U S West Takes Video Step with NCI

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U S West is moving ahead of its digital-cable agenda to
open a path to the TV via set-top terminals that will deliver Web surfing, voice and other
applications over dial-up and digital-subscriber-line connections.

The carrier said it has contracted with Network Computer
Inc. for software that will enable the use of the TV for applications that are independent
of cable TV or other types of hookups that subscribers might have.

With the aid of high-speed DSL links, the carrier will be
in a position to exploit video and other media-rich Web content being developed for
broadband without waiting to build full-service digital-TV networks.

"With U S West @TV, households can enjoy the benefits
of being connected without having to purchase a PC [personal computer]," said Eric
Bozich, vice president for Internet and applications at U S West Interprise Networking.
"We are aiming to make 'Web tone' as common as dialtone."

Many other providers -- including Microsoft Corp.'s
WebTV Networks, WorldGate Communications Inc., America Online Inc. and various cable MSOs
-- are already pursuing Web-to-the-TV strategies, but U S West is the first telco to do
so.

Moreover, because U S West offers telephone service, it can
readily tie a voice connection to the set-top, adding caller ID and other features to
provide a service that, so far, is unique among the "Webtop" providers.

Officials said the company would begin a market trial by
midyear and proceed to commercial rollout across all of its territories by year's
end. Many details remain to be worked out, including arrangements with Internet-service
providers, pricing of the service and vendor choices for supply of set-top boxes, they
added.

As demonstrated at a press conference in New York last
week, the voice-over-TV function allows program viewers to see who is calling them via a
graphic overlay appearing on the TV screen, and to answer the call through a voice
connection that is part of the set-top terminal.

The terminal, which is connected to the phone system via a
standard telephone jack, will cost "under $300" and be sold through U S
West's equipment-distribution outlets, said Robin Tidwell, senior product developer
for @TV.

In the demo, Tidwell took a call from an audience member
via the local telephone line connected to the set-top, holding the conversation without
the aid of a handset at a typical viewing distance from the TV set.

Along with offering caller ID, the system will eventually
keep track of who has called and allow users to originate calls, as well as receive calls,
from the set-top, using the remote to interact with an on-screen representation of a
telephone keypad.

The plan to develop and market a set-top supporting these
capabilities dovetails with a strategy already in play in Denver involving a test of the
services developed by Intertainer Inc., Tidwell said.

Intertainer -- which is also engaged in a market test with
Comcast Corp.'s Comcast Cable Communications Inc. in Willow Grove, Pa. -- is building
a portfolio of content, from movies-on-demand to highly interactive, Web-oriented fare, in
preparation for commercial launches starting in the second half of the year.

"There are no technical barriers to offering the
services that we're creating at this point," said Jonathan Taplin, co-chairman
and CEO of Intertainer. "It's just a matter of whether cable and the telcos will
get the boxes into the home."

The service -- which has investment backing from Comcast, U
S West, Intel Corp., Sony Corp. and NBC -- operates from locally positioned servers that
deliver content over VPNs (virtual private networks) to the end-user.

Intertainer is considering lowering its data rate for
delivering content from the original target of 1.5 megabits per second to as low as 512
kilobits per second to accommodate the types of DSL links that U S West and other telcos
are offering to consumers, officials said.

Intertainer will also deliver stored CD-ROM content via a
service provided by Arepa Inc., a start-up that has developed a means of supporting direct
interaction with such material over high-speed pipes much as people interact with CD-ROM
players installed in their PCs today.

A recent consumer survey conducted by Jupiter
Communications found that access to a CD-ROM library ranks highest in appeal as a
potential service over high-speed-data links, ahead of streamed video by a margin of
three-to-two.

As U S West prepares to exploit its existing infrastructure
to deliver content and voice services to the TV, it has fallen behind its original
schedule for rolling out cable-type video services in the Phoenix area.

There, the company has obtained four franchises, including
one for Phoenix proper, and it has begun network construction with plans to launch
services "very shortly" in some parts of the market, said Rubin Valdillez,
marketing-communications manager for the video-services unit.

"We're committed to doing this, with over 600,000
homes under franchise and more in negotiations," he added.

The company -- which had said services would be launched by
the end of 1998 -- will wait until commercial operations are under way in Phoenix before
deciding whether to build similar types of fiber-rich networks elsewhere, he noted.

Meanwhile, the carrier can begin pursuing an
entertainment-oriented strategy using existing networks at considerably less cost. And NCI
is discussing similar concepts with other telcos, a spokeswoman said.

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