WANT TWO-WAY TV? HEAD NORTH: CANADA'S UBI DRAWS BIG NAMES BUT FAILS TO GRAB U.S. ATTENTION

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Imagine this scenario: Tele-Communications Inc., the U.S. Postal Service, New York's giant Con Ed utility company, the New York State lottery, Hearst Corp. and Citibank decide to form a multimillion-dollar consortium to develop interactive TV.

Each partner has a financial stake in the project, and each is charged with constructing an interactive service that in its first year will be used by at least 30,000 households.

Unlike other planned interactive TV systems, this is not a test. It is a full-scale launch, and some of the biggest multinational marketers have agreed to participate.

Sounds impressive, right? The project's sheer size and breadth-and the power of its partners-make this something worth paying attention to. Right?

Well, the venture is real. There's just one problem. It's not in the U.S., but Canada. And not just Canada, but French-speaking Quebec. And not just Quebec, but Chicoutimi, a city five hours' drive north of Montreal.

Well, maybe there's another problem. For most of the marketing applications, there's no full-motion video, only still pictures.

A year ago, five of Canada's biggest companies-and Hearst Corp.-announced plans to launch the UBI project, a $550 million endeavor, this September.

If all goes according to plan, UBI (the initials stand for universality, bidirectionality and interactivity) will be the world's largest interactive TV system, with 34,000 homes connected within the first few months and a planned rollout to Montreal in the next year.

The partners are top names in Canada: Montreal media company Groupe Videotron, utility company Hydro-Quebec, Canada Post Corp., National Bank of Canada and the Quebec Lottery.

UBI will offer home shopping, electronic catalogs, coupons that can be printed out, banking services, educational tools, home automation, e-mail, classified ads and an electronic business directory supplied by Hearst (see related story on this page).

There will be pay-per-view movies, but no video on demand; that feature won't be a part of the system until costs become more reasonable.

But what looks like the greatest thing since sliced bread in the Canadian interactive realm is mere dough in the oven to those in the U.S. In other words, half-baked.

"In effect what it's going to be is a utilitarian, two-way, enhanced videotext system," said Rishad Tobaccowala, VP-account director of interactive marketing at Leo Burnett Co., Chicago. "It's not the Cadillac; it's the Yugo that works."

"It is a pretty extensive trial in terms of the number of participants and services," said Bill Larkin, senior analyst at Intercor, Costa Mesa, Calif. "But this just doesn't have that sex appeal. It's similar to other things that have come and gone."

Other voracious followers of the U.S. interactive TV market admit they know very little about the UBI project. Despite the participation of Hearst and the sheer size of the project, U.S. attention seems firmly fixed on full-motion video trials.

"It should get more attention," Hearst New Media & Technology VP Charles Schott said of the UBI project. "The fact that it is in Quebec, which is not only Canada but French-speaking Canada, makes it all the more removed from the U.S. business community."

He and others involved in the project say the U.S. is making a big mistake in ignoring UBI, despite its low-tech trappings.

"All the U.S. tests I've heard about all focus on video on demand," said Sylvie Lalande, president of the UBI consortium. "I'm not saying we have the right way of doing it and they have the wrong way ... but the quality of data we will obtain from the first phase of implementation won't be comparable to data from U.S. interactive TV tests."

UBI has a long way to go to prove itself, even in Canada. Although its backers insist the project is on schedule, they admit one of the drawbacks of a consortium is getting the partners to work together toward a common goal.

Instead of wiring all 34,000 homes at once, UBI now plans to flip the switch in about 7,000 homes in September, adding 7,000 more each month until its goal is met.

In addition, UBI executives are just now signing marketers-a major revenue stream for the system-and must construct interactive applications for them.

Still, UBI has three distinct advantages: no competition; few regulatory roadblocks; and an interactive pedigree.

Unlike the U.S., where every Baby Bell and major cable operator has an interactive TV test planned, in the Canadian market-and especially Quebec-UBI is the only thing worth close scrutiny.

Canadian telecommunications regulations also are far less strict than those in the U.S., allowing interactive projects to get off the ground much more quickly.

UBI's lineage may be its strongest selling point. The project is the brainchild of Andre Chagnon, chairman-CEO of Groupe Videotron, which for several years has operated the Videoway interactive cable TV system in Quebec and the U.K. Many UBI executives came out of Videoway.

Videotron and its Videoway subsidiary own 30% of the consortium. Hydro-Quebec and Canada Post both have 20%, while Hearst, National Bank and the Quebec Lottery each have 10%. Each is developing a service that will be available in some form when the system starts up.

IBM Corp. will provide technology components, including set-top boxes, video servers and software.

Consumers will receive, free of charge, a set-top box, in-home printer, "smart" card and remote control. They'll pay monthly basic cable charges but no additional transaction charges to use the system.

Nearly 175 companies, including some of the largest multinational marketers, have signed letters of intent to be a part of the system. Among them: Allstate Insurance Group, Avon Products, Campbell Soup Co., General Mills, Nissan Motor Co., Ford Motor Co., Sears Canada and Weight Watchers.

Weight Watchers wants to provide recipes and the ability to order products.

"We see this as another vehicle for reaching consumers," said Alain Brunet, VP-chief operating officer of Walmar (Eastern Canada), the local Weight Watchers franchisee. "It could take the form of informing prospective members on benefits of Weight Watchers [or] our various products."

The next few months will be crucial to determining the success of UBI as a marketing tool. Armed with rate cards that spell out various packages in minute detail, UBI sales representatives are returning to marketers with proposals ranging from $25,000 to $125,000, plus production costs, for 13- to 52-week interactive marketing programs.

No deals have been signed yet, but many Canadian marketers and agency executives acknowledge the UBI project is something they can't afford to pass up.

"When you have a whole city wired on one system, you'd be foolish not to experiment," said Sunni Boot, senior VP-managing director of Optimedia Canada, Toronto, agency for marketers including Goodyear Tire & Rubber Co., S.C. Johnson & Son and Pizza Hut.

"It's going to give us learning that 1,000 homes in Orlando isn't," Ms. Boot said, a reference to Time Warner's Full Service Network test. She expects at least four clients to participate in the UBI project.

UBI representatives, of course, agree their venture is a must-buy.

"If you're not there as an advertiser in Chicoutimi, [you] will be hurt, because everybody in that city, that region, will be on the information highway," said Pierre Dion, Videoway Multimedia general manager-sales and marketing and the executive responsible for signing marketers to UBI.

He'll have to move quickly to meet his goal of having at least 75 service providers on the system at launch. UBI technicians have spent the past several months building the infrastructure, but marketing applications won't be created until contracts are signed.

UBI also is only now starting to prepare the residents of Chicoutimi for the interactive onslaught, surveying them on their knowledge of the project. VP-Marketing Jacques Larose, a former Montreal ad executive, was recently brought on to boost that effort.

Last-minute scrambling is nothing new in the interactive TV realm; witness Time Warner's fits and starts before finally launching in just five Orlando homes. Only time-and the people of Chicoutimi-will tell whether UBI has the right stuff.

"I'm not confident that it's going to be a wild success," Optimedia's Ms. Boot said. "I'm confident in only one thing: that it's closer to being doable than anything I've seen out of the U.S."

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