ITV's Next Big Thing

2/03/2002 7:00 PM Eastern

Charter Communications Inc. has put interactive television atop its 2002 agenda, with plans to launch Digeo Corp.'s basic interactive channels — now in only four systems — to 1.5 million digital subscribers by year-end.

That deployment, disclosed last week in a briefing by Digeo executives here, would be the most sweeping ITV rollout by a major MSO. Most have focused on high-speed data and video-on-demand.

Digeo, controlled by Charter chairman Paul Allen, supplies interactive text and picture content to lower-end digital set-top boxes using virtual channels. It supplies Charter's ITV service with virtual, text-based news, sports, movies, shopping and weather channels.

"This is probably the most simplistic deployment of an entertainment product we've had at Charter," said David Hausman, vice president of corporate development for the 7-million-subscriber MSO "We expected something to break and it didn't.

"It's a low-cost solution, it's very simplistic to use and it doesn't drive customer calls into the call centers. That's probably the greatest upside."

Digeo ITV content is now deployed to 150,000 Charter digital subscribers in Glendale, Long Beach and Riverside, Calif., and, starting last Thursday, Birmingham, Ala., said company director of basic ITV Aaron Sheedy.

Subscribers can scroll through seven "i-channels": shopping, movies, news, sports, weather, money and iTV Central.

Outside of California and Alabama, Digeo has been quietly deployed in 15 other Charter headends for technical trials in advance of upcoming full-fledged rollouts.

The four announced systems and the other 15 headends are all Scientific-Atlanta Inc.-based systems using Explorer 2100 or 3100 set-tops, Sheedy said. Digeo is working on integrating with Motorola Inc.'s DCT-2000 series platform, along with key vendors such as Gemstar-TV Guide International Inc. and Wink Communications Inc.

Charter also is testing a "premium"-level Digeo ITV service in St. Louis on Motorola's DCT-5000 platform, which will run on Microsoft Corp.'s operating system.


Hampered for years by technology glitches, elusive business models and unfocused consumer applications, ITV appears to be dogged by failure. Digeo executives believe they've found the solution to many of those challenges.

First, Digeo is launching simple, broadcast-type interactive services on already-deployed, lower-end digital set-top boxes.

Second, it's teaming with Wink — in which Allen was an early investor — and riding the enhanced-TV company's hardware-and-software platform in most Charter systems to speed delivery to market.

Wink ended the year with 6 million subscribers, two-thirds of which hailed from DirecTV Inc. By the end of 2002, Wink estimates it will be in 12 million homes — almost half of them cable households.

Digeo executives believe Wink's significant rollouts with Comcast Corp. and Adelphia Communications Corp. will give them an in with those MSOs.

"We can use the [Wink] software as a platform," said Digeo CEO Jim Billmaier.

Conversely, Wink executives see Digeo's ITV portal — which comes with Paul Allen's backing and Charter's business — as a key piece that could complement the enhanced TV and interactive advertising applications it provides to 32 programmers.

Digeo said its approach has lowered start-up costs for cable operators, which, in turn, has led to lower revenue requirements and an improved business model.

Charter has rolled out Digeo to digital subscribers at no additional cost, hoping it helps to increase digital penetration and reduce churn.


Reuters supplies Digeo with news and financial content, including stock quotes updated every 40 minutes. Sports scores and statistics, updated every three to five minutes, come from The Sporting News.

The movie channel lists upcoming theatrical movies and when they're playing at local theaters. ITV Central allows Charter to upsell subscribers to cable-modem service or VOD.

The shopping channel now offers DVDs to consumers, but more products will be added in the future, Sheedy said.

Weather and movie listings are the two most popular i-channels among California subscribers, Sheedy said.

"Weather is huge," Hausman added.

There's also space on the screen for national advertising; Digeo sells the space for Charter. Current advertisers include General Motors Corp., Nintendo Corp. of America and Tide detergent.

Digeo's click-through rates for ads are between 2 percent and 5 percent, said senior vice president of business development Bert Kolde.

Like Wink users, Digeo subscribers can receive coupons or additional product information by clicking on an i-channel ad. In both cases, Charter gains a piece of the electronic-commerce and advertising revenue.

Digeo claims cable operators can cover the cost of the service and hardware deployment through ad revenue, e-commerce and increases in digital penetration.

Any reduction in digital churn — or benefits from upselling other services or reducing CSR costs through the information channel — would be gravy, Sheedy said.

There's also the possibility of generating premium-service revenues from e-mail, instant messaging and games, he said.

Charter's Hausman said it's too early to determine whether Digeo has reduced digital churn or helped digital penetration in California, though the MSO has enjoyed some digital retention benefits from VOD in markets where it was launched more than a year ago.

"VOD, ITV basic and ITV premium, they all add up collectively to reduce churn," Hausman said. "For a single product to have a monumental effect [on churn], probably not."

New i-channels slated to launch this summer will include local traffic information, local school-lunch menus, high-school sports statistics and expanded weather information.

Games will be another new content component, Sheedy said, building on Digeo's relationship with Two Way TV.

Two Way is developing trivia and parlor games for Digeo. Digeo also plans to develop play-along games with existing TV shows.

Digeo is developing Web tools so that local content providers, such as schools, governments, newspapers and TV stations, can efficiently use Web-based data or other information for ITV.

Electronic mail and instant messaging are also in the works, Sheedy said. Digeo expects those applications to be ready in the third and fourth quarters, respectively.

Digeo also plans to develop a customer-support channel, to help Charter cut down on the number of phone calls it gets from subscribers.


On the ITV front, middleware vendors such as Microsoft Corp., Liberate Technologies Inc. and OpenTV Corp. continue to battle it out in the marketplace, developing software products and associated interactive content for low- and higher-end platforms.

WorldGate Communications Inc. claims its DCT-2000-compatible platform has launched on about 60 cable systems, including U.S. operations owned by AT&T Broadband, Comcast and Charter. President Gerard Kunkel has said he expects ITV in general to gain much momentum this year.

None of those vendors, though, is as close to a planned MSO-wide deployment as Digeo.

Insight Communications Co., a 1.3-million-subscriber operator, has launched a churn-attacking ITV package called LocalSource, using Liberate software on most of its systems. LocalSource provides text-based local news and information content.

Aside from Charter and Insight, though, MSOs are marching to the beats of their own ITV drummers, and the pace is generally pretty slow.

AOL Time Warner Inc. is developing the AOL TV platform, but ITV has yet to move to the forefront of Time Warner Cable's agenda. Comcast will spend 2002 concentrating on its own VOD rollout.

In advance of Comcast's acquisition of the MSO, AT&T Broadband has shelved most of its longstanding ITV plans to focus on rebuilding systems. And Cablevision Systems Corp. has added interactive features with its new iO: Interactive Optimum digital platform.

"Any motion is good motion, since ITV is on such a low trajectory," said Arlen Communications Inc. analyst Gary Arlen, a Multichannel News
contributing editor.

Charter's Digeo rollout will give operators the ability to measure results, and that's beneficial, he added. "The question is whether you're seeding the market, or will they be so dissatisfied it poisons the market."

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