CONVOLUTION

Small Trials

One small start-up company called Telemorphix (this author was a member of the team), which formed around 1992-1993, tried their luck on a 1 hour live show they developed called "21st Century Vaudeville." A show which played once a week on a leased cable channel from Viacom (a cable franchise now owned by AT&T) in San Francisco, "21CV", as it was called in short, became a cult hit in town. "21CV" ran for 6 months there and for a year in Boston in partnership with local station, WMFP. In the summer of 1994, a version of the show traveled around the country with the Electric Carnival, a showcase sideshow for experimental computer technologies with an entertainment edge funded by Paul Allen’s Interval Research, in association with Lollapalooza, the now-defunct "alternative" rock n’ roll tour. The format of the show featured "Jack", an embittered ex-Apple engineer cartoon host, made live by a phoned-in audio voiceover improvised by the founder of the company. Viewers who saw the show could call in via an 800 number that flashed on the screen. Once in the virtual green room, the viewer could request to become another cartoon character from which there were hundreds to choose: e.g. the Punk, the Fork, the StickMan, etc.. Viewers could also fax in a drawing of their own, which would then be animated by the producers. Eventually, it would be the viewer’s turn to appear on TV intercut with Jack. In between music videos that were submitted by viewers, Jack and a character appeared one at a time. When the viewer talked into their telephone mouthpieces their voice came out of the TV set, which also triggered the mouth of the character to move (the mouth was pre-animated by producers offline). Each character interacted with Jack in an ad hoc way. Some viewers would take on the personification of the character, or were simply themselves. The effect was marvelous. In some ways, this was truly interactive TV in the purest sense (e.g. personalities interacting with other personalities). Unfortunately, the company suffered a financial breakdown when the founder went through a divorce and everything had to be sold. Additional experiments like this and other start-ups experimenting with ITV technologies such as the beleaguered NetChannel (eventually bought by AOL to serve their AOLTV platform), TV Answer, and Interactive Television Network (ITN) lost a lot of money and never got off the ground. Though, many industry pundits then and still today term these experiments "failures", those in the industry know that this work paved the way for future developments and insights.

Large Errors

Perhaps due to the potential corporations saw in Internet interactivity and commerce and new developments in video compression, some cable and telecommunications firms began to test very large, very expensive, multi-service, high-speed ITV systems to see if ITV was possible. (At that time, of course, everybody called it "interactive television" - a term still in use today - though many try to reinvent it as something else falsely as real estate barrons do when naming their new neighborhood subdivisions to make things seem more attractive.) Trials with different goals began to appear sponsored by one company or a coalition of companies - sometimes from different industry sectors. In general, competitiveness and a belief that ITV would be a lucrative industry drove these companies to explore new methodologies and business models. Services tested in the field included movies-on-demand (now called "video-on-demand" or VOD), "walled-garden" services featuring news and personal information portals, interactive gaming, home shopping, commerce applications, and interactive educational programming. Tremendous errors in judgment were made, however. Available technologies at that time were too expensive to support such an undertaking. According to Daniel Levy, now vice president of client services at RespondTV, an ITV infrastructure services provider working with many of the biggest names in the business, these lessons "still reverberate today."

Here, Levy was in charge of the service style guide for the fated Time Warner Full Service Network (FSN) project, which launched on December 14, 1994 in Orlando, Florida. Over 4,000 homes made up of mostly family units had access to this service via a fiber network. Services available included VOD, shopping, games, an EPG, and postal services. Not a free ride by any means, subscribers were billed on a pay-per-use basis via their credit cards. All told, the project cost many millions of dollars - possibly up to $100 million, says Levy. Most blamed this excess on the fact that the technology simply cost more than the deployment could support. "It was far too expensive, but we knew that going in", he said. Contrary to public assumptions about the project, however: "We knew FSN would eventually become deployable much later on. "It wasn't a wasted effort: we learned a lot." Levy also points out that a few things gleaned from the experience were invaluable. They were: 1) the service, itself, must be available free to the customer; 2) different tiered pricing models do not work; 3) VOD is a very popular application of the technology; and, 4) people really want simple interactive options. FSN eventually closed its doors in 1997. Throughout the mid-90’s, over 21 trials kicked off after 1993 when Source Media launched the Interactive Channel in Denton, Texas. Between 1994-1996, 17 more major telecommunications or cable trials took place outside the U.S. It's not known in total how many more start-ups were working with new technologies. There were specific ones not mentioned here. Overall, these trials, whether they were small or large, helped define the future trajectory of ITV systems, the perspectives of those people working on them, and emerging business models coming into focus today.

A small sampling of large trials that took place around the U.S. in the mid-90’s.

Company	Name	Location	Technology	Services
Bell Atlantic AT&T	FutureVision TelITV	Dover Toms River, NJ	Phillips set-tops nCUBE servers Switch Digital Video	Near VOD Pay-per-view Shopping
Bell Atlantic AT&T	Stargazer	Fairfax, VA	Stellar One set-tops nCUBE servers AT&T ADSL	VOD Internet
Time Warner	Full Service Network (FSN)	Orlando, FL	Fiber to curb	VOD, games, shopping, postal
TCI Microsoft	MS Network	Redmond, WA	General Instrument Hewlett Packard NEC	VOD, games
Cox Cable	no name	Omaha, NE	Zenith set-tops Hybrid Fiber Coaxial	VOD, NVOD transaction
Southwest Bell	Little Richard	Richardson, TX	Fiber to curb	VOD, games, 60 channels

Data provided by: S.Churchill

A Confusing Time

While big corporate cable trials came and went, the Internet continued to grow. More and more people were connecting online with modems. Telecommunications companies could barely keep up with the desire to surf. In the mid-90’s to about 1997, TV-related browser plug-ins and video applications (a good one was CUSeeMe, and still available today) were released to the market. Terms like "PCTV", "InternetTV", "NetTV", and others became the buzzwords in every trade and consumer computer publication. All claiming to be "the" video solution that would enable one's computer to view digitally compressed MPEG data streams downloaded from the Internet, what was actually viewable were jerky video images that did not synchronize to the audio. Cable video infrastructure developers like Scientific-Atlanta (S-A) and General Instrument (GI), meanwhile, continued to develop advanced set-top box systems without much notice by the media. Also at this time, new shows on TV emerged to cover news about computers, technology gadgets, and "cyberlife." ITV was nowhere to be found, however.

At this time, telecommunications companies returned to their labs and marketing offices to figure out what new broadband technologies would continue to feed the desire for a faster Internet. What was eventually sold to the public were Integrated Services Digital Network (ISDN) connections, xDSL (where the "x" stands in for several variants such as A, H, S, & V), and Fractional T-1 and T-3 pipes. Across the fence, the cable industry – seeing new business being built through ISP subscriptions, consulting, online advertising, ad banners, and media investments - started to invest and build hybrid fiber coax (HFC) and two-way optical fiber networks. These cable operators became determined not only to bring their cable legacy systems up to speed, a task still in process today, but became motivated to offer more pay-per-view programming packages and explore new interactiveTV technology platform strategies to maintain and grow their subscriber base. Both cable operators and the telecommunications industry, in an atmosphere of intense rivalry, touted their respective network methodologies as the best offering (this fact continues to fuel the Open Access vs. Forced Access controversy) today – although we may be near to an FCC ruling in the next few months. Post Telecommunications Act of 1996, a few cable industry players built their own high-speed data networks (@Home, MediaOne, RoadRunner) to compete in the telecommunications space. Telecommunications companies have only begun to experiment with "residential gateways" – set-tops that use broadband IP technologies to bring entertainment programming and many other services into the home.

New Competition

As the cable and telecommunications industries invested hundreds of millions of dollars in more flexible and high speed networks, the Digital Broadcast Satellite (DBS) industry (e.g. Sky Broadcasting, DirecTV and EchoStar), emerged to become a strong competing provider of entertainment programming and interactive digital services. DBS firms, when they first came out in the early 90’s, however, first offered consumers more video and audio channels than ever before. Due to transponders that could compress digital video efficiently and the fact that consumers could buy an 18" dish and set-top receiver in retail stores, the industry grew to the chagrin of the cable industry. Marketing their service as "digital", DBS services attracted thousands and then millions of new subscribers in a few years. Reasons for the switch seemed to be that customers were: a) dissatisfied with cable service and control over content, b) inconveniently located in apartment buildings not outfitted for cable or in rural areas, consumers wanted their TV, c) consumers wanted clearer images and audio (note: DBS set-top boxes are, for the most part, analog receivers that convert the digital signal to display programming; although, new digital receivers are deploying as well). Today, the DBS industry has over 14 million paying subscribers. DBS subscribers may be, in fact, the first en masse consumers to get access to the first ITV applications. Both EchoStar and DirecTV, for example, have made EPGs available on their set-top receivers. They have also been aggressively building alliances through strategic technology and marketing partnerships with companies such as OpenTV, Microsoft’s WebTV, and TiVo. America Online has heavily invested in General Motors' Hughes Electronics which owns DirecTV for $1.5 billion and struck partnerships with ITV middleware providers such as Liberate and TiVo for their AOLTV platform. Sky Broadcasting, of course, has aggressively launched Open Interactive (also called Open or Open…) to rave reviews and growing profits. We may even see Rupert Murdoch of the Sky empire buy DirecTV soon to enlarge it. Other competing services to Open such as Energis, there, will deploy in 2001. The strategy behind all this is to attract further dissatisfied cable and telecommunications customers and, perhaps, get a jump on that industry for "tcommerce" opportunities. Industry rivalries such as these keep the pressure on for the development of more ITV backend architectures to evolve.

A comparison of high speed data offerings:

Network	Connection	Architecture	Speed
Cable (DOCSIS cable modem and set-top)	Always on	Connects to node in communities with 500 or more subscribers and out to cable headend. Slows as more people get on. Some security concerns if file sharing is not turned off. Firewall products available. Hardware: Cable Modem & network card. Digital set-top box if over a television.	6-30 Mbps down 320 Kbps-10 Mbps up
DBS (dish & set-top)	Always on downstream	Data streams with video programming at very fast rates, but requires phone connection to send data upstream.
DSL (modem and set-top soon)	Always on	Connects directly to Central Office and then shares bandwidth once it goes out to the Internet. Firewall products are available. Hardware: Bridge or DSL modem. Possibly a splitter if using ADSL, but not with the new G.lite standard. "Residential Gateways", a type of set-top box for IP networks, are emerging now.	1.544 – 28 Mbps

SOLUTIONS

In the very late 90’s and up to today, the ITV industry has finally started to take shape. Why? Bandwidth is finally achieving the speeds necessary to process digital video, computer technologies are becoming device-centric, innovations in software have paved the way, lessons have been learned, and early forms of content and applications are proving the concept. In this environment, not only are we seeing more established companies embracing ITV as a long-term strategy, newer ITV companies are emerging - a few have gone public (e.g. ACTV, Liberate, OpenTV, TiVo, WorldGate, and Wink). Large mergers are also taking place inter-industry and intra-industry (e.g. Liberate-MoreCom for $521 million and OpenTV-Spyglass for $2.1 billion). To capture the evolution of this phenomenal growth, general media and trade publications are making room for coverage of the topic (e.g. this author’s email newsletter "InteractiveTV Today" [itvt] focuses exclusively on news, trends and analysis of ITV). In the end, however, it’s the actual solutions -- the standalone retail products, set-top boxes, middleware platforms, data broadcasting services, and other types of ITV applications being deployed commercially -- that will determine whether the industry is taking root and will thrive in the years to come. The strategic combination of these and their associated business models will establish what and how content producers can realistically begin to produce and broadcast.

Standalone Retail Products

Early in the history of ITV, Intel released a standalone product to the shelves called Intercast in 1995 which featured software bundled with commercially-offered TV tuner cards. "Intercast" gave the public its first example of interactive data and television in a unified environment viewable on a PC. Content developers included CNN, CNBC, Lifetime, QVC, M2, Lifetime, and The Weather Channel. NBC, an early partner, broadcast a special Intercast version of the 1996 Summer Olympics – a project for which the network had high hopes. Unfortunately, Intercast found few buyers as TV tuner cards were: a) still such a new concept, b) difficult to install, and, c) there was not enough content offered to capture consumers’ interest. In 1999, Intel withdrew its support for the product in order to refocus their efforts on developments within ATVEF. After that, Intel became very involved in the evolution of that commercial organization and invested aggressively in projects in association with the Public Broadcasting Service (PBS), although even these strategies have greatly shifted as Intel repositions its investments around information appliances in general rather than ITV specifically. For example, in the fall of 2000, both planned to co-launch an ITV digital terrestrial broadcasting network (which would rely on TV tuner cards or external receiver antennae) on a 24/7 basis, though this project has since fallen through due to similar problems with the TV tuner card industry. Prototypes released to the media demonstrated a high-level of production value and ATVEF-compliance. PBS continues plans for the roll out of a production program for producers so they can begin working on content for their new strategy involving the production of DVDs. Intel is currently the continuing sponsor of the AFI-Intel Enhanced TV Workshop held in Los Angeles annually, but this financial backing may shift towards other new media ventures within AFI. The bottom line is that Intel has yet to find a new standalone product or ITV strategic program to fully back since they exited Intercast. There are confirmed reports, however, that Intel is also currently developing a set-top box platform – though no public explanation of that experiment is available.

Another standalone product from WebTV proves and continues today a need for the services a consumer retail set-top box can provide. WebTV established itself as an important leader in the industry when it premiered a standalone set-top box with an information and Internet service in October, 1996. Grabbing the media and consumer's attention with low prices and access from one’s couch, WebTV (purchased by Microsoft in 1997 for $400 million) now has a 1 million + subscriber base. Although this number and rate of growth has been disappointing to industry observers, WebTV has created a bit of a cult following with users, obtained space on several MSO set-tops in Europe and Japan as well as a recent deal with EchoStar for their DISHPlayer box; is being mainstreamed into Microsoft TV, a new total ITV platform for MSOs. Ultimately, WebTV has maintained its leadership position with respect to VBI analog advanced broadcasting. Additional services offered include being able to watch TV with the image of another channel reduced on screen (also called picture-in-picture or PIP), a walled garden, Javascript support, banking and bill payment services, surveillance software, an EPG, and Web page building tools. WebTV’s set-top products include Classic, Plus and WebTV for Windows 98 – the last two feature two-way VBI broadcasting. Producers of ITV content over a WebTV Plus or WebTV for Windows 98 can use 3rd party authoring tools such as Dreamweaver and the services of various ITV databroadcasters such as Wink Communications, Mixed Signals, and RespondTV to provide subscribers with interactive enhancements. In the second half of 2000, a slew of new ITV, ATVEF-compliant, VBI-based programming was available over the WebTV platform. WebTV also made a deal with the CBS network to "enhance" a range of different programs. The results of that deal are due in 2001.

A short list of available programming currently exploiting VBI broadcasting:

Although WebTV has certainly led the ITV industry with two-way VBI broadcasting, this platform and other ATVEF-compliant boxes such as those that are Liberate, MSTV-enabled, or work with Spyglass software (a company now owned by OpenTV). All boxes still demand the use of some extensions in order to get those platforms to work properly. This fact continues to stifle the acceptance of this technology by producers as does the general lack of awareness of the technology, the little training available, lack of standards, bandwidth, and the lack of documentation, and the bugginess in the developer tools. This is all improving daily, of course.

In 1999 ReplayTV and TiVo introduced their own standalone products in retail that offered viewers advanced VCR-like digital recording capabilities via hard disk drives. As mentioned previously, these DVR units also feature software that enhances the EPG model (including software that enables viewers to skip commercials) as well as databroadcasting content services. At once proclaimed important developments by the press and analysts, broadcasters quickly and continue to invest millions of dollars in these companies because: 1) the boxes clearly give the viewer a powerful tool of control; and 2). broadcasters want to have some influence on the evolution of the software that will control it; and 3) these companies want to own a piece of that action. Strangely, these units have not met with great success in stores. Reports to date note that TiVo and ReplayTV combined sales as of October, 2000 have reached just 70,000 units in the U.S. Reasons for this lack of acceptance may be because the units are complicated to set up, too expensive (each has their own business model, but neither gives the box away), and there hasn’t been enough advertising or brand development, although this fact has recently changed as both companies have launched aggressive advertising campaigns, rebate programs, and other special promotions around the world. Certain deals made by ReplayTV and TiVo may bring their technology to a wider public. TiVo will be featured on a later version of America Online’s AOLTV standalone box, for example, which was released late 2^nd Quarter, 2000. TiVo has also just launched in the U.K. ReplayTV is now packaged as Panasonic’s "Showstopper" debuting the first industry 60 hour drive in October, 2000. Microsoft TV's Ultimate TV platform has its own system. These companies are also beginning to evolve their software and databroadcasting services to create more powerful ways to select programming interactively and even remotely (e.g. MyReplayTV which controls from the Web). Without skipping a beat, the DBS industry has again taken notice.

The DBS industry has always deployed standalone retail products. This fact has enabled them to sell or give away digital set-top receivers and interactive services mostly in Europe where DBS service is strong in advance of the cable and telecommunications industries there. These companies (too many to mention) clearly understand the potential of ITV to deliver a unique service, targeted advertising, and tcommerce. Each provider is trying to determine which box and set of services are strategic winners. In the U.K., BSkyB has deployed Open, an ITV service which features middleware from OpenTV. DirecTV and EchoStar in the U.S. have or will begin soon to offer their own ITV boxes featuring Wink Communications' enhanced service and services which include DVR units, as mentioned previously.

One other company that has yet to deploy, but might have another bright idea is Telecruz. This chip manufacturing company hopes their all-in-one ITV on a chip series for embedding in televisions or even set-top boxes may prove the ultimate standalone product. Announced in the 4^th Quarter, Telecruz received an additional $35 million round of funding on top of a previously $34 million to drive their strategy. Partnering with TV manufacturers such as Zenith, Aiwa, Samsung and Videocon in India, Telecruz hopes consumers will want to avoid the multiple set-top box dilemma. But, what of digital STBs?