Interactive TV commerce, or "t-commerce" as it's become known, has been one of those futuristic services that has seemed to be just over the horizon for decades. But now, at long last, the technology is beginning to catch up with the hype.
This year, most of the major cable and satellite TV companies are rolling out interactive systems, at least in test markets. And experts expect tens of millions of households to have access to some sort of interactive television in the next few years.
The Gartner Group predicts that TV portals will generate revenue of $228 per subscriber per year, or $4 billion in 2004. Jupiter Communications estimates the U.S. interactive TV market will address 30 million households and produce $10 billion in annual revenue also by 2004.
Seeing the dollar signs dance before their eyes, cable operators are beginning to get a tantalizing taste of what's possible in the overall "e-commerce pie," and it's enough to make their mouths water. The slices of the pie represent a huge market opportunity for a wide variety of companies, including set-top box manufacturers and dozens of software and middleware vendors.
So what are some of the gizmos out there for TV interactivity? Well, just like there are bakeries full of a variety of tasty wares, cable operators have many choices depending on their taste and, more importantly, what they think viewers will buy into.
Unfortunately, for technology that is meant to be simple, the answer right now is complicated because a free-for-all among box manufacturers, software companies and application developers has erupted. Alliances are being announced between network operators and vendors because no one seems to know yet which has the most compelling products, and all the players appear to be trying to hedge their bets.
Set-top box makers like Motorola and Pace Micro Technology are cutting deals with cable operators and companies whose interactive applications will run inside their boxes.
Motorola's DCT-2000 is being used to deploy a lot of interactive services for operators like AT&T Broadband, and the company is also working with middleware software made by Liberate Technologies and WorldGate Communications.
"The DCT-2000 is an incredibly interactive box for running applications like Web browsing, e-mail and VOD," says Lou Mastrocola, director of product development for Motorola's digital network systems business unit. "It's the perfect platform for doing that. Of course, when you get into more bandwidth-intensive applications, you have the (DCT) 5000 box as an option.
"Right now we're in the process of converting many systems from standard digital broadcast (PPV) to an interactive environment, but this is going to continue for the next two to three years. If you look at the future with Motorola, it's definitely not just with one box or the other, it's with both (DCT-2000 and DCT-5000) in interactive mode."
International set-top box maker Pace Micro Technology considers its role in interactive TV to be making sure its box has enough memory, processing speeds and drivers to support the particular middleware they're supporting.
"That frees up the operator to have whatever applications written to either Liberate, OpenTV or Microsoft software," says Neil Gaydon, president, Pace North and South America.Middleware and portal providers
Cable operators can set up their systems to be interactive in one of two ways: piecemeal or as a full system. They can work directly with set-top manufacturers and the companies they've made deals with whose interactive applications run inside their boxes, or in a turnkey fashion with TV "portal" companies such as MetaTV.
MetaTV, a year-old Sausalito, Calif. start-up, wants to help companies that do business on the Web make the leap to TV and give network operators the ability to port their own branded "walled garden" portal over their existing infrastructure, says Ranjit Sahota, the company's CEO/CTO. MetaTV pulls the most important content from a Web site and creates a design for a TV screen.
The beauty of MetaTV's technology, says Sahota, is that it doesn't have to bet on any one system being able to work, especially if there is a delay in the development of that software.
WorldGate Communications recently introduced CableWare 2000, an open software environment based on thin client architecture, that can co-exist with set-top box exclusive applications.
WorldGate's Internet on TV system, which includes the company's Channel Hyperlinking Technology, allows viewers instant access from the program or commercial they're watching to a related Web site. WorldGate's service requires a set-top box, which is made Internet-ready with a software download or hardware add-on.
"E-commerce takes on many forms," says Gerard Kunkel, SVP sales and marketing for WorldGate. "It works on Internet TV, enhanced TV and VOD services because it's pervasive. It's often confused that e-commerce is an application unto itself when it's not; it's a feature of all these other applications."
Kunkel says as interactivity relates to cable operators, it comes down to incremental revenue and how they can get some of that revenue. How they will do it, he says, is through a multiplicity of applications running through a set-top box.
As far as revenue sharing, WorldGate works with the cable operator to build those relationships with content providers, says Kunkel. Because they're in business with the operator, it's in everyone's best interest to get the best deals with the best content for enhancement, he says.
WorldGate's interactive software is currently running on Motorola DCT-1000 and DCT-1200 boxes and is deployed in cable systems owned by Charter Communications, Massillon Cable and Comcast Cable Communications.
Another interactive software provider, Liberate Technologies, concentrates on the security aspect of e-commerce. Its platform, which is based on open standards, supports all the SSL standards, which is a security technology used in Web browsers.
"One of our key pieces is we do not touch the revenue stream of the network operator," says Charlie Tritschler, VP marketing. "They license our platform but they do not have to pay monthly fees based on e-commerce or advertising. If there is revenue involved, like in transactions, we'll work with the partner that they're working with to extract some of that revenue."
AT&T recently announced it would be using Liberate's interactive software in set-top boxes for its pilot tests, slated to start later this year.
Liberate software is being actively deployed by Insight Communications in the Midwest and on AOLTV, which launched in July in Baltimore, Phoenix and Sacramento.
Liberate is working with set-top makers Pace, Philips, Scientific-Atlanta, Motorola, Acer and Pioneer. Its POP TV device group works closely with set-top box manufacturers and chip vendors to make sure the software is preintegrated to make life for the set-top manufacturer as easy as possible.
Another company partnering with AT&T is RespondTV, which provides an infrastructure for real-time enhanced TV services, including serving, hosting and direct response applications. Its technology is compatible with industry standard ATVEF-compliant enhanced TV systems and set-top boxes.
The challenge cable operators face in enabling two-way interactivity is that there are so many pieces to enable all the different content areas they're interested in, says Richard Fisher, RespondTV president.
"What we do as a company is provide the infrastructure, support and services to serve up interactivity," Fisher says. "Our approach to the market is to solve what is an unbelievable dilemma and challenge for the industry, which is to create a turnkey solution."
RespondTV's approach to revenue sharing is to charge a flat fee for serving up enhancements, collecting data and sending it back. Fisher says the company doesn't distinguish between what it charges to send back a packet of information to someone requesting more information vs. one where someone wants to buy something.
Mountain View, Calif.-based OpenTV, another interactive software developer, recently reached a milestone in the interactive TV industry when it announced it had deployed its software in more than 10 million set-top boxes worldwide.
The company's RunTime software allows viewers to surf TV channels, access interactive services and perform functions like controlling camera angles and instant replays during sporting events via remote control.
OpenTV is Internet based, meaning the Web content arrives on the TV screen with the "look and feel" of television, says Vincent Dureau, OpenTV's CTO.
"We're a technology provider," says Dureau. "We provide technology to network operators and then the operators cut their own deals with either the merchant or the people who own the content."
In this model, Dureau says, network operators act as gatekeepers between their subscribers and the rest of the world whereby the operators can extract some type of revenue share from people who want to provide merchandise or content onto their networks.
OpenTV also has its Open Advantage program that provides tools for developers that allow them to create content, and provides technology for set-top box makers to help make their boxes become interactive.
"Our success has been that we've designed technology that is very lightweight so that we can run on small, cost-effective set-top boxes," says Dureau. "OpenTV has a whole range of products that cover thin and bigger clients."Cable infrastructure's role
Some cable operators are spending billions upgrading their systems to carry two-way signals, which is a key prerequisite to deployment at any level.
Charter is in the middle of a three-year, $3.5 billion plan to upgrade 135,000 miles of its cable plant to 870 MHz, says John Pietri, SVP Engineering. The upgrade, which started last summer, included cable plant the company inherited through 12 recent acquisitions that weren't close to 750 MHz and were in rural areas.
Charter's upgrade will add not only two-way interactivity, but will also help provide additional analog capacity, digital video and high-speed data services, says Pietri. He says the company is working on digital video launches and expects to have it available to 90 percent of its customers by the end of this year.
"We expect to be deploying some interactivity at least on a limited basis by the middle of next year and expanding upon that as we move forward," Pietri says.
Cox Communications already has a lot of the pieces in place for two-way interactivity because it's currently offering high-speed data and cable modems to its customers, says Michael Pasquinilli, director of iTV technology.
The company has publicized a Liberate-based trial that includes Web browsing and e-mail. Cox spends a lot of time testing future services in a laboratory it built specifically for that purpose, says Pasquinilli.
Cox is working with Concurrent Computer Corp. to deploy a movies-on-demand service over Scientific-Atlanta Explorer 2000 set-tops in San Diego. Cox's responsibility was to make sure the network infrastructure was ready to deploy VOD, and Concurrent was responsible for the video servers and the client software that executes it in the set-top, Pasquinilli says.
"I'd say it's quite a few steps from turnkey," he says. "Cox's philosophy is to integrate all these services into our infrastructure and try to stay away from turnkey and 'end-to-end' solutions so we can keep control of the technologies."
Pasquinilli believes a cable operator can be successful in the interactive field if it has a lab to test the interactive services instead of "throwing things out in the field to see what happens."
Another cable company whose infrastructure is ready for interactivity is overbuilder RCN Corp., says Rick Rioboli, vice president of technology and marketing.
RCN's HFC network is two-way ready and is being built from scratch with node sizes of 150 homes, says Rioboli. Its strategy was to build the network with small node sizes from the beginning because fewer homes behind a node provides more bandwidth for the customer.
Interactive services the company is working on to deploy beginning next year include VOD and a broadband portal, says Rioboli. RCN is working with Charter Communications and a Paul Allen-created company called DIGEO to deploy these services.
The biggest roadblock to RCN deploying any interactive services is the lack of streaming media middleware and a holdup in the deployment of thick client DCT-5000 boxes, which are needed for the applications RCN wants to deploy, says Rioboli.
"The DIGEO (streaming media) solution is very different from what's out there and it will really give us a real strong competitive advantage," says Rioboli. "Until that streaming video becomes available, we can't launch a lot of what we think is going to differentiate us. That's exactly what we're struggling with now—do you roll out a Volkswagen right now and then make sure you can upgrade it to a Porsche, or do you wait and put the Porsche on the road sometime next year?"Cutting through the confusion
The impact of interactive television probably won't be felt for a couple of years as cable and satellite companies flirt with the prospect. But while most of the focus has been on PCs and the Web, the television is contending as the mainstream access method of the future. Competition has driven most of the major cable operators to upgrade their networks and start making deals with middleware vendors and set-top makers for new services. Now it's just a matter of deciding which ones the public will be willing to pay for.