Shift in access battle

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One battle over cable TV and "open access" may be ending, but a second one may be just beginning.

What's at stake is who will control the pipelines and interactive TV signals reaching consumers' homes, and the implications for advertisers.

One outcome is that cable TV operators could become gatekeepers for cable-based Internet access providers who may wield significant power in reaching consumers.

Over the last year, open access has referred to a battle between cable operators and Internet Service Providers over whether ISPs could provide service over upgraded cable networks.

Phone companies, for example, are common carriers that must let ISPs compete for the Digital Subscriber Line service of businesses and consumers, giving consumers choice in the providers, speed and price of such service.

Cable operators are not common carriers. Within some boundaries (like local access) they command which services to offer.

The Federal Communications Commission backed cable's open access arguments in February by denying Internet Ventures of Los Angeles the right to offer high-speed Internet service over regular analog cable channels. FCC Chairman William Kennard argued it is too early to start regulating broadband access over cable.

Until America Online agreed to buy cable TV powerhouse Time Warner in January, AOL was leading a coalition opposed to this cable stance. The company changed its lobbying tune in February.

Later that month, however, just as it appeared that ISPs had lost the open access fight, AOL gave in and signed a "memorandum of understanding" reading in part: "AOL Time Warner is committed to offer consumers a choice among multiple ISPs."

AT&T Corp. last month moved to gain control of Excite @Home, which includes the leading cable Internet service @Home. AT&T requires its cable TV subscribers to access the Internet via an @Home link. The FCC is currently examining AT&T's agreement to acquire MediaOne, a leading cable TV provider, and if the deal is finalized, AT&T will control how a substantial number of cable TV subscribers nationwide access the Internet.

Media buyers say the next move on the frontier of interactive TV will be new set-top TV devices, or "smart boxes," that will move the TV and Internet one step closer together.

"The whole digital revolution will happen once there's (widespread) deployment of smart boxes," but it will be at least three years until there is "meaningful" penetration of the devices," says Bob Igiel, president of the broadcast division of New York-based Young & Rubicam's media buying unit Media Edge.

The convergence of TV and computers will accelerate once smart boxes are more prevalent and consumers will decide which appliance -- a TV or a computer -- best serves their needs.

"There are a lot of iterations of interactive TV," says Mr. Igiel. "Some forms will have a wireless keyboard in front of the set. Others will have boxes. A lot are aimed squarely at the Internet...I consider it a convergence of appliances -- TV and the computer on one screen. How the consumer decides to utilize that is the issue, and what kinds of content and offers will be compelling is also the issue," he says.

Before assuming the open access fight is over, however, heed the warning of Mark Mooradian, VP-senior analyst for Jupiter Communications, who warns that only a limited number of ISPs will be allowed to reach consumers on cable. He predicts the number of U.S. ISPs, now over 5,000, will plummet sharply as a result.

As the cable access battle fades, however, a new battle may be opening over interactive TV.

The technology is being pushed most heavily by the Advanced Television Enhancement Forum, a cross-industry alliance now at work on creating standards for interactive TV.

In an interactive TV system, all cable users can access some Web merchants through cable set-top boxes. But the free, basic service would only allow access to services the cable operator chooses, and it would charge sites for carriage.

OpenTV already has shipped 6.1 million copies of its interactive TV software for use in set-top boxes, licensing the technology to manufacturers of set-top box makers and other developers.

AT&T plans to launch its interactive service with set-top devices from General Instruments, a unit of Motorola Corp. The boxes would run a version of Microsoft Windows CE, and Microsoft has invested $5 billion in AT&T to maintain its place in that set-top box.

While cable operators haven't settled on the details of their offering, it's likely they will offer some interactive services free, charging those portals and e-tailers for the traffic they get, while offering cable modem service from a variety of ISPs as an option for those who want access to the whole Internet.

Mark Snowden, a Seattle-based senior research analyst for market researcher Gartner Group, expects the service to reach the market late this year, adding that the satellite companies could match the enhancement -- albeit by using telephone lines as a return path.

The cable companies can avoid a new open access controversy with careful positioning of its offerings, Mr. Snowden says.

"They have to work to position it as another channel, not the Internet. They dedicate a channel to an interactive service, and subcontract the programming out. Then it's just like HBO or CNN. If they maintain that positioning they can avoid a lot of controversy," he says.

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