Internet TV model in question: What the false starts mean and who's to blame

If the market prognosticators had been right, U.S. consumers would be preparing for an onslaught of products that let them simultaneously surf the Web and watch enhanced broadcast television from the comfort of their couches.

In reality, vendors are still mulling over so many details and models that the Internet TV explosion that was expected around Christmas will be much more muted if even detectable.

Part of the problem is that with such a new technology, no successful economic model has proved itself in the marketplace. Just as problematic is the number of models. Companies such as Worldgate and ICTV are relying on cable operators as the main conduit to deliver downstream data, using their broadband networks and advanced digital set-top boxes. Others such as WebTV and Network Computing Inc. are more software-oriented and don't necessarily need a set-top.

As a result, no service provider has been able to establish a large enough base of subscribers to make a major impact on the market. According to one recent analysis, Microsoft-owned WebTV has sold about 300,000 home terminals, which would put it at about the same level of a large telco-operated Internet service provider but far below most other home electronic devices. Such numbers also are putting some doubt in cable operators' minds as they contemplate deploying new set-tops. However, comparing WebTV or any other vendors' boxes with other home electronics is unfair at this stage of the market, said Wes Hoffman, president of ICTV.

"There are a number of ways to provide it, and what people need to look at is subscription to a platform rather than a technology purchase for the home," he said. "There's a very real difference between purchasing an Internet appliance for the home vs. a VCR, which has a very fixed and rigid standard."

Moreover, customers should not be expected to flock to a product that provides a "weak experience for a high price," he added. "Based on what we've seen, we absolutely believe the idea makes a lot of sense, but it's got to be in a form and price point that's acceptable."

Hoffman blames cable operators for failing to acknowledge consumers' desires. Under its current model, ICTV envisions cable operators offering several service tiers with a low-end service starting at about $10 for five hours of use per month. By making customers pay as they go, cable operators get much closer to the pay-per-view environment in which they currently operate.

"The pay-as-you-play model works as long as you deliver compelling content," said Hoffman.

Other vendors, however, say the market is not as bleak as it looks. Dave Limp, vice president of marketing for Network Computing Inc., said the U.S. market has some unique challenges but isn't impenetrable. NCI, a subsidiary of Oracle, has developed its software for multiple platforms, including set-top boxes and Internet appliances.

"I'm more bullish," said Limp. "We've not made any particular bets on where the first big deployments are going to be. If there's any delay in this industry, it's not a lack of want but probably because the general public is not jumping up and down for this."

NCI's latest program, called AnyISP, targets vertical markets such as consumer interest groups. Service providers then develop applications specific to vertical markets and launch service over their existing network.

"I don't think it's a Holy Grail of this industry, but it's a good start," said Limp, adding that the company officially launched the program in Japan but has signed some agreements in the U.S. "We still see a horizontal appeal."

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