Interactive TV market heats up

Interactive TV is becoming big business in the UK, business models are going in different directions
Written by Matthew Broersma, Contributor

Competition for the UK's interactive television business will heat up a notch on Monday with the launch of Freedomland, a set-top box system that seeks to undercut offerings from British Sky Broadcasting, ONdigital and Bush. The launch comes as questions hover over the future of the British interactive television industry, with providers moving in different directions.

Interactive television, particularly through digital set top boxes, is key to the government's plans of easing the "digital divide" between rich and poor, since set top boxes don't require an expensive PC.

Freedomland has signed up 130,000 users, mainly in Italy, since launch two years ago. In the UK market, its direct competitors for connecting TV watchers to the Internet will be ONdigital's ONnet service, which until recently was only offered to ONdigital television subscribers, and Bush, which makes a stand-alone Internet set-top box. British Telecommunications also makes a set-top box which has been criticised for technical flaws to do with BT's back-end systems.

The most successful interactive TV provider so far has been British Sky Broadcasting, with its majority-owned Open service. About 60 percent of Sky's 4.7 million digital subscribers are estimated to use Open at least once a week -- amounting to nearly 3 million regular users. But unlike other providers, Open isn't open; that is, it allows access only to its own "walled garden" and not to the wilds of the Internet.

Unlike the most prominent interactive TV providers, Freedomland is not tied to a television company or telco. It uses third-party hardware -- provided by France's Netgem, which also supplies ONnet's boxes -- and intends to focus on building up a range of customised content, beginning at launch with partners such as the BBC and Boots. For now, however, the appeal of Freedomland, like that of ONnet, is inexpensive access to most Web sites.

The system undercuts ONnet, charging £6.99 per month to ONnet's £8 a month. Both systems give away the hardware in exchange for a 12-month service contract.

One source of trouble for Internet TV companies has been how to keep costs low enough to be attractive. That has meant the necessity of subsidising set-top boxes, which can prove expensive.

The market has considerable potential, however. Unlike the US and continental Europe, where interactive television has failed to attract significant interest, UK consumers have given interactive television a warm welcome. In England 23 percent of households are expected to use some form of interactive TV this year, according to Jupiter MMXI, compared to 9 percent in the rest of Europe and 7.5 percent in the US. Only 35 percent of Britons will connect to the Net through a PC, Jupiter predicts.

One possible killer app could be TV-based betting. Freedomland has partnered with betting company Bluesquare (www.bluesq.com) to allow users to place bets on sporting events, for example, while they watch the game. Telewest is testing a similar system with William Hill.

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