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FCC tackles interactive

Interactive television is more idea than reality, but the hazy future of two-way TV isn't stopping regulators from trying to prevent cable operators from one day dominating the business.

The FCC plans to launch a rulemaking in the next few weeks that would prevent cable systems from interfering with interactive TV services of unaffiliated programmers.

Although few people have access to the service today, believers say ITV eventually will revolutionize television by letting viewers have on-screen Internet access, weather reports, sports scores and news stories at the click of a remote. Many expect marketers to flock to the service too, because TV shows and advertisements can be embedded with links for merchandising tie-ins and product purchasing.

The agency's effort to craft an industrywide proposal comes three weeks after the Federal Trade Commission included interactive-TV restrictions among a set of sweeping conditions needed for its approval of the America Online-Time Warner merger. The FCC rulemaking also confirms the cable industry's biggest fear regarding that merger: that the merger conditions, particularly interactive TV and open access for Internet service providers, will become models that all cable companies will eventually have to follow.

The FTC order forbids AOL-Time Warner from interfering with interactive triggers or content carried by non-affiliated Internet providers or programmers.

The FCC will ask for input on whether that restriction should apply to all multichannel carriers. There must still be two rounds of public comment on the proposal, but ITV rules could be in place within the year. The FCC, incidentally, is also conducting its own review of the AOL-Time Warner deal and is expected to rule in early January. The FCC's conditions, however, are expected to include only opening up AOL's instant-messaging service.

It's unclear, however, whether the Republican-led commission that will be in place after George W. Bush's inauguration will follow through with a proposal drafted by current Democratic Chairman William Kennard.

Sources say the proposal being drafted under Kennard's team also may consider broader interactive-TV restrictions, such as whether cable companies should be barred from favoring their content by caching it on local servers across the country or transmitting it at higher data rates than unaffiliated services. By making their own content easier to access than competitors,' cable companies can give their business an unfair boost, cable's critics say.

"ITV is taking on the architectural dimension of traditional cable television, that is to say tightly controlled and homogenous," says Jeffrey Chester, executive director of the Center for Media Education.

Cable industry officials argue that the FCC's effort is premature. "The FCC has to be careful about moving too rapidly to regulate an industry before it really exists and interactive TV falls into that category," says David Beckwith, spokesman for the National Cable Television Association. "They also have to be careful to make sure their actions respond to real problems and are not simply a response to companies seeking an advantage in the marketplace."

Beckwith's complaint was a thinly veiled jab at Disney, which lobbied hard for the AOL-Time Warner ITV conditions.