INTERACTIVE: BEHIND THE HYPE/INTERACTIVE TV; How operators are vying to complete the interactive loop,

Digital interactive TV may be on the way - but will it be delivered by

satellite or cable? Meg Carter reports

The digital TV revolution is dawning and with it will come a new

generation of interactive delivery systems. In the blue corner, digital

satellite; in the red, digital cable. Yet predicting who will come out

on top remains an imprecise science.

To date, the stumbling block to achieving true real-time inter-activity

has been the so-called return path’, necessary for viewers to

communicate with broadcasters.

Terrestrial broadcasters have no return path, unless you count the

opportunity viewers have to phone in. Cable and satellite delivery

systems, however, already offer limited interaction.

At one level, cable systems have the potential to be the sure-fire

winner in the race for interactivity. They have advanced fibre-optic

networks already in place and a number of operators have conducted

interactive trials. Unlike satellite, they have a built-in return path -

fibre-optic cables.

However, satellite also has its advantages: notably, the clout wielded

by Rupert Murdoch.

Interactivity, for the time being, may remain limited, but BSkyB is

planning a plethora of interactive and on-demand services when it

introduces digital satellite broadcasting next year.

Murdoch is further ahead than any of his rivals in developing the

digital decoder box essential for receiving these new digital and

interactive channels. And, insiders claim, although limited to

using telephone lines for the return path in the short term, future

technology could enable viewer responses to be transmitted back to the

broadcaster via satellite.

Simon Howson-Green, the head of Internet at BSkyB, outlines the options

to interact already available: ‘At a basic level, there’s the

interactivity with Sky text. More sophisticated is Intertext, where

viewers can use the touch-tone keypad of a telephone to key in

letters and numbers to create their own small ads, key in messages or

lay games.’

Existing applications, however, are limited by bandwidth, which dictates

the number of people who can interact or play at any one time and the

sophistication of the images carried.

Digital promises to free up bandwidth and boost channel capacity,

allowing a new generation of services - from near on-demand channels to

pay-per-view. Reliance on a telephone return path will not pose too

great a problem, Howson-Green insists. ‘As far less data will be coming

back to us, the capacity needed for the return path will be much lower.’

However, a Sky source adds: ‘There are tremendous possibilities for

delivering vast quantities of information other than via a telephone

line. Data could eventually be broadcast direct to a PC and viewer

responses transmitted back to the satellite.’

Not that the latter option is seen as viable by any of Sky’s cable

competitors. John Doherty, the head of strategic development at Nynex,

comments: ‘To get information back without a phone line, you’d need

another set-top device: a transmitter. It’s an infrastructure that will

be costly to develop, costly to buy and which does not yet exist.’

Different cable operators have networks at varying stages of

development. At Nynex, the return path is almost fully in place, giving

its customers the opportunity, for example, to buy the recent Holyfield

versus Tyson pay-per-view fight by hitting a button displayed on-screen.

‘We are already offering impulse pay-per-view services and trialing

cable modems in the North,’ Doherty asserts.

Other cable operators are running similar trials. Videotron, for

example, has worked with J. Walter Thompson on an interactive test

involving Kellogg’s Frosties. The company has also experimented with

basic interactive TV programming where four different versions of the

same show are relayed to homes via four separate cable channels.

Viewers can select different options, such as camera angles for sports

events or answers in a quiz show or a learning programme.

Cable’s data capacity is greater than a satellite and phone line-based

option, Doherty claims, making a faster and better quality service.

Another factor, he adds, is that ‘we operate a closed network - there is

no outside interference from rain or clouds’.

Cable operators insist they will be ready for digital satellite’s

launch. And they claim their hand is strengthened by increased

consolidation in the business.

Just last month, Cable and Wireless merged its Mercury Communications

division with Bell Cablemedia, Nynex and Videotron resulting in a major

telecommunications force. The new entity commands unprecedented clout -

access to six million households in the key markets of London,

Manchester and Liverpool. In other words, critical mass in the

residential market at one stroke.

But Murdoch has been busy, too. He is forging increasingly close links

with BT, which plans to invest pounds 5 billion in transforming

Britain’s telephone network into the most technologically advanced in

the world, capable of relaying programmes and movies via an ordinary

phone line. BT recently announced a merger with MCI, which already

holds a stake in News Corporation.

A Murdoch-BT alliance rivals the powerful technological advantages of

cable-based networks, insiders claim. BT is even considering

contributing to digital decoder development costs and subsidising their

retail price.

But, cable operators warn, the regulators have already been alerted to

this powerful alliance and Oftel recently voiced fears about a joint

promotion with BT offering discounts on Sky subscribers’ phone bills.

Satellite may have less capacity - 60 per cent of cable for carrying

viewer data, according to some estimates - but combined with the

national penetration of BT and the centralised administrative clout of

BSkyB, this is still significant.

The ability to manage customer response quickly and efficiently and

information will be crucial. While some cable operators - such as Nynex

- are investing significantly in this area, Sky’s centralised state-of

the-art customer centre in Livingstone remains a powerful card.

Both Sky and BT are also adept at marketing, while cable, in the wake of

its calamitous joint advertising effort this year, has much work to do.

As the table on this page shows, both sides have strengths and

weaknesses. It’s just that Sky’s strengths could prove to be in the more

important areas.

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cable versus satellite in the race for interactivity

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Cable                                   Satellite

+Built-in return path: the cable        -No built-in-return path; must

                                         rely on telecoms partner: BT

                                         (although in the longer term,

                                         limited reverse path could be

                                         via satellite)

+-Although data capacity is high,        +-BT has the numbers, but not

 cable penetration remains               the hi-tech network. It will

significantly lower than BT              invest pounds 5

                                         billion in development

-Likely to have to rely on Murdoch-     +Developing its own digital

developed digital decoder boxes          decoder boxes which, many fear,

for future digital interactive service   will give it the killer

provision as Murdoch-BT digital          advantage

decoder plans are further ahead          Retail price could be

                                         subsidised through partnership

                                         with BT

-Content will be key - and for the      +Sky, by comparison, is the

time being, cable relies almost          content king

exclusively on material sourced

from elsewhere

+Industry regulators are likely to      -Oftel has already voiced concern

favour cable under growing pressure      over a recent Sky-BT joint

to rein in Murdoch’s media               promotion offering subscribers

ambitions                                discounted phone bills

-Joint ad campaign dropped after        +Both Sky and BT are experienced

one year. But new Cable and              and adept marketers

Wireless merger may provide more

focused initiative

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This article was first published on Campaign