Interactive TV: Play or Pause?

Interactive TV may finally be on the verge of commercial success. Heavy hitters such as AT&T Broadband, Microsoft and Sun, as well as lesser-known names such as Liberate, HITS, and ICTV, are signing up customers and forging partnerships designed to bring ITV into every home.

Today, few carriers offer any form of ITV. Instead, most are waiting to gauge customer demand—or they want to see more content and advertisers enter the sector. Looking at the successes of early ITV believers, like British Sky in the United Kingdom, doesn’t give newcomers much hope. British Sky, which uses satellite systems and a phone line, has one of the largest ITV customer bases, with 5 million subscribers. But the phone line’s slowness makes interaction disappointing.

Subscribers never completely understood ITV services, and it was never marketed properly, says Dennis Jones, business development manager at ICL Telecom. “Consumers saw it as more channels, not as interactive. Sky deliberately didn’t talk about interactivity, because the interaction level was so very low over a phone line.”

Digital cable has much more potential, though, because of the faster speed. When more cable operators move to digital, analysts expect the market to expand. Analyst and consulting firm Ovum estimates that 357 million homes worldwide will have access to ITV within five years, and the market will generate revenues of $44.8 billion.

St. Joseph CableVision:

ITV Pioneer

Two years ago, when St. Joseph CableVision in Missouri first offered MagicCable, the service drew a loyal base of subscribers from the 55-plus demographic. The combined e-mail, Internet access, games and cable TV service was well-suited for less technical users and folks who didn’t own PCs. Subscribers could read their e-mail, surf the Web or play games over their TV with a wireless keyboard and specialized set-top box.

Since MagicCable first launched, nearly 1,000 of St. Joseph’s 26,000 subscribers have signed up for the usage-based service. General Manager Bill Severn expects to see a considerable increase when St. Joseph upgrades to digital service. “Digital will skew our demographics to a younger set because they will be interested in enhanced services such as video-on-demand and [television commerce].”

The operator plans to move to digital by the end of 2001. To make the switch, it is adding Headend in the Sky (HITS), a package of digitally compressed video and audio services. ICTV, a head end-based solution that delivers e-mail, broadband Internet and ITV applications, has already begun integrating its platform with HITS, so St. Joseph CableVision can bring billing in-house, rather than outsource it to RR Enterprise. The current workflow uses a customized system from ICTV to gather usage information, which is then e-mailed to the third-party biller.

ICTV begins tracking each customer’s usage when the subscriber logs in to the system to access e-mail or the Internet. Subscribers are identified by their user name and password, and ICTV tracks their activities, rating Web surfing and e-mail as separate events. Video game use is tracked by a separate system with different rates. “The operator can configure our interfaces so that they can track usage through the set-top, much like they track usage on a phone,” says Mitch Askenas, vice president of software engineering at ICTV.

ICTV collects each household’s usage data in real time and uploads the information for each of the cable operator’s four billing cycles. The first 20 hours of usage is rated as off-peak. Usage after 20 hours is rated as peak and charged at $1 per hour. ICTV rates the usage and separates it into peak and off-peak, and RR Enterprise aggregates the billing information for the customer’s monthly bills.

Using a third-party biller makes the process clumsy, says St. Joseph’s Severn. Customers receive two bills, one for Internet access and the other for cable TV. And if a subscriber has a question, St. Joseph’s customer service rep must toggle out of billing to retrieve information from the operations system.

The process is awkward on ICTV’s side, too. Rather than the customer usage information being automatically uploaded to RR Enterprises, the data is sent via e-mail. “We asked about creating APIs or sockets to deliver the information, but they manually put it into a mainframe and run Sunguard [a legacy billing system],” Askenas says.

Looking back over the past two years, Severn admits that being a pioneer hasn’t been easy. St. Joseph CableVision struggled with technical problems. Mysteries like why a head end module went down or why only one group of customers can’t do something stymied the staff.

As Severn looks ahead at television commerce, he acknowledges that the strategies are still unclear, but he doesn’t expect significant technical barriers. Instead, the relationships with content providers and online retailers could be similar to the company’s partnerships with home shopping channels such as QVC and HSN. “They will bill for the goods, and we will receive a residual. We won’t have to integrate with their systems, as long as we have partnerships with the appropriate vendors and have the right checks and balances in place.”

Severn expects the future to be just as frustrating, challenging and rewarding as the past. “Two years ago, people said it couldn’t be done. We’ve proved that it can work, and work well.”

TV Cabo Takes ITV Leap

In Portugal, almost 1.8 million TV Cabo customers have the option to purchase ITV services beyond e-mail and Internet access. Home banking, television commerce, information services and streaming media are a few of the premium services that will be included in TV Cabo Interactiva.

Launched in June, TV Cabo wants to sign up 100,000 subscribers for the interactive service by the end of this year and increase that base to 1 million within three to five years. In its first phase, Interactiva includes an electronic programming guide and home banking.

The service is supported by Pace, Octal, Xacct, Microsoft and DST Innovis. Pace and Octal supply the set-top boxes, while Xacct provides the mediation platform. Microsoft steps in with its software and TV server at the head-end for provisioning and management, and DST Innovis handles the billing.

Bob McKenzie, senior vice president of strategic marketing at DST Innovis, says setting up provisioning interfaces to the Microsoft TV server was one of the biggest challenges in the TV Cabo project.

Another was setting up the rates for the various services. Customers can choose a flat fee for services or be charged for actual usage. Within these offerings, TV Cabo charges subscribers a higher rate to access Web sites outside Portugal.

IP addresses are mapped to the customer account and rated either off TV Cabo’s network or out of Portugal, explains McKenzie. “It’s based on collecting time and destination data from the server and delivering it to the rating system.”

Xacct gathers and aggregates the data from the routers, cable modem termination system, DHCP server, and the combined mail, news merchant and MSTV server. Xacct passes the information to DST Innovis’ real-time rating system, which forwards the records to its billing system.

TV Cabo has been regularly expanding its service offerings. In November 1999 the operator introduced broadband access, followed with the recent ITV enhancements. It plans to add more services, such as video on demand and television commerce. While many of the U.S. operators complain that the lack of content is holding them back from ITV deployment, TV Cabo is finding that content providers are beginning to produce. The Discovery Channel, for example, is providing interactive content for its “Ultimate Guide to Mummies” TV series, and MTV is expanding its VideoClash program.

First seen in the United Kingdom, VideoClash allows MTV viewers to decide what video will be next in the rotation. Viewers vote for their choice using SMS messages over a mobile phone, a traditional wireline phone, or e-mail to the MTV Web site. As the video plays, the viewers can see their messages displayed as a “ticker tape” across the screen. MTV is rolling the program out across Europe and will add another interactive program, Daily Chart Live.

Ocius Contemplates ITV

Cable operators aren’t the only providers considering ITV. Ocius, an integrated communications provider based in Altamonte Springs, Fla., also plans to roll out services during the next 12 months. Video on demand and recorded broadcasts of special events or programs top its list of ITV offerings, but the new carrier sees revenue potential in television commerce, too.

Ted Mahoney, Ocius’ CEO, predicts that once families can access the Internet using their TVs, Internet activity will move from the home office to the family room. “We will see even higher Internet activity and additional transactions occurring, because more family members will gather around the TV versus the office.”

In preparation for these services, Ocius has chosen NextLevel as its unified access platform and Protek as its provisioning and billing provider. NextLevel’s access equipment is stationed at Ocius’ network edge to deliver digital TV, Internet telephony and broadband services into the home. NextLevel gathers the different types of traffic from the coax line and distributes it to its appropriate destination. When Ocius rolls out its ITV offerings, NextLevel will gather much of the usage and customer information and deliver the data to the Protek billing system.

Ocius expects to gather customer information through the set-top box. The information will be stored in the residential gateway and polled every hour or once a day. To gather television commerce information, Protek would set up languages and codes to identify the event to the billing system as a transaction versus a pay-per-view event. The customer usage may be identified and tracked through the set-top box or the MAC address. For more on customer privacy and security, see “An Open Road or Restricted Fly Zone?”

Protek says it can gather click-through information, the amount of time spent at a site, or whether the subscriber visited a specific area. It will also help Ocius set up credit authorization if necessary, says Gary Miles, executive vice president of sales at Protek. “We can set up 20 to 30 profiles that limit or extend credit. The profiles can be set as VIP, student or corporate, and include information such as how long the subscriber has been a customer, credit bureau rating, and past spending levels.”

If Ocius does offer television commerce, the ICP doubts that it will take on the responsibility of billing the customer for purchases. Building in credit ratings, order processing and collection may take too much of a cut out of the revenue. “My hunch is that there is not enough profit margin to bill for transactions,” says Matt Dannehl, COO at Ocius. “We will probably take a percentage of the purchase or charge a flat fee for each transaction.”

Jeff Barnell, senior vice president of marketing and product management at NextLevel, says offering television commerce is still a couple of years out: “We are just taking baby steps now.” He suggests offering simple tasks that will ease consumers into interacting with their televisions. During a cooking show, for example, a pop-up screen could appear asking the viewer if she wants a copy of the recipe. Or, after a documentary, the viewer could request a transcript of the program.

For any ITV plans to move forward at Ocius, the ICP will need an infusion of cash. But money isn’t the only obstacle to getting ITV to the masses. Ocius’ Mahoney says a woeful amount of content is available for ITV, and no one is rushing to create content when there might not be a demand.

“We have the bandwidth and control management to handle two-way sessions,” he says, “but there’s a limited number of things that can be put on the screen, mostly documentary movies. The producers and advertisers in this space don’t see any service providers delivering ITV, so they haven’t created an abundant amount of content. We’re all waiting for some financial support.”