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Dutch Testing Interactive TV Over DSL

Monday May 7 7:14 AM ET
Dutch Testing Interactive TV Over DSL

By Jana Sanchez

AMSTERDAM (Reuters) - Dutch group KPN Telecom NV said on Monday it was testing technology that would allow it to offer interactive TV, video on demand (VoD) and games to consumers along with its high-speed Internet service.

If the entertainment services get the go-ahead, they could bolster the company's domestic fixed-line revenues and offer competition to similar services being launched by the Netherlands' largest cable company, United Pan-Europe Communications (UPC).

``KPN is engaged in trials to see how the technology for interactive TV and VoD could be combined with their DSL (digital subscriber line) services... The stuff works. It's just up to them when to roll it out,'' an industry source said.

Although KPN spokesman Michel Hueber confirmed the entertainment trials, for strategic reasons he said he was not prepared to release further details yet.

The former telecoms monopoly would need a commercial broadcast license to offer the services, but there was no reason why such a license would be withheld, said Leonard van der Meulen, a commissioner at the Dutch media regulator Commissariaat voor de Media. The most optimistic voices -- the vendors who stand to gain if telecoms companies roll out these services -- say most telcos would have to compete quickly with the entertainment offerings from rival cable and satellite services, or risk losing even more of their domestic Internet and voice telephony revenues.

``We have been talking to every major telco in Europe... I think you will start to see all the major telcos offering these services as early as the end of the year,'' said Stephen Turnbull, regional general manager for the home networking group of Motorola, the largest maker of set-top digital TV devices.

Timing, Costs Are Issues

European telcos are plagued with debt, and would have to dig deep to come up with the money needed to roll out the services, analysts and industry sources said.

``Most telcos are going through a difficult phase and trying now to figure out what can be done over DSL,'' said Stuart Collingwood, vice president of Liberate Technologies.

Cost estimates for KPN to roll out such services on its network run as high as almost one billion euros.

The set-top box costs about $500 -- a high unit price due to the small number being produced. Network upgrades could require funds which KPN might have trouble finding.

KPN is burdened with 21.9 billion euros of debt after the acquisition of German mobile carrier E-Plus and the purchases or interests in four third-generation (3G) mobile phone licenses.

One way to cut costs would be for KPN to ask consumers and vendors help foot the bill for the rollout, said Turnbull.

``They are going to have to look at creative ways to finance this... they need to deliver these services, and people will pay for these services,'' Motorola's Turnbull said.

Even then, the challenge is to demonstrate that these services can be profitable.

``They cannot get the cost model to work in many instances. The boxes are expensive, the upgrades are expensive and most of them are paralyzed by their 3G debt and collapsing share prices,'' said Liberate's Collingwood.

KPN is unlikely to charge more for the services than UPC would do. Analysts estimate a typical Dutch family could spend between 50 and 120 euros per month on interactive TV and VoD.

The Technology Works

The software and hardware to offer interactive TV via a set-top box or so-called home gateway is already in use in the U.S., Canada and Britain.

Motorola, Pace Micro, Philips Electronics and Nokia (news - web sites) all produce a set-top box for delivering interactive TV via a telephone network.

Companies that make interactive TV software, mainly used on cable and satellite networks, say they can easily transfer their software to a telecoms network. Those companies include OpenTV, Liberate and Microsoft.

There are also smaller companies that make software exclusively for telco uses, including Canada's iMagicTV, whose software is being used by Britain's Kingston Telecommunication Group and being tested by Norway's Telenor.



Excel - Greg