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ITV delivery battle heats up

Television's next big thing is threatened either by a handful of media conglomerates or by the peddlers of sci-fi paranoia, depending on which of the opposing camps now fighting over the rollout of interactive TV you believe.

Last week, some of the biggest players in the TV business tried to sway federal regulators for or against rules that would limit cable companies' and other broadband distributors' right to block, strip or otherwise interfere with polls, sports stats, online quizzes, marketing and other interactive services expected to be add-on services to traditional video programming.

Never mind that true two-way TV, which allows viewers to tap new services via cable connection or over-the-air TV, is virtually nonexistent. But the rhetoric unleashed on the FCC last week would have regulators believe that the future of TV already hangs in the balance.

The central issue: Will broadband distributors, and cable operators particularly, have the power to hold hostage the interactive services of rival programmers and demand exorbitant carriage fees or block their add-on services altogether?

"Vertically integrated broadband distribution providers with market power-whether they are cable, telecommunications or satellite operators-will have enormous economic incentives to favor their own affiliated ITV content and services," complained a coalition of programmers, none of which own broadband distribution networks. The coalition operates under the catchy moniker "Non-MVPD Programming Networks," meaning, they aren't multichannel video-programming distributors.

The coalition is composed of Disney and Viacom, owners of two top broadcast networks, ABC and CBS, as well as the MTV, Nickelodeon and Disney cable channels, all of which rely on cable to reach most of the U.S. USA Networks and Spanish-language network Univision also joined the coalition. Allied with them are consumer advocacy groups and the Association for Maximum Service Television, a trade group representing local stations on digital and other advanced-technology issues.

The cable industry argues that interactive television itself is more dream than reality and that the FCC has no business regulating what is essentially a nonexistent business. "This is a peculiar-and misguided-proceeding," wrote the National Cable Television Association. "Such a premature urge to regulate emerging services is unprecedented."

Regulation now would harm, not help, the creation of interactive services because cable companies won't be willing to invest in the added bandwidth necessary to accommodate two-way services if they are forced to tailor their buildouts to preconceived business models, according to the NCTA.

At the moment, the risk of ITV rules is slim.

The agency isn't proposing any regulations at the moment and is only conducting a general inquiry to learn more about interactive TV and the potential for problems in the business. FCC Chairman Michael Powell said in January that the market is "too immature" to conclude that any harm will occur. Still, he argued that the FCC should be prepared to act if broadband distributors use their bottleneck power to hamper unaffiliated ITV services.

His caution remains welcome reassurance at AOL Time Warner, which is the favorite whipping boy of proponents of ITV rules. A handful of perceived sins by the company, such as once disabling non-AOL browsers when new customers signed up, stripping broadcasters' program guides from Time Warner cable systems and taking ABC off the air during contract talks with network parent Disney, built a story of evidentiary ammunition for the company's critics.

Already AOL Time Warner has paid for its aggressive tactics: The Federal Trade Commission, as part of its merger approval, forbid AOL Time Warner to interfere with interactive triggers or content carried by nonaffiliated Internet providers or programmers. Those conditions will be in place only five years, however, and could expire before ITV gains widespread popularity.

Besides the fact that consumers have not made clear what, if any, ITV services will succeed, it's also a mystery what type of connection will be the prevalent return path for two-way communication, according to the company. "Virtually every ITV service today that incorporates a two-way connection to the Internet does so via a dial-up connection-and there is no reason to suggest that will change in the future," the company said.