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Interactive TV Looks Sticky To Cable Ops and Vendors

New York -- Interactive services may be still be in their
infancy, but according to panelists at an industry discussion here last week, some
operators are finding that aside from additional revenue, interactive television is
helping to retain and grow subscriber bases.

In a panel discussion at Kagan Seminars Inc.'s
"Interactive Summit," Insight Communications Co. Inc. president Michael Willner
said he has been offering a limited form of interactive TV in systems in Rockford, Ill.,
and Columbus, Ohio, for about six months. The MSO launched the service in Evansville,
Ind., last week, and it offers interactive digital cable and video-on-demand in those
markets.

Willner said plans for residential and business voice
telephony with the AT&T Corp. brand name are scheduled for later this year.

Insight is offering VOD on a limited basis through Diva
Systems Corp., and later this year, it plans to offer enhanced-television services on a
similar platform.

Willner said the VOD service, which launched in Rockford in
October, has been a success, and more than 400 movie titles are available. Incremental
revenue per digital subscriber is about $22 per month, he added.

"That amounts to a $4.40 rate increase per
month," Willner said, "and nobody is mad at me. It has revitalized basic
[service] growth. We aggressively rebuilt the system nine months ago. The basic-subscriber
numbers have increased in the last quarter by 1.5 percent."

Rogers Cablesystems Ltd. vice president and general manager
of interactive television Mike Lee is taking a slightly different approach. Lee said the
Canadian cable giant hasn't deployed any interactive services yet, but when it does,
it will be to reduce churn for other Rogers assets in wireless communications and media.

"We're making sure that when a customer goes
outside of the interactive services, they're still dealing with the Rogers
identity," Lee said. "When it comes time to choose an alternative provider,
it's difficult to walk away."

Lee said his company is planning to launch interactive
services by the end of the second quarter on Motorola Broadband Communications Sector
"DCT-2000" set-top boxes, rather than waiting for the more feature-rich
"DCT-5000" boxes.

"There will continue to be customers who are not
willing to move to advanced services," he added. "We can satisfy their
interactive demands [through the DCT-2000] and, in parallel, work on VOD and interactive
TV."

Executives at WorldGate Communications Inc., Peach Networks
Ltd., ICTV Inc., ACTV Inc.'s HyperTV Networks Inc. unit, MoreCom Inc. and eRemote
Inc. devoted most of their presentations to pitching their own products during a panel on
Internet-TV business models. But they also discussed their opinions on whether
subscriptions or advertising revenue will drive advanced television growth.

HyperTV currently charges programmers fees for developing
Internet content that correspond with television shows, but president Bruce Crowley
predicted that ad revenue will eventually cover all of the costs for the company's
service.

"The business model is about creating scale. When the
advertisers can do that, then the advertisers are willing to pick up the bill,"
Crowley said.

Ami Miron, CEO of Horsham, Pa.-based interactive-television
vendor MoreCom, said the company charges operators per-subscriber royalty fees, plus a
system-integration charge. In one of the company's deals, MoreCom waved its equipment
charge in exchange for a set percentage of revenues generated by the service, Miron said.

MoreCom is deployed on Israeli MSO Golden Channels and
German MSO The Kirch Group, and the company struck a deal with one U.S. MSO for a
deployment by the end of the first quarter, Miron said. Former General Instrument Corp.
and Phillips Consumer Electronics Co. executives founded the company.

WorldGate CEO Hal Krisbergh said much of the revenue from
advanced television would come from fees that companies charge advertisers when
subscribers click on their ads.

The average household watches eight hours of television
daily and views 180 ads, Krisbergh said. Citing a Nielsen Media Research study that valued
a single "click-through" at 37 cents, WorldGate's service could generate
monthly ad revenue of $22 per subscriber if the subscriber clicked on only two ads daily,
he added.

ICTV, which only has one deployment, currently recommends
that operators charge subscribers $9.95 per month for its service. But senior vice
president of marketing Michael Collette said he expects that retail price to drop once
advertising revenue increases.

Peach doesn't expect the subscription model to go away
any time soon. General manager of U.S. operations David Brown said consumers are
"willing, ready and able" to accept subscription charges.