Sneaking a Peek at Comcast's ITV Plans

8/26/2001 8:00 PM Eastern

When a cable operator talks publicly about its interactive-TV strategy, it can speak volumes — especially if that operator wants to become the largest U.S. system owner.

Recently, a Comcast Corp. executive provided such a sneak peek. Cable unit senior director of new business development Steve Heeb dished some dirt on the MSO's plans earlier this month during The Interactive TV Show USA, organized by Access Conferences International and held in New York.

Though Heeb was cagey about certain details, he outlined the operator's rationale for ITV and its plans for deployment of new services, including video-on-demand and a walled garden of local content and streamed media.

Public statements from major MSOs on ITV have been rare in recent months. Heeb began his remarks by acknowledging a dilemma that many operators face: They must express their support for ITV at industry events without generating unrealistic expectations, especially on Wall Street. Comcast is being particularly cautious about its public statements, in light of its bid for AT&T Broadband.

Yet any glimpse into an MSO's thinking can provide both important guidance for ITV service developers and insight into the operator mindset for those who are unfamiliar with cable's inner workings.

Heeb discussed the changing landscape that has prompted MSO interest in ITV, cable modems, telephony and other new services. As traditional subscriber-acquisition growth gradually slows, Comcast is seeking to increase sales of these revenue-generating units, he said.

"We need a certain input of revenue-generating units, and ITV is one of them," Heeb said.

New services must meet Comcast's goal of maintaining existing cash-flow margins and must be able to produce higher margins within 24 to 36 months, he added.

Comcast is conducting several trials and establishing the infrastructure to roll out VOD and walled-garden services on a mass scale next year, he said.

Heeb expects that successful content will be based largely on existing genres. Comcast's initial ITV fare will include instant information (news, sports and weather) and games.

The walled garden will include streamed media, so a viewer could see a text-based headline from E! Online (which Comcast co-owns), for example, then click on it for access to a related video clip.

Comcast's current 2000-series digital boxes can provide enough streaming capability to support its current plans, Heeb said. Comcast "will have an advanced box next year," but Heeb wouldn't say which vendor would provide it.

Heeb showed a Comcast ITV-rollout timeline that starts with a walled-garden service, VOD and interactive advertising then proceeds to television commerce and, eventually, Internet-protocol voice services and telephony.

Comcast, which has extensive experience in home shopping through its QVC subsidiary, believes t-commerce will become a reality when it can sell products on a mass scale, he said.

Heeb stressed that ITV is about content, not technology, and its success depends upon how simple it is for viewers to use.

"It has to be TV-centric. Static pages don't cut it," Heeb said.

He also believes MSOs will require adequate business models to justify investing the billions of dollars that ITV will consume. As revenue-generating units become more important, Wall Street will put "serious pressure" to drive RGU growth.

"When do MSOs need ITV to satisfy Wall Street?" Heeb asked.

Integrating multiple applications remains difficult and no single entity can accomplish the task alone, he added. MSOs need support for database management, and especially in tracking and aggregating set-top box usage — or all the clicks that viewers make.

Cable operators also need help in managing their digital "assets" — or all the programming, streamed content and related data — so content can be properly scheduled and delivered. And digital rights management currently "doesn't exist," Heeb noted.

Ongoing support is another concern. If something doesn't work, Heeb posited, who is responsible — the set-top manufacturer, middleware provider or the applications service?

And too much stock is being put in ITV successes in the United Kingdom, which have been produced in a different media landscape, in Heeb's view.

"The U.S. is not the U.K.," he said.

ITV provides an opportunity for new brands to enter the cable environment. Heeb used online brokerage service E*TRADE Group Inc. as an example.

So should ITV providers "build it, and they will come," or layer on new services? Heeb said Comcast favors the latter approach.

One thing missing from Heeb's presentation was any mention of personal video recorders, which Comcast has tested in several markets.

When I approached Heeb for clarification on this and other points, he said Comcast's press policies prevented him from talking to me.

That's too bad. Heeb's presentation was a welcome addition to the industry's thinking about ITV and developers can use all the clarification they can get.

The directional information provided by major MSOs is appreciated by an industry that needs more direction.

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