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Interactive TV

Trade Reports by Ken Freed

Interactive television is a reality. Here's the story.

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MEDIA
VISIONS

Journal
Setting the Pace
for Interactive TV
by Ken Freed.
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A conversation with Andrew Wallace at Pace Micro about world interactive TV development trends.
 

Andrew Wallace serves as the vice president of global marketing for Pace Micro Technology, the world's largest manufacturer of digital set-top boxes for interactive television services. Each production run of any Pace box is made-to-order, so network operators alter the box to fit their network rather than change their network to fit the box..

Coordinating campaigns targeting digital satellite, cable, and terrestrial operators internationally, Wallace spends less time at Pace headquarters in Yorkshire than he might like. The good thing about globe hopping, however, is that it affords a global vision.

Flying between far-flung appointments, Wallace spoke with me by telephone shortly before NAB2000.

-o-

KF: Let's start with the role of Pace in the North American television marketplace. How do you see yourselves?

WALLACE: We are a catalyst for change. U.S. television operators must invest in broadband services, and they want to know what their options are for digital boxes. We have digital compression licenses from General Instrument, Scientific Atlanta, Silicone Graphics and others, so our presence in the U.S. market increases competition.

KF: What is the most significant recent trend in interactive TV?

WALLACE: What stands out is the rapid change in the middleware business. I can name three huge things in the last few months.

First is Microsoft's new relationship with NDS, in which they'll work together to deliver middleware and browsing capability to lower-end set-top boxes. Microsoft is working on this with NDS as NewsCorp suppliers [for Sky].

The second thing is that OpenTV just bought Spyglass for its web browser. We provide a reference platform for OpenTV, and we're already seeing great interest from TV operators worldwide in a Spyglass-enabled OpenTV box.

The third thing is Liberate's high-speed cable implementation of middleware for the national rollout of digital television by Cable & Wireless, starting in Manchester. Meanwhile, Liberate has bought MoreCom [broadband Internet on TV with a suite of enhanced TV applications]. Fortunately, we have relationships with all of them.

These corporate deals in the past few months indicate how fast the market is moving. What this means is that the ability to integrate new technologies into set-top boxes is being highly valued.

KF: What are the market forces underlying these changes?

WALLACE: The digital dawn has caused an awakening to the importance of the interactive TV market and how fast it can grow.

A 60 percent a year growth in the interactive TV market is causing the major players to start looking at every way possible to establish a position as the market evolves. With the market is evolving so fast, any opportunity to change the competitive landscape over each quarter is valuable. That's why Pace recently bought VegaStream for voice over IP.

KF. What would be another example of this force at work?

WALLACE: Take home networking. For about a year, we've been working with an array of partners, from retailers to car companies, to put together systems that use the set-top box as the gateway for the home network. This means less contention for the TV screen, so activities like home shopping can be done with other devices, like the ShoppingMate service on a PDA that uses a wireless link to a Pace box. The STB serves as a node and resource for other devices, because the box has more processing power and storage capacity.

The rapid evolution in middleware is changing the home networking landscape even as we speak. The emergence of the MHP [Multimedia Home Platform] standard for DVB will make it easier for everyone, such as advertisers, to create programming for multiple platforms without having to produce multiple versions of the content.

KF: All this presumes a two-way box, but until recently, the mere mention of a set-top was anathema to terrestrial broadcasters.

WALLACE: We have not talked about one-way boxes with any broadcaster in a few years. Since it's impossible for a TV operator to increase revenues through a box if they can't talk to it, we would regard it as inconceivable for a box not to have any return path.

KF: Is this the case in America, too?

Two-way digital terrestrial boxes are already shipping in the UK for the ONdigital service based on DVB-T. American broadcasters are now talking to us about building for them an ATSC box with a phoneline return. They see what increased competition in interactive TV is doing for the business in western Europe, how it's driving significant innovations in both interactive services and marketing strategies, so Americans are very open to looking at new ways to compete.

KF: Jumping across the pond, what do you see as the key market forces shaping interactive TV in Europe.

WALLACE: A major force on the continent is the renovation of the cable systems, especially in Germany and Belgium, accompanied by an accelerating rollout of digital services with established business models. As a result, we're starting to get fair competition between the cable and satellite platforms, such as in Italy.

Another major force is that we're seeing the five main players in interactive TV -- OpenTV, Liberate, Canal+, Microsoft, and PowerTV -- all starting to expand their marketing efforts in the UK and western Europe.  

Eastern Europe, however, still has a pretty low digital penetration per capita. Digital TV is not driving market development in eastern Europe as it is in western Europe and America. In a year or two, eastern Europe may begin catching up, but that depends on their economies.

KF: If you look five years down the road for the U.S. and Europe, what do you see?

WALLACE: I see the growth of digital television rising toward 60 to 90 percent penetration in the UK and western Europe, and perhaps 20 percent penetration in the United States. I see the evolution of the set-top box into a home gateway for high-bandwidth video, data, and voice services. Within the household, I see the emergence of the set-top box as the central node for home networking.

-o-

Contributing to the expansion of interactive television services surely will keep Pace busy. So, Andrew Wallace will keep globe hopping. Marketing a transnational corporation is not exactly a spare-time job. end
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Kagan Euromedia Magazine
First Published in Kagan Euromedia, April 2000.
Revised. (c) 2000 by Ken Freed
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