increasingly apparent there is no "one-size-fits-all" strategy.

This is an industry that heretofore looked to big operators-most often Tele-Communications Inc. (now AT&T Broadband) and Time Warner Cable-for leadership. But now other companies are joining, and in some cases, leading the development charge for specific interactive applications.

In October, Charter Communications Inc. became the first MSO to publicly commit to a set-top-based personal video recording technology by signing a deal with ReplayTV Inc., Motorola Broadband Communications Sector and a Vulcan Ventures Inc. subsidiary to develop a digital set-top with PVR functionality. Two weeks ago, AT&T Broadband announced its own ReplayTV deal.

Insight Communications Co. Inc. has been an early proponent of video-on-demand, having launched Diva Systems Corp.'s VOD service in Rockford, Ill.; Evansville, Ind.; and Columbus, Ohio. Insight also bought into Source Media and deployed its local interactive guide in most of its systems, defining digital as headend server-based interactivity from day one.

Cablevision Systems Corp. is set to rewrite the MSO digital set-top rulebook in December, when it rolls out Sony Corp. of America's power-packed interactive set-top.

The big guys also are moving ahead. AT&T Broadband has widened its vendor community, signing deals with Panasonic Consumer Electronics and Philips Consumer Electronics Co. for set-tops and Liberate Technologies Inc. for middleware over the past three months.

But software glitches have prevented AT&T from getting the Motorola Broadband Communications high-end "DCT-5000" into the field this year.

Time Warner Cable's 2001 focus will be deploying VOD through the Scientific-Atlanta Inc. "Explorer 2000" set-top. But the exact nature of future interactive-TV applications from Time Warner will likely be defined by its parent's merger partner, America Online Inc.

Aside from VOD, Time Warner's said very little publicly about its vision for interactive TV as it races to complete its merger with AOL.

The following is a rundown of where a handful of major MSOs stand on the key hardware, software and content considerations related to their advanced digital set-top strategy.


CHARTER

Charter Communications Inc. has become a strong proponent of interactive services, having launched Wink Communications Inc. and VOD with Diva. It's also working out details of a rollout of WorldGate Communications Inc.'s Internet-over-TV service and Digeo, the interactive interface being developed by Vulcan Ventures.

Stephen Silva, Charter's senior vice president of corporate development and technologies, said Charter has deployed Wink in more than 23 markets.

"We have 225,000 Scientific-Atlanta-based Wink homes," he said. Charter also is working on integrating Wink into the Motorola set-tops it has in the field.

Charter has generated $1 million in net cash flow from Wink since its launch, Silva said. That's Charter's cut from Wink advertising and electronic-commerce revenue.

"The service does add value," Silva said. "It's a good interactive service."

He said cable needs to understand that competitors are deploying interactive technology. DirecTV Inc. will have 3 million Wink-enabled homes by year's end, he said.

Charter recently launched Diva's VOD service in Los Angeles and is evaluating how many VOD launches it will take on next year.

"We're going to be aggressive," Silva said.

Charter chose Diva because it offered a complete end-to-end solution, Silva said. Charter integrated Diva into its Scientific-Atlanta headend in Los Angeles, where Wink is already deployed. The integration work took less than 100 days, Silva said.

Silva expects a VOD equipment payback in 40 to 48 months, or perhaps sooner, depending how many new revenue streams appear. Charter offers 300 VOD titles in Los Angeles and is on its way to 450.

"We will do trials to find better ways to use technology," Silva said. For instance, there are nine different languages spoken in Charter's Los Angeles call center. Ethnic programming, high-school sports and other local programming are all possible VOD possibilities, Silva said.

"We're trying not to limit ourselves," Silva said. "They are enabling platforms to create many revenue streams."

Charter's sister company, Digeo, is working on an interactive-TV interface that the company hopes to introduce next year. It would incorporate Macromedia Inc.'s "Flash" technology and streaming media.

Services such as Wink and VOD would likely appear as icons on Digeo's main opening screen.

Charter is also jumping into the personal-video recorder space, signing a deal with ReplayTV Inc. to install PVR devices in advanced Motorola set-tops.

"We've seen too many times an idea worth chasing and not enough people stepping forward to do it," Silva said.

Vulcan Ventures also is part of the Charter-Replay-Motorola deal, bringing enhancements to the PVR experience.

"The idea is to create an enabling platform and drive new applications," Silva said. Adding Replay features helps solve the dilemma of TV listings taking up so much capacity in existing set-top memory banks.


INSIGHT

Most of the 73,000 digital boxes Insight has in the field are the Motorola DCT-2000. Out of the gate, Insight chose to pack its digital offering with interactive services, in addition to more channels.

For $6.95 a month, customers receive SourceMedia's local guide, Source's interactive program guide, access to Diva's VOD service and three groups of digital channels.

"We looked at the competitive landscape and wanted to use the technology available today to enhance the viewing experience," said Kim Kelly, Insight's chief financial officer.

Churn with the interactive features is lower than for digital tiers that carry only extra programming, Kelly said. Some 83 percent of subscribers rate the service at either a four-or-five on a one-to-five scale, she said. "That's FedEx territory."

Most subscribers take the $16.85 a month package, she said, which includes all the interactive features and three programming genre segments. Incremental revenue per digital subscriber has hit $22 a month, Kelly said, with extra revenue coming from additional outlets and pay-per-view/video on demand.

Using Liberate Technologies software, Insight is able to run most applications from a headend-based server, including the interactive program guide, which frees up memory in the DCT-2000 box.

Insight recently signed a deal with Commerce.TV Corp. that will bring e-commerce to the DCT 2000. Commerce.TV offers products from 50 national retailers.

The walled-garden shopping application will launch in the first quarter of 2001 in Lexington, Ky., Kelly said. Diva will be rolled out in wide scale in early 2001, she said.

"We'll also look at local [companies]," Kelly said, because "our strength is our ability to stay local."

But the full extent of local participation is tempered by logistics. "Fulfillment, even for local is more complicated," she said.

Kelly foresees using the DCT-2000 platform for several years to come.

"The 2000 has a wonderful future," she said. "We're not looking to phase it out. The DCT-5000 will be a premium product that can co-exist in homes."

Two applications Kelly is looking to add to the 5000 boxes, which aren't present in the 2000, are TiVo Inc.-like personal-video-recording capability and cable mail. Also on tap are shopping enhancements, as the 5000 carries greater graphics capability.

Kelly is unsure how big Internet over the TV will be. "I'm not sure open access to the Internet is something people want," she said, referring to Web TV and WorldGate. "I'm not certain people want that on their TV and in their family room," she said, alluding to privacy and Internet-content concerns.

At the end of the third quarter, nearly half of Insight's 1.4 million subscribers were able to receive digital service. That number is expected to increase to nearly 100 percent by year's end, she said.


COX

Cox Communications Inc. has rolled out VOD in San Diego, and soon will do so in Phoenix, using Concurrent Computer Corp. servers and S-A boxes. According to Dallas Clement, senior vice president for strategy and development, Cox is working on making VOD work with its base of Motorola boxes.

About half of Cox's 700,000 digital subscribers are on the S-A platform, the other half on Motorola.

"We've got to clarify the technology on those Motorola boxes," Clement said. "Do we want to use the same server or look at other server technology?" is one question, he said, that relates to Motorola. Another is guide integration.

At the moment, Cox has no contract with TV Guide-Gemstar International Inc. Cox has pumped money into WorldGate and its TV Gateway guide project.

"The S-A boxes have more stability," he said, and were Cox's first VOD focus point. "The next thing is, we turn to the Motorola box."

Cox continues lab and field testing to determine the answer to the thick client vs. thin client question.

"We hope to get smarter on that this year and next year," Clement said.

Cox is looking at more VOD rollouts next year that will include research into what other content customers want on a VOD system, Clement said.

As Clement looks forward, he sees enhanced TV services, Internet browsing, walled garden and communications applications running on the 5000 boxes. But as more 2000-series boxes are deployed, Clement said it's important to make sure the customer's electronic mail and VOD experiences are the same over both pieces of hardware.

Cox has to "make sure it's common and integrated," he said.

CABLEVISION

Cablevision Systems Corp. plans to deploy the long-awaited Sony digital interactive set-top box in December, which would vault it to No. 1 in the category of most advanced set-top deployed in the marketplace.

According to
CED
, a sister Cahners publication, the Sony set-top will sport a 300MIPS processor, 32 megs of RAM, 16 megs of flash, at least eight megs of video D-RAM, a Data Over Cable Service Interface Specification (DOCSIS) and DAVIC modem, a three-dimensional graphics card, a tuner, a conditional-access slot and a smart card slot.

It will also have three universal serial bus (USB) ports, two 1394 or "I-link" ports, plus in-and-out outlets for digital audio, S-video, NTSC and RF.

According to Wilt Hildenbrand, Cablevision's executive vice president of technology and engineering, that box will cost $350. Sony's building a second box with less firepower (100 MIPS processing for example) that will be used for additional outlets in the home. It will cost in the $250 range.

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