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WorldGate Drops ITV, Picks Up Video Phone

After eight years battling in a sluggish interactive-TV market — and with funding running dry — WorldGate Communications Inc. is effectively hanging up on that business and redialing itself as a start-up videophone-technology provider.

The company announced last week that it would sell the bulk of its ITV patents and intellectual property to interactive programming guide TVGateway LLC, owned by a consortium of Adelphia Communications Corp., Comcast Corp., Charter Communications and Cox Communications Inc. WorldGate was also a partner in TVGateway, and as part of the agreement it will sell that equity investment back to the consortium.

Total sale price for the assets: $3 million cash, with $600,000 paid up front and the remaining $2.4 million paid at closing, expected in September or October.

WorldGate said it will use the money to recreate itself as a start-up, focusing on the video phone technology it has been developing quietly for about a year.

That's quite a switch for WorldGate, one of the early entrants in what was once considered a promising ITV market.

"Clearly we've been frustrated, as I think the whole industry has been, in ITV. We have actually been one of the most successful in getting ITV product deployed, but not really what I would call financially viably," said founder, CEO and Chairman Hal Krisbergh. "A lot of people have tried, and it is clear the industry for a whole bunch of reasons is just not ready to move out in ITV."

Not so for video telephony, a technology Krisbergh said he has been interested in since his days at General Instrument Inc.

"I always believed the ultimate product for the industry was video telephony," he said. "It seemed to combine all of the elements of video, of television, of two-way communications, of personal communications."

While WorldGate doesn't have a product ready yet, it does have a name for it — Ojo. Designed to attach to a cable modem or digital subscriber line service, the Ojo videophone would be sold at retail or through an operator, Krisbergh said. A first version will be ready by year-end, with trials likely in 2004.

Part of the TVGateway deal does allow WorldGate a royalty-free license to continue supporting its ITV products, but Krisbergh is quick to say the company's focus will be on the Ojo videophone project. Even at that, WorldGate will face the same challenge as it did in its ITV days — trying to gain operator attention at a time when a slew of other services including video on demand and HD are center stage. But Krisbergh said he likes the odds there.

"We think it first of all utilizes the existing high-speed modem infrastructure. So what it gives is it gives the operator in effect a new revenue stream for his high-speed customers," he said.