Buzz Rises on TV-Data

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NEW YORK -- The strategic details are still vague, but the
cable industry is abuzz over the opportunity to deliver Internet and other data services
to TVs via the set-top.

The rising tide of anticipation that Web-to-TV could blow
open a new revenue payback on the industry's multi-billion-dollar investment in two-way
infrastructure was clearly in evidence last week at a Kagan Seminars Inc. meeting here.

Asked at one point how they ranked, on a scale of 1 to 10,
the need to equip set-tops with modems, speakers from three out of four MSOs gave the idea
a 10.

"We'd like to have that option for consumers who don't
have PCs," said Ann Ivancie, director for Internet marketing operations at AT&T
Broadband & Internet Services.

Among the group members from AT&T Broadband (formerly
Tele-Communications Inc.), InterMedia Partners, Comcast Corp. and Time Warner Inc., only
Time Warner's Doug Semon, principal Internet system architect, voiced uncertainty about
the possibilities. "We have the mechanisms in our Pegasus set-top to use in find out
how useful that is," he noted.

If the early results in a handful of rollouts are any
indication of what the industry can expect, it's easy to see what the excitement is all
about. The results also suggest that the industry might want to forge ahead to deliver
data to TVs using current digital set-tops or even analog terminals rather than waiting
for more expensive and more highly computerized models.

In one example of consumer demand for Internet access via
TVs, Wes Hoffman, president of ICTV, Inc., said the initial market response to a test run
ICTV conducted with St. Joseph Cablevision, in Missouri, was far beyond anything the
vendor or cable operator had anticipated.

ICTV delivered a choice of two services via its
headend-based platform over St. Joseph Cablevision's facilities: Users could select
between a service devoted strictly to delivering CD-ROM games and other content, priced at
$5.95 per month for the first three hours or a service combining Internet access and
CD-ROM content, priced at $9.95 for the first five hours. They overwhelmingly picked the
latter, Hoffman said. Moreover, in a two-month period after the subscriber base hit 200,
customers were spending an average of $42 per month on the service, Hoffman added.

"We expect those numbers to come down as new users
come on, but the trend confirms what we saw in our trial in Santa Barbara (Calif.),"
Hoffman noted. In that trial, conducted with Cox Communications, users spent an average of
$18 per month on the service early on, with the average dropping to $13 to $14 over time.

Strong early results for TV-based Web services were also
reported by Gerard Kunkel, vice president for strategic planning at WorldGate
Communications Inc., which has deployed its Internet-to-analog set-top technology in nine
markets and expects to be in 30 or more by year's end.

Take rates for the service, priced at between $3.95 and
$9.95 per month depending on the operator, are at eight percent in homes directly targeted
by telemarketing only and at 20 percent or better in telemarketed homes where fully
saturated marketing campaigns are underway, Kunkel said.

In analog mode, the WorldGate service uses headend-based
computer gear to provide Web surfing capabilities to all users, delivering data at 192
kilobits per second to the set-top via the vertical blanking interval of standard TV
channels. Like other headend computer-centric services, WorldGate is preparing to deliver
Internet services to digital set-tops via digitized 6-MHz channels, which means the data
rates will be much higher.

Such developments give operators an opportunity to move
ahead immediately with Internet-to-TV offerings, rather than waiting for the advanced
set-tops that will contain industry-standard DOCSIS (data-over-cable-service interface
specification) modems, said David Robinson, senior vice president and general manager for
digital network systems at General Instrument Corp.

"I consider the existing (digital set-top) product a
mainstream Internet product," Robinson said.

The delivery of GI's next-generation DCT-5000 set-top
featuring built-in standardized cable modems -- scheduled to begin in the third quarter --
will enable a number of advanced applications, Robinson noted. But, he added, the current
generation of boxes, priced at under $300 per unit, comes with modems that operate at 1.5
megabits per second in both directions.

"Companies like WorldGate, ICTV and the Interactive
Channel are already in the field with the means to make Internet access a compelling
service to the set-top," he said.

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