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Cable'sInteractive Future Still Hazy

The cable industry may be pushing hard for Web-like interactivity via software and hardware upgrades, but in the wake of the NCTA show, the question of how much material impact it will have on the business remains unclear.

CableLabs’ new Tru2way platform and upgrades in VOD technology took center stage at vendor stands on the NCTA exhibit floor, with 350 exhibitors. The event ended May 20 with the NCTA pegging attendance at 14,000, which is down from 15,000 last year and off from 32,000 in dot-com-inflated 2000.

In a sign of slow progress this year, Project Canoe—a cooperative of big MSOs to redesign their cable infrastructure for digital and interactive ads—remained in the talking stages after NCTA wound down. Many would tab this a disappointment: Canoe is a low-hanging fruit initiative to monetize existing basic cable network viewership via standardized ad insertion and more detailed audience data.

Signs point to the cable industry being in a mode of investing and foundation-building, with tangible results expected to be visible in the marketplace in a few years. “Shame on us if it’s not material by 2010,” Cox Communications President Pat Esser said at an NCTA panel. “It’s going to be heavy lifting…but we can do it.”

James Kelso, VP of video engineering for Cox, says that the industry is making progress on Canoe, even if the general public can’t see it. But he thinks the level of disclosure by operators on Canoe needs to change in the near term.

“I think it’s increasingly important to show our hand,” he says. “Once we say this is what we’re doing, a hundred other engines engage, and that’s beneficial to everyone.”

The buzz on interactivity was everywhere at the show. “It really is all about content meets technology meets customers,” Chrysler Chief Marketing Officer Deborah Wahl Meyer said in a general NCTA session.

How might this brave new world work for cable?

In a few years, perhaps audiences will vote for American Idol via their TV remote controls, not cellphones, and results will be tabulated in seconds, with curious viewers able to call up vote counts in their state, county or even town. In cooperation with broadcasters, cable systems will insert targeted local ads tailored for each viewing home, garnering premium prices for CPMs. While watching shows, viewers will be able to call up other TV programs on split screens, get information off the Internet via screen insets and engage in online commerce.

“There’s a lot of technology to be deployed before this is ubiquitous,” said Cablevision Systems Chief Operating Officer Tom Rutledge.

Already, cable’s Tru2way platform is getting some positive reviews. “It’s very significant not only to the cable industry, but the consumer-electronics industry,” Panasonic North America Chairman and CEO Yoshi Yamada said.

But Sree Kotay, senior VP and chief software architect for Comcast, suggests that advertisers looking to do interactivity today should focus on ETV and relatively simple “lightweight applications,” as doing richer Tru2way applications is “still too early from a footprint standpoint.”

“Tru2way will be at scale, but not necessarily at volume for us,” says Kotay, who noted that Comcast Media Center in Denver has created a centralized hosting platform called HITS Advanced Interactive Services (AxIS) to support the development and delivery of Tru2way applications.

Kelso believes Tru2way will enable interactive applications for subscribers who crave multi-tasking. “Some people want TV to be simple, but others want to be doing six things at once,” he says. “When I was growing up, attention deficit was a disorder. Now, it’s a life skill.”

VOD, which is already interactive, is a prime early target for further enhancements in the short term. At NCTA, numerous vendors were pushing new software and equipment enabling rapid-fire changes to packaging, marketing, audience tracking and commercial insertion for VOD.

TVN Entertainment says it is investing $28 million in technology upgrades that will allow quick updating of VOD packaging by only modifying the coding attached to content, and no longer requiring an entire content file be reloaded. “This is a way to make the [multichannel] platforms inherently customizable,” TVN COO Douglas H. Sylvester said in an interview.

So if a famous actor dies, VOD platforms can now easily organize tributes, increasing the relevancy of their content by simply repackaging what’s already available. TVN estimates about 70% of current VOD-enabled homes have the technical capability to participate immediately, meaning the other 30% require upgrades.

“VOD has great potential and with dynamic ad insertion could be a great business for us,” said Discovery Communications CEO David Zaslav. “The DVR [digital video recorder] and the Web both are being embraced by consumers, but neither model is particularly attractive.”

To deliver enhanced services, cable needs more bandwidth, and a big chunk can be pried from existing infrastructure by reclaiming some analog TV channels. Comcast Chairman and CEO Brian Roberts estimates this will cost the industry less than $5 billion, versus the $100 billion in digital upgrades years ago that paved the way for today’s cash-cow cable modem business.

“I’m bullish,” says Deloitte Consulting Principal Jan Woodcock. “I’m seeing a lot going in the right direction.”