iTV: The Next Killer App?

Imagine never having to reach for the phone again when you want to order a pizza. Just a few clicks on your television's remote control is all that stands between you and your piping-hot delivery. This is interactive television (iTV) and it's local telephone company CT Communications' take on the future of home delivery. Using its recently installed IP network as the framework, the Columbus, Ohio, company is testing out a new iTV offering dubbed "Dinner and a Movie."

Brian Strunk, CT Communication's director of marketing and sales, said his company has something it can use to compete against the other telephone and cable companies in the area. With a Fujitsu Siemens set-top box, Myrio's user interface and the online ordering and data delivery capabilities of NeoNova Network Services, CT has designed a service to turn the television as we know it into something more than just a box.

The service, still in field trials, is just a glimpse at the promise, and possible threat, of interactive television (iTV). Telcos, cable companies and satellite networks are gearing up for what some consider the next killer app for the Internet.

Is This for Real?

In the past 10 years, plenty of technology has been hyped as the next must-have product for the home and business, "The One" that will forever change the way we communicate: e-mail, instant messaging, RSS , e-Learning, eBooks and online document sharing. But arguably, e-mail and instant messaging are the only two killer apps that have had any lasting staying power in the international community.

As far as communication mediums are concerned, there are only two that top them on a global scale -- radio and television. And they had a bit of a head start. So telecom providers, cable companies and satellite providers are beginning to merge television's ubiquitous hold on the world and morph the Internet's capabilities to create iTV.

"TV rules," said Allison Dollar, co-president of the Interactive Television Alliance (ITA), at the Supercomm trade show in Chicago last month. "Worldwide penetration of TV is far higher than any other kind of device or service -- 98 to 99 percent worldwide, including third world countries. We know there's two-and-a-half per household in the U.S., places that don't have telephone service at all."

For most people today, "interactive" means personal video recorders , like TiVo and ReplayTV, or 24-hour TV guides with information on the shows in the schedule. But the possibilities extend far beyond most people's expectations: instant feedback on commercials, TV shows and actors; one-click shopping; taking remote control user surveys; voting on local referendums; and, yes, even ordering that pizza. It opens up the world to consumers in much the way the Internet does today, though this time around it's all done with a set-top box and remote control.

Or is it Just Another Fad?

If you're a follower of Metcalfe's Law, which states that the value of a communication's system grows at approximately the square of the number of users of the system, you can see iTV's potential value is nearly limitless.

Data carriers love the potential. Where once portals like Amazon.com or Google.com earned click-through revenue for their popup ads or link redirects, iTV operators will get a small take in late-night acquisitions of "Freedom Rock," or the "George Forman Cookbook."

"With eBay, the transaction opportunity completely bypasses the service provider," said Geoff Burke, video solutions field marketing director for Calix, a voice, video and data equipment manufacturer. "With a set-top box in every home, you have the opportunity to affect the relationship with every one of the components that goes into that transaction."

But while the potential is there, one industry analyst thinks the telephone companies aren't ready for iTV just yet. Mike Paxton, an analyst at Instat/MDR, is not convinced iTV will develop into a killer app, and he doesn't think it's the telecom carrier's ultimate goal.

"Interactive TV, the way we break it down into different applications, would not be a killer application," he said, "nor do I think that any of the specific interactive TV applications today could be considered killer apps themselves. Now, what the carriers think, I don't know, but my impression is they don't. I think the application they're most interested in the most is video itself. Once you have that capability, you can start thinking about monetizing some of the other applications.

For a would-be killer app, the technology sure is taking a long time to realize itself. Despite the fact that the vehicle for iTV's launch is already in place -- it can run off today's hybrid fiber coax (HFC), VDSL or satellite transmission -- the carrier's are taking a measured, incremental approach to the technology, laying thousands of miles of fiber optics.

Because of the capital necessary to roll out fiber-optic cable to homes -- fiber to the premises (FTTP) or fiber to the node (FTTN) -- expansion has been limited primarily to new-home developments and smaller operators like CT Communications. But times are changing, especially as equipment and fiber costs drop in price.

In recent times, the two largest telcos in the U.S. -- SBC and Verizon Wireless -- are both investing heavily in fiber over the next decade. Last month, SBC's Chairman and CEO Ed Whitacre committed his company to a $6.2 billion FTTN rollout over the next five years. And Verizon started laying fiber in parts of Texas in May.

According to Ells Edwards, a Verizon spokesman, the company expects to pass one million homes in its nine-state region by the end of the year, and two million by the end of next year. Because of more telecom-friendly regulation at the Federal Communications Commission (FCC) and installation costs, Verizon was able to commit to fiber.

"The cost of fiber is coming down, but the cost has always been in installation," he said. "We feel it's reasonably priced to do so these days."