VOD: MOVING FROM CONCEPT TO REALITY

There were so many companies touting a hardware solution, software solution or end-to-end solution to either video on demand or interactive television at NCTA 2000 that it almost could leave one with the impression that good old-fashioned cable television is very last century. And by the end of the year, that statement might be true.

"We're now talking with every major cable operator, and what we're learning is that every one of them will do some level of deployment of VOD over the next six months," says Tim Rea, Diva executive vice president and chief operating officer. "Maybe it'll be the first deployment, or it will be more. And in 2001, there's no doubt that VOD will become pervasive."

To see the inroads that VOD has made from being a concept to becoming a reality, one needs look no further than Diva. It wasn't too long ago that Diva would arrive at trade shows with an 18-wheeler full of equipment and call it a booth. Today, that truckload of equipment has been replaced by a few racks of equipment. And Diva can now claim 20,000 customers in seven deployments, with as many as 2 million Charter Cable customers in the Los Angeles area set to sign up by summer.

"The Charter deal is for 2 million customers, and that's a watershed for the VOD category and the cable industry," says Rea. "We're still talking with them about what hubs we go into."

On top of that announcement came the news last Wednesday that Diva had signed a deal with Time Warner to port Diva's hardware and software to Time Warner's Pegasus VOD platform. The importance of that announcement is that it shows how far Diva has come with its technology. Critics of Diva point to its proprietary aspects, but Rea says the recent deals discount those claims.

"When we were first starting, we had to do a couple of proprietary things, like provide our own box, in order to show that we could do VOD," says Rea. "But when we convinced others that we were real, we were able to do things like make a deal with Motorola and now we're ported to their box. Certainly the Charter deal forever quiets that issue of whether or not we're proprietary."

The technical issues, however, are the least of the difficulties according to one industry expert. "Nobody has had a real market impact because they haven't been able to sell it to consumers," says Adam Goldberg, Harmonic staff engineer, advanced systems development. Harmonic is heavily involved in conditional access, a potential solution to content gatekeepers who feel the new technologies offer a little too much freedom. "Either they charged too much, you needed an extra phone line, or you needed an extra set-top box. The idea of VOD is nothing new. But who's going to cause an impact and win is tough to say. VOD exists, but you need to be able to have something that people actually want to pay for."

Goldberg adds that the trick is not technical. "The technical capability is there, and on the more advanced networks the bandwidth is there," he says. "You can do interesting things with it, but the trick is selling it and coming up with features and pricing that people want."

I am the Intertainer

Diva isn't alone in expecting a big 2000 and an even bigger 2001. Intertainer will be getting its first customers up and running later this spring. They'll be Comcast customers (an investor in Intertainer) but Jonathan Taplin, Intertainer president and CEO, can only say that they'll be somewhere on the East Coast.

Intertainer is going to offer more than 60,000 hours of programming, from a number of studios including Dream Works SKG and Sony. Taplin is a big believer in offering a more compelling product that extends well beyond movies.

"The question is no longer does VOD work; it's really what is VOD?" he says. "It's not just movies, but also e-commerce, interactive advertising and all the other ways that you can earn money out of that bandwidth."

He also believes that the interactive revolution will be enabled by companies like Intertainer that create an open platform. "By helping to enable the revolution, hopefully, the tool set used to create the content will propagate, and it grows," he says. "It's kind of like the Web: there was HTML, and everybody wrote to HTML, and it exploded because everyone knew they could work together."

The major message coming from all the companies in the interactive space went something like this. Cable companies have a top-quality two-way connection between consumer and head-end. Cable companies are also under increasing pressure from direct broadcast services to offer better content and better services. Throw in the occasional misstep like Time Warner ticking off millions of viewers (it doesn't matter who was right, it does matter who gets mad) and the cable industry needs to make sure it offers every advantage it can over its competitors (that means DBS).

That's where interactivity comes in. First, the cable operator arranges to get some high-quality digital set-top boxes that basically put a computer on top of the television set. Then you offer a slew of VOD services, high-quality interactive content, and Internet access. The subscribers cable bill becomes a little more expensive, and, most importantly, they don't hit the road, enticed by Direct TV's "NFL Full Ticket:" Or, maybe they do, but at least the cable operator did everything they could to stop them.

At least that's the way it's supposed to happen.

Making it happen

Cable operators can try to attract customers by using words like digital and high speed, but the consensus among insiders is that the difference is going to be content.

For cable operators, the trick is finding out what services to layer on top of that two-way network. Pick the right layers and they might create an enticing package to viewers. Pick the wrong ones and the viewer won't even notice they're offered.

Scientific-Atlanta's Ken Klaer, vice president and general manager, marketing and business development, subscriber networks, says that VOD is a perfect example of a service that should effectively take advantage of the two-way stream. Bandwidth-intensive content flows to the set-top, while low-bandwidth commands, like VCR functionality, and head back from the viewer.

"One of the challenges for the cable operator is taking a server and integrating it with the billing system and making sure the network is properly designed and configured," he says.

There's also the question of how many servers will be needed to handle viewer demand. David Greer, senior system consultant with Concurrent Computer Corp., says that a rule of thumb is 10% peak usage. So for 20,000 digital subscribers plan for 2,000 streams to be available at the peak time. At 320 streams handled per server, that would mean seven servers.

But for many cable systems it still comes down to the set-top box. If they deploy the right set-top box they can consider VOD. Scientific-Atlanta, which currently offers the Explorer 2000, 3000 and 5000 digital set-tops introduced three versions of its latest--the Explorer 6000.

"The first one is Internet-centric, with an additional Docsis tuner built in, as well as additional processing speed and memory, says Klaer. "That's three tuners in the set-top, with the Docsis tuner offering a way to get high-speed data to the box. What the cable system does with it is up to them."

The other two models include a video-centric version that uses MPEG-2 for its third tuner (allowing picture-in-picture or feeding of a second television), and the third is an HDTV tuner. The Internet version ships in September with the others shipping in the fourth quarter.

The relationship between server and set-top is also important because the greater the flexibility in the set-top box architecture the more the placing of servers in strategic locations can help create more available bandwidth. "You might want to put high-demand content on the servers at the hub and manage it as a continuous VOD server," Klaer says.

Greer says that he's already had experience getting VOD services up and running, with a service for 50,000 Time Warner customers in Tampa Bay beginning in the next week. He's also working with Cox Communications in San Diego on an installation that will be rolled out later this year.

But again, it might come back to content. And with the tremendous amount of Internet content already out there, the easier it is to tap into that content, the easier it might be to get customers excited.

Taplin adds that every application creator for Intertainer is done in either HTML or Java, and at NCTA they announced that Intertainer will work on Scientific-Atlanta's Explorer set-tops and the DCT-2000 and DCT-5000 from Motorola as well as a PC with a cable modem.

"All of those products can run off the same database, and that's important, because we think operators need to stay completely neutral in terms of hardware because there are constant efficiencies in hardware," he says. "So we also work on nCube, SeaChange, and Concurrent servers."

So will cable operators get it and not miss the opportunity to tap into interactive? The consensus seems to be yes.

"The DCT5000 and the Sony Cablevision platforms will be showing operators that by not being cheap you actually get advantages," says Taplin. "Chuck Dolan is willing to spend a little money and he's getting something cool, and I think AT&T will and Paul Allen will as well. A few people will be leaders and then everyone else will have to follow. If you don't you allow the PC to become the driving entertainment platform in the home."