| Talk back to your TV: With interactive television, consumers will soon access Internet-based services from e-mail to TV shopping, video games to banking in their living rooms—without a computer.
Do you need a computer to get on the Internet? Not anymore. Consumers in Puerto Rico are about to ride the next big wave in access to the Internet just by turning on their TVs. New systems and services, such as iTV, will make it easier to get connected--and at faster speeds--than ever before.
There are some 750,000 Internet users in Puerto Rico, with Internet penetration estimated at about 20.5%. But the majority of those computers are in businesses and schools. However, nearly 100% of households on the island have television. Verizon estimates that there will be 780,000 Internet users in Puerto Rico by year’s end—and that’s before cable gets into the act.
Local cable T.V. companies want to bridge the gap by offering Internet access through their cable networks into your living room. In the process, they hope to expand their subscription base—and their bottom line—in an already fiercely competitive market.
In the race to attract new clients and thus increase sales, cable TV companies are readying to launch their latest product: interactive television (iTV). This service allows users to have interactive services such as electronic mail (e-mail), banking, video games, chat rooms, and even weather forecasts through the cable signal.
"Television will no longer be a passive experience; it will become interactive, even without the need for a computer," said Jose Alegria, general manager of Liberty Cablevision of Puerto Rico.
The best known application of the Internet today is the World Wide Web, a function designed to allow easier navigation to the information at different addresses. But the Internet as a whole is an electronic communications network that connects computer networks and organizational computer facilities around the world, that allows for multiple applications.
"An advantage offered by interactive television is that users will be able to get highly rich graphic content through a superior connection–in terms of speed–than the one offered by traditional Internet Service Providers (ISPs). Compared with DSL (digital subscriber line), cable can be 25% to 100% faster," he added.
A much faster and easier-to-use Internet will also stimulate the introduction of new services and possibly even significant new business opportunities through Internet advertising.
After launching iTV, now scheduled for March 31, 2002, Liberty Cablevision’s main goal is to make the service reach 40% of its clientele during the first year, according to General Manager Alegria. The company lists more than 23,000 cable TV subscribers as of last August.
"We [Liberty Cablevision] will actually become an ISP by providing e-mail, web hosting, etc.," said Alegria.
Competitor Adelphia, on its part, has everything set and ready to launch the product but launch date is still in waiting because the company is up for sale.
Adelphia’s Vice President & General Manager in Puerto Rico, Francisco Toste, told CARIBBEAN BUSINESS that the company postponed the launch of any new products–including iTV–until Adelphia is either sold or a decision is made not to sell.
"If the company is not sold, I believe we would launch iTV during the first six months of 2002," said Toste, estimating that the service would cost around $39.95 per month.
If the company was to launch iTV tomorrow, though, Toste said nearly 50,000 out of 140,000 Adelphia subscribers could hook up to the service right away. "This service demands lines that handle two-way data traffic. Last year we entered a three-year expansion plan to refurbish those lines and make them capable of both transmission and reception of data."
Toste emphasized that the need for speed will determine the success of iTV and the fate of ISPs after iTV is released. "If speed is really important for you, then you will change from a regular ISP to cable TV, where users will find no jams or busy lines when connecting because they will always be connected," he said.
"You can even have several TV units and computers at home and everyone can watch different channels or do different activities at the same time. iTV is not limited," added Adelphia’s Marketing Director Gabriel Palerm.
Local cable TV companies are banking on the competitive edge that faster access in navigating through the Internet will give them over other ISPs to boost their customer base and therefore boost their bottom line.
They may be on to something. Industry observers in the U.S. believe that offering Internet access will make it possible for cable companies to almost double their revenues while using much of their existing infrastructure.
"In my opinion, revenues will not double literally; but there’s no doubt that this [iTV] as well as the development of future interactive and Internet-related products will certainly contribute to strengthen the local cable TV industry by bringing new ways to generate revenue," said Adelphia’s General Manager.
According to the National Cable & Telecommunications Association (NCTA), the U.S. cable TV industry has experienced total revenue growth from $17.6 billion in 1990 to $40.6 billion in 2000.
The cable TV industry began in the U.S. in 1948 as an alternate television service to households where reception of over-the-air TV signals was poor. It has since evolved into a multi-billion dollar industry now serving 68% of U.S. television households, according to the NCTA.
In Puerto Rico there are four main cable TV service providers. Adelphia is currently the largest with 140,000 subscribers, followed by DirecTV with 130,000. Centennial de Puerto Rico provides cable service to some 100,000 households, while Liberty Cablevision has more than 23,000 subscribers.
Locally, the cable industry has aggressively upgraded its equipment starting in the late 1980s to support other services, including Internet access and telephone service.
The enhancements involved laying fiber-optic lines from key signal distribution points most of the way to residential areas, then using the original coaxial cable to distribute the signal among the homes in a neighborhood or part of a town. By using fiber optics only where it was most needed, cable companies eventually spent far less than would have been necessary to replace the entire network with optical and two-way lines.
Liberty Cablevision of Puerto Rico, for example, is currently engaged in an expansion plan that includes the investment of nearly $50 million in a 36- to 48-month period to refurbish its network with new cable lines, according to Alegria.
DirecTV
As soon as next month, Puerto Rico consumers will have yet another alternative: interactive television through satellite instead of the Internet.
In an effort to pioneer the launch of iTV on the island before Christmas, DirecTV recently began to replace all DirecTV [black] boxes for ones with integrated modems, with the capacity to receive interactive services.
"We need to have enough of these new boxes installed in order to do a massive flash download among subscribers," said Consuelo Sanchez Octavio, senior vice president of business development at DirecTV Latin America.
A flash download allows the user to receive [via satellite] the necessary software for interactive services. Sanchez Octavio said users receive a notification indicating a specific date and time when they will receive the software. "Download only takes two to three minutes," she said.
However, Edilberto Lopez, interactive services manager at DirecTV Puerto Rico, made clear that "what DirecTV is about to launch is interactive television, not Internet through satellite" which, he said, would be released in the future.
DirecTV already launched iTV in Brazil and Argentina, and it will soon be available in Venezuela. (See separate story.)
While iTV continues to capture the attention of cable operators, programmers and technology vendors, it's not yet clear how quickly consumers will adopt it, or which applications they'll be drawn to. |
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How fast is fast?
The difference in speed among ways to connect to telecommunications services such as the Internet is striking. The fastest modems in general use in Puerto Rico to date receive and transmit data at 56,000 bits per second (56 kilobits per second, or kbps). This is the limit at which most home computers can connect.
But people do not usually leave their computer and modem on all day, connected to their Internet service provider all the time. This interrupted connection implies that when people want to use the Internet, they must wait while the modem connects, which sometimes results in delays because lines may be busy.
The desire for broadband communications–a communications network in which a frequency range is divided into multiple independent channels for simultaneous transmission of signals (voice, data, or video), allowing more room for more digital transmissions–is the result of the increasing speed of computers and more powerful applications.
The most widely developed version is asymmetric digital subscriber line (ADSL) from the phone company. It is capable of delivering 3 to 4 Mbps (megabits per second) to the home or office and a slower rate back, typically a small fraction of a megabit per second. But ADSL does not have the capacity to carry television, so it is suitable only for data and voice.
The various satellite systems currently being deployed are specialized for voice, data, or television. These systems have been in the works for a while, so the increasing popularity of the Internet has imposed a new set of design challenges.
A telephone call requires a known quantity of network capacity, and a system to carry telephone calls can be designed for an expected number of calls. But the potential of information exchange on the Internet and the exponential demand for greater network capacity has sparked the deployment of fiber-optic cable capable of carrying more data. But the speed of Internet service can vary greatly and depends on how many people are connected to the same network.
Right now system designers and broadband entrepreneurs are left to figure out how much money people will pay for high-speed access–which basically boils down to determining how much happier higher speeds make them. "Then again, if speed is an important consideration for you, you will change to interactive television," said Adelphia’s Toste.
Given the wide range of systems and technical requirements, it is tempting to speculate which technology will be the winner. But technical differences should have minimal influence on consumption. The consumer will be most interested in convenience and speed.
Industry estimates suggest that the cost to newly wire a neighborhood for broadband, so that the cost of installation is shared across all the residences, is roughly $1,000 a home.
With nearly 100 million homes in the U.S., the implication is that perhaps $100 billion must be spent to provide a new wire line connection to every home in the U.S. To wire one home at a time is much more costly, so gradual wiring of isolated consumers would be even less reasonable.
Telephone and cable companies are therefore moving forward with incremental improvements that are substantially cheaper than a total replacement.
Meanwhile, cable TV companies are selling broadband Internet service based on their hybrid fiber-coax networks and cable modems, offering higher speed and instant access at a fraction of the investment.
The same two-way digital networks that allow companies to deliver the Internet can also be used to deliver telephone service—or Voice over Internet Protocol (VoIP)--further diversifying opportunity for cable companies’ revenues.
VoIP is the method of using the Internet to transmit voice using the Internet protocol (IP), commonly used for data, instead of using the public switch telephone network (PSTN) that we use today to place telephone calls.
Cable vs. telecomm
As it looks from the outside, the mix of cable and Digital Subscriber Line (DSL) technology will have nothing to do with their relative technical merits but everything to do with the relative levels of investment and marketing by these two market forces, telecommunications and cable companies.
Although the cable TV network has emerged as the early leader in providing such high-speed data access in homes stateside, that’s not the case in Puerto Rico.
Internet access over cable runs at speeds up to 100% of those of the traditional dial-up world. This raw speed is the catalyst demanding the dramatic change of typical Internet services. And, as explained by Adelphia’s General Manager Francisco Toste, the connection is always on, enabling users to call up a website immediately as they wish.
Telephone companies have recently started to introduce their own high-speed services, but so far, their offerings are considerably slower than cable and in almost all cases, more expensive.
Puerto Rico Telephone (PRT) recently launched its DSL access, but the experience has yet to prove to be the convenient solution–at least not compared with what cable TV companies are soon to offer: high speed access through the same cable that brings television entertainment.
One of the reasons that cable service costs less than DSL is because it's a shared facility. A coaxial cable traveling in a neighborhood from house to house can provide high-speed service to thousands of customers. A single piece of equipment at the cable company's office can patch those thousands of customers onto the Internet.
DSL, on the other hand, requires a separate pair of wires for each subscriber: The phone company needs to install a special DSL modem at the home or office for each DSL at its central office.
DirecTV’s Interactive Services Manager Edilberto Lopez described using interactive TV for the first time as "a breathtaking experience, with images and text that flash before your eyes, and full-motion video and audio that play without jittering."
Service will be the last word
When it comes to delivering consistently reliable service, cable companies in Puerto Rico do not have a good history. This may be because they've never been forced to deliver a consistent high-quality service.
Although it might be an inconvenience to go without cable for a few nights, nobody will die if they can’t get their fill of "Star Trek" or "Gilligan’s Island."
Telephone companies, on the other hand, have been required for years to deliver highly reliable dial tone. As cable companies begin to provide their own dial tone, they will soon have to meet the same demands.
In the words of Adelphia’s Toste, the only apparent problem that iTV would encounter is that it will be subject to all cable TV conditions, including the loss of signal during bad weather. "On this, telephone lines have a clear advantage."
While it is unlikely that the battle between cable modems and DSL will be won on technical merits, service appears to be the leading factor to determine who will be No.1.
A new niche for advertisers and marketers
Although cable TV companies are only service, not content providers, interactive television (iTV) promises to open a new niche for advertisers and marketers from which to generate revenue.
Not only will cable TV service providers boost their budgets to advertise the product, but other advertisers will invest in the medium heavily, according to Francisco Toste, vice president & general manager at Adelphia.
"I believe that the introduction of iTV will certainly help advertising investments increase," said Toste.
According to the National Cable & Telecommunications Association, cable advertising revenue has also experienced growth, from $2.5 billion in 1990 to $5.6 billion in 1995 to $13.8 billion in 2000.
For its interactive qualities, iTV would also help change the perception many advertisers still have towards the Internet.
"While some are still skeptical about using the Internet as an advertising or marketing tool, the speed offered through cable TV vs. the speed offered by regular Internet Service Providers will surely help them [advertisers] change opinions," added Adelphia’s Marketing Director Gabriel Palerm.
"It would also position cable TV as a better, stronger competitor," he added.
To achieve that, cable TV providers are investing millions of dollars in technology and technical infrastructure. Adelphia, for example, plans to invest nearly $50 million in a three-year period to upgrade its systems for high-speed Internet capacity.
"We are investing between $500,000 and $750,000 in equipment (servers, etc.) to transfer data alone," said Toste. Investments will also prepare cable companies to offer other sophisticated services in the near future, such as video on demand, and cable telephony, according to him.
On the advertising agencies side, iTV means a golden opportunity, according to Mary Ann Gabino, account supervisor at Arteaga & Arteaga Advertising, the agency that handles the account of Liberty Cablevision.
"Some clients complain that there’s no way to measure the immediate effects of advertising. With interactive television, it will be possible to begin a commercial on regular TV and conclude it through the Internet. That would also help increase advertising investment," said Gabino.
H.B.F.
DirecTV has launched iTV in South America
Interactive channels available include:
- E-mail – Using the remote control [through a virtual keyboard displayed in the TV screen] or by using a wireless keyboard [optional] users can send and receive electronic messages to anywhere in the world including other DirecTV affiliates. DirecTV subscribers will be able to have up to five e-mail addresses per household.
- Video games – iTV allows users to access a variety of interactive video games through the TV screen.
- TV banking – Users would be able to access their bank accounts and check balances, pay bills, perform money transfers, and more.
- Weather – iTV offers weather forecasts for 2,000 cities around the world. Users can also access satellite maps.
- Shopping – Cable TV subscribers will also be allowed to experience T-commerce (television commerce) to order and buy products over the Internet through cable TV.
- Customer service – By using the remote control, users can check their monthly cable TV bills and even get updated information about programming, pay-per-view and special events, and more. This channel also offers a frequently asked questions guide to help users better get acquainted with the system.
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