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Soft economy won’t stop ITV’s progress

Feb 26, 2001  •  Post A Comment

Cable operators insist their interactive TV rollouts are on schedule and, thus far, immune to this year’s anemic economy.
Other industry observers are less sure, saying a sluggish economy could put another crimp in cable’s already-tardy ITV future.
“The slowing economy has already slowed the rollout of broadband services by both cable and DSL [digital subscriber line] companies,” said Jim Stroud, senior analyst for the Carmel Group. “A slowing economy will clearly have at least some effect on the rolling out of interactive TV.”
“When you start to see the economy slowing, you are going to see [multiple system operators] being more selective about their spending,” said Ian Olgeirson, senior analyst for Paul Kagan Research. “A lot of operators are unsure about the payoff of ITV. It’s speculative and could fall under something MSOs can be cautious about.”
Others say it’s not a withdrawal because cable’s ITV revolution still hasn’t gotten out of the starting gate yet.
“We’re seeing just further delays,” Mr. Olgeirson said. “In fact, we’re just not seeing any deployment-which you have to count as a delay.”
Moves by AT&T and Cablevision Systems this month may be the latest signs of an ITV slowdown.
AT&T laid off about 900 employees nationwide, including 450 workers in Washington state who were building AT&T’s broadband plant.
AT&T, which is test-marketing interactive program guides from Wink and Worldgate, said it plans to concentrate on selling existing services, which could mean ITV is going on the back burner. Observers say AT&T Broadband, which parent AT&T plans to spin off this year, will likely make the biggest ITV cutbacks. “They are obviously trying to get their books in shape,” Mr. Olgeirson said. “So spending a lot of money on a real speculative venture [may] not be part of that plan.”
AT&T could also slow down ITV if it decides to sell off some of its rural cable systems.
“A lot of AT&T systems might not be upgraded for all of the necessary MHz and two-way requirements to provide all of those advance ITV services,” said Thomas Eagan, senior analyst for UBS Warburg. “Instead of going ahead with ITV, those systems may need money to upgrade the systems that were just acquired to two-way and higher MHz levels.”
Earlier this month, the Long Island-based Cablevision postponed its rollout of 100,000 Sony DCT-5000 digital set-top boxes, which would provide video on demand and eventually a host of other advanced interactive services.
Cablevision officials said the time is needed to build customer support for what will amount to a forced switchout for its customers.
“Frankly, we don’t want to annoy them,” Cablevision Chairman Chuck Dolan said this year. “We come along and say, `Hey, either you let us come into your house to switch out those boxes by a certain date, or you are going to lose all these services.’ That’s a great way to get your subscribers annoyed at you.”
But observers say Cablevision’s switchout also means its subscribers will, in some way, pay more, which could produce subscriber defections.
“These are very high-end boxes,” Mr. Stroud said. “At some point those boxes have to be paid for, and consumers are going to have to foot that bill in some fashion.”
Despite dour forecasts, other cable operators scoff at a slowdown and insist their ITV plans are moving full speed ahead.
“I don’t see a direct link between the economy and Cox’s ITV plans,” said Vince Groff, manager of interactive TV for Cox Communications. “We’ve spent billions of dollars upgrading our networks. These are exactly the types of services we want to introduce to pay for that network.”
In the next breath, Mr. Groff said Cox’s ITV rollout will also depend, to some extent, on the economic fate of others. “There may be some slowing from the fact that there is not as much money pouring into anything, including interactive television [companies],” he said. “But the economy doesn’t affect our desire to get these services out.”
Cox, which reaches 6.2 million cable homes, so far has rolled out video on demand systemwide in San Diego and is conducting ITV beta tests with Cox employees, rolling out advanced digital set-top boxes from Scientific-Atlanta to roughly 2,000 Cox customers this year.
Mr. Groff said Cox will roll out interactive program guides first, followed by VOD and then eventually a package of ITV services that includes e-mail, chat and e-commerce.
St. Louis-based Charter Communications also has great ITV expectations this year.

Right now, Charter offers video on demand in Los Angeles and Atlanta using DIVA Systems technology. It will add 10 new markets this year.
Charter is also on schedule to launch an interactive TV portal from Digeo to about 2 million of its 6 million subscriber base in the next year and a half.
“We don’t have any plans on changing those numbers,” said Steve Schumm, executive vice president for Charter Communications. “If the economy really goes south and impacts us, I guess we’ll reassess, but we don’t think that’s going to happen.”
Philadelphia-based Comcast Corp. boasts that it is on schedule to install 400,000 more digital set-top boxes this year. The box will serve as a video-on-demand platform. “We have not backed off; we’re staying the course with the decisions that were made,” said Mark Hess, vice president of digital services for Comcast Corp. “We have purchase orders in place and servers are being delivered. We’ll have VOD in every major Comcast market before August is done.”
Some of cable’s medium-to-smaller MSOs are also making headway with ITV. Insight Communications, Susquehanna Cable and Blue Ridge Cable have signed deals with Commerce TV, an e-commerce interactive service.
To date, dedicated interactive TV services such as Wink TV have made the industry’s largest ITV inroads. Wink TV expects to be in 5 million to 6 million homes by year-end.
But Wink got a black eye on Wall Street this month. Its stock dropped 30 percent after DirecTV fell nearly six months behind schedule in adding Wink’s interactive program guide.
Experts said while cable operators may still bring new interactive services to market, the key question is whether consumers will sign off on rate increases to their monthly bill.
“Most of new cable services rolling out are using higher-end digital set-top boxes, and someone has to pay for those boxes,” Mr. Stroud said. “Consumers are a little tighter with their money these days and may be more hesitant to spend an extra $10 a month. Consumers are clearly the X factor in all this.”