The market for internet-on-TV will grow to 12 million users by 2002 and cable operators, rather than dial-up, will become the dominant service providers, according to a study by SRI Consulting. The research outfit believes there are currently less than 500,000 consumers worldwide who subscribe to internet-on-TV services, and of those the majority use Microsoft Corp’s WebTV network, delivered through modems. But according to SRI’s David Rader, cable operators have the greatest opportunity in the internet TV arena. Rader predicts that, beyond five years, cable TV services will catch up and surpass dial-up services. Rader says companies like Time Warner Inc, Cox Communications Inc and Tele-Communications Inc will become the big players in the TV- based internet market. He said: The market’s still in its infancy so there’s no hurry for them although they are concerned about WebTV and Microsoft gaining more ground. Rader explained that companies were poised to take over the internet-on-TV market for three main reasons. First, they have the ability to spread the cost of the set-top box across several revenue-generating services, including digital TV. WebTV subscribers currently pay around $25 monthly, on top of an initial $400 or so to buy the set top box. But cable companies could slash that cost to around $10 a month, and the set-top box functionality would be integrated into the service, reducing costs further still. Second, cable operators have strong ties to TV programmers with whom they can work to develop entertainment content that specifically targets TV audiences rather than simply reformatting web pages designed for PCs, as existing services do. Third, cable networks can provide more bandwidth which will allow the operators to offer faster services and quicker internet downloads. But it’s not just the cable operators that will get in on the scene. Rader also thinks ISPs, America OnLine in particular, will want a slice of the internet TV pie. Although Rader concedes AOL is being rather closed-mouth about it he says the company, the largest PC internet service provider, won’t just sit back and let Microsoft rake in the cash. AOL already has an interest in the market, having bought the remnants of NetChannel Inc, the failed competitor to WebTV whose set-tops were built for it by Thomson Multimedia’s RCA brand, which is now to make WebTV units. According to Rader, AOL admits NetChannel isn’t TV-oriented enough and that the ISP is currently working on developing a more TV-friendly alternative. Although there’s no definite date for its release, Rader says he wouldn’t be surprised if AOL announced a service before Christmas or (more likely) some time next year. He also points to strong growth in the UK, where Cable & Wireless Communications Plc has recently announced that it will offer internet services through digital set-top boxes by next year. The company said it will use hardware from General Instruments and software from Oracle’s NCI (Network Computer Inc) to deliver the service. But until the market really kicks off and more services are rolled out, Rader says there will continue to be a big divide between the cable companies, who operate a virtual monopoly on the market using hardware from the likes of General Instruments and Scientific Atlanta and the other camp, lead by software companies like Microsoft and Oracle alongside consumer electronics giants like Sony, Thomson Multimedia SA, Philips and Mitsubishi. The demarcation line was etched ever-deeper last week when Thomson Multimedia agreed to sell a 7.5% stake of its business to Microsoft, General Motors’ DirectTV, NEC Corp and Alcatel SA. As part of the deal, Thomson will license and sell Microsoft’s WebTV technology under the RCA brand in the US and Thomson in Europe.
