Web-to-TV on Early Boxes Moves Closer to Reality

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Chicago -- Technical advances are pushing the cable
industry ever closer to launching Web access via digital set-tops without waiting for
next-generation terminals to hit the market.

Comcast Corp. last week became the latest MSO to move in
that direction, saying that it would begin deploying the digital set-top version of
WorldGate Communications Inc.'s technology in a Philadelphia-area system this fall.

The decision came as Excite@Home's @Home Network unit
was offering private screenings of its own Web-to-TV technology, which will require
next-generation OpenCable set-tops with high levels of computing power built in.

The National Show floor here offered operators an
opportunity to assess the competing views of companies like WorldGate, which say the
moment to exploit set-top connectivity to the Web is now, versus those like the @Home
group, which say the quality of systems relying on headend-based personal computers to do
most processing is too poor to merit serious consideration.

For companies like Comcast, the Webtop opportunity over
existing boxes offers a low-cost or even free incentive to draw customers to its
digital-TV platform without directly competing against the higher-priced @Home high-speed
service.

"We have been pleased with our testing of the
WorldGate service, and we believe it can add value for our cable customers," Comcast
Cable Communications director of new business development Steve Heeb said in a prepared
statement. "This represents one of our first offerings of interactive-TV services,
and we will be following the results closely."

Bresnan Communications recently became the first MSO to
commit to the WorldGate system on the digital set-top platform, figuring to launch service
this summer in St. Cloud, Minn.

Charter Communications, which uses the analog version of
WorldGate's system in several systems, is also looking at the digital version,
sources at the MSO said.

Unlike WorldGate, @Home uses a set-top TV client with a
built-in browser that integrates the TV-access service with the PC-based service so that
no special headend hardware is necessary.

"This is technology we've developed from the
ground up as the next big step toward all-band, all-device services," @Home director
for set-top products Jeff Huber said.

@Home also developed a nonsurfing service component,
"Local TV," which enables operators to use a tool kit to select Web content and
package it at the headend into MPEG frames that display information in an interactive
format on noninteractive cable systems, Huber noted.

This feed can be customized to supply information about
events, services and products in conjunction with local advertising. The system also
supports an interactive TV guide that allows users to click on items in the guide and go
directly to the chosen channel.

But e-mail, Web surfing and other high-speed online
applications over the @Home system require set-tops like General Instrument Corp.'s
"DCT-5000," which is slated to go into trials toward the end of this year.

Even though market penetration of advanced boxes is
expected to move slowly -- earlier-generation digital boxes are now in the range of 4
million units shipped -- @Home does not intend to use its new technology in the more
network-centric mode that suits the lower-cost boxes, product manager Michael Bauer said.

"We don't think the network-centric model is
compelling enough," Bauer added. "If the quality is so poor that you can only
charge $10 [per month] for the service, it doesn't make sense for us to offer it,
especially when you consider all that we're spending on backbone and other
infrastructure to support the best possible broadband service."

But to the untrained eye, it was hard to see how the
quality of the on-screen presentation shown by @Home in its demonstration differed from
that of commercial systems being shown by WorldGate, ICTV Inc., Peach Networks Ltd. and
MoreCom Inc. -- the four providers offering systems that would allow Web surfing via
current-generation digital set-tops.

While these systems have nuances of differences among them
-- some require Windows NT servers and others, like WorldGate's, only require PC
cards at the headend -- they all offer Web surfing and e-mail. Those with servers support
delivery of DVD and CD-ROM on-demand services, as well.

WorldGate CEO Hal Krisbergh took exception to the quality
distinction drawn by the @Home group.

"What you're hearing is a Silicon Valley attitude
that doesn't recognize that the cable industry is a TV-centered industry with a
tremendous opportunity to offer the public access to the Internet without requiring the
purchase of PCs or expensive set-top boxes," Krisbergh said.

Along with graphic display quality, issues such as
interactive response time and picture-in-picture combinations of Web and TV displays have
also been points of contention in the debate.

Interactive response times vary from vendor to vendor. But
the ability to embed the browser in the set-top, the way @Home does, reduces latency to
the levels that people are accustomed to in using a computer mouse.

The headend-based browser systems, however, have improved
significantly over the past six months or so. Now, latency might not be a problem for
people who otherwise might not be used to accessing the Web.

Vendor demos showed response times ranging from speeds that
appeared to be as fast as @Home's to rates that were significantly slower but still
within one second of the remote click.

Along with offering easy-to-read graphics and improved
response times, the current-generation Webtop vendors also showed advanced capabilities
such as simultaneous display of Web pages and TV channels, which were once thought to
require next-generation set-top processing power.

MoreCom, for example, using a Scientific-Atlanta Inc.
"Explorer 2000," demonstrated a variety of combinations of simultaneous Web and
TV displays, including full-screen TV with transparent-overlay Web-page graphics.

Network-centric vendors also face an uphill battle on the
business front. For example, both Bresnan and Comcast will only offer the WorldGate
set-top service at an access speed of 128 kilobits per second, mainly because their
contracts make @Home the exclusive provider of Internet access at speeds above that rate.

These MSOs also see the 128-kbps rate as a differentiator
that allows them to offer the Webtop service as an incentive to subscribe to the digital
set-top TV services.

But MSO officials signaled that they want to see solutions
to the business issues that will allow them the flexibility to offer the services in
whatever configurations they please.

Adding to the business complications, WorldGate has had to
come up with its own electronic programming guide to supplant TV Guide Channel, which its
customers normally use.

That's because WorldGate, like other providers of
Webtop services, requires a small amount of central-processing-unit power at the set-top
to operate, encroaching on the CPU power that has been committed under contract to TV
Guide.

So far, TV Guide has not been willing to negotiate
agreements that would lessen MSOs' CPU commitment by the slight amount necessary to
accommodate the Webtop vendors, sources said.

"It's definitely a war with the EPG people,"
acknowledged Terri Swartz, director of marketing for MoreCom. "But we're
offering an alternative to get around the problem."

Such issues notwithstanding, the Webtop opportunity has
MSOs thinking about how best to move ahead as quickly as possible, Krisbergh noted.

"There will be a lot of options for high-speed access
to the PC, but the cable industry is television, and that's where the industry's
strength lies," he said.

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