Coming Soon On iTV

[Patria_y_LaPava]

CARIBBEAN BUSINESS

Coming Soon On iTV

Puerto Rico's cable TV companies will soon offer direct, high-speed access to the Internet through your TV, without the need for a computer.

BY HECTOR BERRIOS FIGUEROA

November 8, 2001
Copyright © 2001 CARIBBEAN BUSINESS.
All Rights Reserved.

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.