Television's bright future begins to dim

THE BALTIMORE SUN

The Interactive Channel, a new cable TV offering, promises in a glossy brochure that it is "Handing You the Future of Television, Today."

This channel, we're told, "delivers the things you want to see when you want to see them . . . You can instantly access news, weather and sports . . . You can shop for products and services, hear CD music samples, view movie previews."

Sound good? It sounded good to me until I stopped by the TC Interactive Channel's exhibit at the cable TV industry's vast annual show in New Orleans last week.

There, after a salesman struggled to get the channel working, I was surprised to discover that this version of the "future of television" lacks a key ingredient: moving pictures.

That's right. News, weather, sports, entertainment and shopping on the Interactive Channel all come in the form of still pictures with sound: essentially illustrated radio.

No wonder cynics say that the information highway is really a super-hype-way, that dreams of a thrilling new world of interactive TV are just that -- dreams that will fade in the face of huge economic and technological obstacles.

The truth lies somewhere between the promises of the promoters and the skepticism of critics. There was no shortage of hype last week in New Orleans, but there was also plenty of evidence suggesting that cable television eventually will offer valuable and, yes, exciting new programs and products to its customers. They will take years to reach most homes, and they will cost money, but they are coming.

Peter Krasilowsky, an industry analyst with the research firm Arlen Communications in Bethesda, uses the term "skep-thusiast" when he talks about the future of television. He's enthusiastic about the entertainment and information and education that new media can provide, but he says, "The skepticism has to creep in when you look at the economic and technological problems that stand in the way."

Both the problems and possibilities facing cable were on display last week. On the negative side, cable executives griped incessantly about federal rate regulations that they say have removed the incentives for cable to invest in new programs and technologies. Price cuts in basic cable rates ordered by the FCC will take an estimated $3 billion out of cable industry profits and put it into the pockets of consumers.

"What Washington did to this industry was nothing less than a political caning," declared Decker Anstrom, the president of the National Cable Television Association.

Paul Amos, a former CNN executive who is struggling to launch a new network called the Health Channel, says regulation has made it hard for anyone in the industry to borrow the money needed to expand.

"Regulation has been the earthquake that destroyed the information highway," Mr. Amos said. "It's a little like I-10 out in California."

The cable industry needs to borrow money because the costs of rewiring America to provide interactive television are enormous -- tens of billions of dollars, by all estimates. To take just one example, new cable set-top boxes that will allow viewers to get movies on demand now cost $400 and up, manufacturers say.

Meanwhile, deploying the digital technology that will allow cable to provide 500 or more channels of programming has proved more difficult than some assumed. Some key tests of interactive TV, which had been promised in 1994, have been postponed while engineers try to get the glitches out of new equipment.

On the encouraging side, the cable industry show offered glimpses into a TV future that promises real improvements over today. One example is a simple yet valuable product called Your Choice TV that allows people to see episodes of favorite TV shows they may have missed. Viewers can pay $1 to view the most recent episode of a TV show.

This is hardly revolutionary -- it's really little more than a substitute for the VCR -- but it's the first step on the road from passive to personal television. What's more, Your Choice TV isn't a futuristic idea; it's being tested on eight cable systems and 20,000 homes this year, with encouraging results. Viewers, it turns out, will pay to see "free" programming when they want to see it.

Viewers also seem willing to pay for movies-on-demand, provided they can not only receive the movies over their cable wires but also retain the ability to stop, start and pause them. Gerald Levin, the chairman and CEO of Time Warner, says this "virtual VCR" will be a major selling point of interactive television and cites as evidence the response when his company's 150-channel cable system in Queens, N.Y., began offering 60 channels of pay-per-view movies. Even without VCR-like controls, customers bought more movies because they found the movies they wanted at a convenient time.

"Something magical happened," Mr. Levin said. "The convenience and the choice and the control that was delivered to the consumer fundamentally altered the relationship between our company and the consumer."

Those three C's -- convenience, choice and control -- look to be the big selling points for interactive TV. Hewlett-Packard, the electronics giant, released an extensive study last week reporting heavy demand for new media from busy people who want to save time by getting programs and products when they want them.

These people want to be more than couch potatoes, said Casey Sheldon, a marketing executive for Hewlett-Packard's "interactive television appliances." Among other things, Hewlett-Packard is developing low-cost printers that will attach to cable or phone wires and deliver coupons, product data or news to homes. "We're bullish on interactive TV and the services it will provide," Mr. Sheldon said.

Convenience also is driving the growth of a cable network called Mind Extension University. MEU is another simple idea -- televised college courses -- that is becoming more user-friendly by allowing subscribers to order lectures on videotape and communicate with teachers by electronic and phone mail. Students earn degrees in business, education and science from such institutions as Colorado State, George Washington University and the University of Arizona.

"The mission is to make education accessible to everybody," said Ralph Bilyeu, 29, a regional manager for MEU. At test sites, MEU now offers access to libraries and to the Internet computer network over cable. That way, students can do research without leaving home, an enormous boon to those in rural areas or with physical handicaps.

Young people not so academically inclined can tune to the Sega Channel, which will become available within the next six weeks to 325,000 homes, including those on an East Lansing, Mich., cable system owned by Tele-Communications Inc. The channel provides about 50 Sega Genesis video games a month, which can be downloaded by subscribers in about a minute, at a cost of about $15 a month. That's cheaper than buying or renting the games, say the channel's promoters.

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