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Show Accents Surfing Via TV

12/06/1998 7:00 PM Eastern

Anaheim, Calif. -- Web surfing via cable set-tops gained a
little more traction last week with the emergence of new suppliers and a handful of new
affiliate launches for market pioneer WorldGate Communications Inc.

WorldGate -- which is now serving close to 2,000
subscribers since launching in Charter Communications Inc.'s St. Louis-area system
last summer -- has signed deals with Charter and five other cable companies to launch
services in additional systems representing more than 400,000 homes passed, WorldGate CEO
Hal Krisbergh said.

In other developments, start-ups Peach Networks and MoreCom
Inc. made their presence known at the Western Show here; and Microsoft Corp.'s WebTV
Networks unit announced a set-top-compatibility deal with Scientific-Atlanta Inc. The S-A
deal expands the presence that WebTV had already established in cable via an earlier
set-top agreement with General Instrument Corp.

These activities marked a step forward in the direction of
what many cable strategists view as a major goal of the OpenCable advanced set-top box
initiative, where the boxes themselves will have enough computer power to provide some
measure of Internet access without the use of personal computers.

But with the exception of WebTV, the providers pushing
ahead now are offering centralized processing solutions that allow cable companies to
offer customers full Internet access through conventional digital -- and, in
WorldGate's case, through both digital and analog set-tops. WebTV supplies a
computerized set-top to facilitate access via the TV.

"In the past, the high cost of stand-alone set-tops
appeared to be justified by superior capabilities," Krisbergh said. "It is now
clear that the superiority of the cable infrastructure and centralized processing
overwhelms the stand-alone set-top solution."

All of the WorldGate launches announced last week involve
the use of advanced-analog set-tops, including, for the first time, S-A's 8610.
Systems using the S-A box include Charter's Newtown, Conn., franchise and Prestige
Cable's Mooresville, N.C., system, Krisbergh said.

Other WorldGate launches, pegged to GI's analog
set-tops, include: three Prestige systems, in Georgia, Virginia and Maryland;
Charter's Los Angeles complex; Massillon Cable in Ohio; overbuilder Tacoma City
Light's Click! Network in Tacoma, Wash.; TVCable in Ecuador; and Cable Bahamas. In
addition, Charter intends to keep expanding in the first quarter, with the addition of
eight more systems, Krisbergh said.

With the industry rapidly moving to the digital set-top
platform, the appeal of TV Web surfing is about to get much stronger, he predicted.

"Digital gives us the opportunity to increase download
speed to 27 megabits per second," Krisbergh said, adding that WorldGate's system
is now compatible with both the GI and S-A lines of digital set-tops.

WorldGate has made progress on several technical fronts,
including the ability to set up service via software downloads to set-tops, thereby
avoiding truck rolls, Krisbergh said. The company has also begun deploying support for
Java software applications, and it has set in motion the means to deliver streamed audio
and video, using client "plug-ins" at the headend processor and framing the
content in MPEG-2 for high-quality playback at the TV set.

"The real opportunity for this service will come with
streaming over digital channels," Krisbergh said.

The newest entrant in the TV-surfing arena is Israel-based
Peach Networks, following close behind the introduction of MoreCom in a press announcement
three weeks ago. Peach's centralized processing and distribution system includes a
proprietary means of reducing the computer power needed to encode Web data to MPEG-2 for
distribution over the cable network, Peach CEO Ofir Paz said.

"We have a way to implement real-time encoding on a
Pentium machine where one encoder delivering 10 [MPEG-2] streams consumes 10 percent of
the CPU [central processing unit] resources," Paz said, adding that the process is
very tightly integrated with Microsoft's Windows operating system.

"This optimized encoder module also delivers computer
graphics at very high quality very cheaply, avoiding the need for high-end graphics
rendering at the set-top," Paz added.

Peach is using statistical multiplexing with its encoder,
as well. Statistical multiplexing is a means of varying the amount of bandwidth allocated
to any single MPEG stream, depending on the amount of new information that the stream
requires from frame to frame. This allows more streams to be packed into a 6-megahertz
channel than would be possible if each stream was delivered at a fixed data rate.

Where IP (Internet protocol) data is concerned, statistical
multiplexing delivers up to 400 streams at one time, meaning that 400 users can access the
Peach channel simultaneously, Ofir said. Fewer streams would be delivered in instances
where users were accessing IP video, rather than ordinary graphics, he noted.

"This system is designed to run all Windows
applications and to run over very, very thin clients [set-tops with little processing
power]," Ofir said. "We think that the functionalities that come with
centralized processing at this level will extend the life of digital set-tops, avoiding
the costs of upgrading to more expensive boxes to accommodate higher levels of
applications."

There are complications to this approach, Ofir
acknowledged. While Peach believes that there are no legal problems with using the Windows
platform in this fashion, licensing issues respecting the use of some applications written
for the Windows OS, such as games, would have to be resolved in any centralized
distribution scheme, he said.

One of the opportunities that Peach and MoreCom see in this
new arena concerns the delivery of video-on-demand in a low-cost fashion, where Web sites
are the source of the entertainment, rather than proprietary system servers located at the
headend. At the Western Show, MoreCom delivered video clips from various Web sites and
displayed them full-screen at entertainment quality as if they were regular programming.

"Delivering high-quality broadband Internet to
customers' televisions is like adding as many new channels as there are Web
sites," MoreCom CEO Ami Miron said.

MoreCom's "MoreVideo" clip-on-demand system
supports picture-in-graphics and full-screen display with HTML-based (HyperText Markup
Language) navigation, allowing operators to create their own Web-video sources, Miron
said.

In contrast to these players, WebTV -- which claims about
500,000 customers over dial-up lines in North America -- hopes to leverage high-speed-data
access over cable by using its set-top technology in conjunction with S-A and GI digital
set-tops.

Other cable-TV-surfing systems avoid the need for
cable-data modems by delivering services in MPEG-2 format over digital-TV channels. But
WebTV will use the modems that are built into advanced set-tops, such as the symmetrical
1.5-mbps modem used in S-A's Explorer 2000, said Steve Necessary, vice president of
marketing at S-A.

S-A will offer the cable-optimized Windows CE operating
system with its digital set-tops as an option starting one year from now, Necessary added.

And WebTV is in discussions with operators, which would
have to link their headends with the WebTV headend to facilitate delivery of the service
over cable, officials said.

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