The new millennium's digital home is witnessing an entirely new range of products and services, thanks to the all-encompassing convergence. The foremost of them is "interactive TV" or intelligent TV, which some simply call as "New TV". The digital technology, interactive capabilities, and new navigation functions are transforming both the television set itself and the way consumers view and use it.

Now users will be able to choose the movies and watch it as and when they wish to i.e. Video on Demand (VoD). One will be able to attend lectures in other countries through the television i.e. Distance Learning. One can even do shopping through television. Interactive television—with link to the Internet—will enable us to send e-mail, browse the Web and do things which were once only possible with a computer.

It is the recognition of this powerful technology that is one of the major driving factors behind the current broadband strategies. The planned merger between the world's largest Internet service provider, America Online (AOL) and Time Warner—acquisition valued at about $ 125 billion approximately and one of the largest in US—is dictated not only by the convergence of Internet and content/entertainment, but also how to deliver broadband in the digital age to the masses. Just like it did to the Internet, AOL is creating a model for the cable TV and Internet industry to deliver broadband applications. AOL which has world's largest Internet subscriber base of over 23 million and Time Warner which brings one of the largest cable TV networks—including CNN and HBO channels—want to race ahead in the broadband race too.

The new company after including Time Warner’s cable and magazine subscribers is expected to have over 100 million paying subscribers. Both partners need to retain customers. The premise seems to be same as the one that makes Microsoft, a company with 90 percent market share in PC operating systems, strive to have software running on cell phones to game players to set-top boxes.

The merger would enable distribution of AOL's interactive TV offering i.e. AOLTV over Time Warner's cable system—the second largest in the US. AOLTV is the online giant's effort to extend its interactive services, such as high-speed Internet access, e-mail and instant messaging, to the TV screen. In the form of a set-top box manufactured by Philips and also a product shipped with Hughes' DirecTV, it is to help AOL extend its brand, franchise and audience in the online world to
other devices at home. It will also help AOL's expanding relationship with cable operators. It is expected to serve as a bargaining chip in delivering services over other cable TV systems. AOL would benefit from forming partnerships with large cable operators to manage the TV portal, which would leverage combined AOL-Time Warner's strengths in content and services—as a "walled-garden service". Undoutedly, a strong market opportunity!

AOLTV is part of the company's "AOL Anywhere" strategy—an initiative to spread its services across a range of non-PC Internet devices such as cell phones, pagers, handheld computers and Web appliances. AOL has already taken steps into wireless devices and spread its popular AOL Instant Messenger into these services. It has also signed an alliance with PC-maker Gateway to develop Web-enabled appliances. Its testing of a satellite service is another step in the online giant's efforts to offer its service through multiple pipelines and devices. It has also signed deals with several local phone companies to offer its members high-speed Digital Subscriber Line (DSL) service. Merger with cable operator Time Warner gave the company a significant foothold in offering cable broadband service. Clearly, AOL's strategy aiming at impending broadband explosion sees the battle as one of "bandwidth" and not that of cable versus satellite versus wireless versus telephony/DSL.

In fact, this is a strategy AOL has been pursuing for quite sometime now. On 14 June 2000, it forged a relationship with TiVo (accompanied by a $200 million investment in TiVo by AOL) to incorporate its technology by early 2001, i.e. its digital recording features, in AOLTV, which is directly pitted against Microsoft's WebTV. WebTV was acquired by Microsoft in 1997 and is the current leader in the interactive TV segment with one million subscribers and partners like AT&T. It will enable customers to chat, check e-mail and surf the Web via a wireless keyboard or a remote. The TV signal will remain on screen even as the customer focusses on Internet services. AOL does have advantage in terms of a
large audience and the ability to leverage members' preferences in the services it offers and advertising it generates.

TiVo produces set-top boxes that record TV programmes using a hard disk instead of a traditional video cassette. TiVo technology lets TV viewers customize their programme lineups and allows viewers to not only record their favourite shows, but also to skip commercials, shuffle their programming line-ups, and repeat missed parts of shows. AOLTV partners include Liberate Technologies, which provides its software platform.

With AOLTV, AOL could grab a big piece of the $9 billion e-commerce and subscription revenues that the
interactive TV market is expected to generate by 2004, according to Forrester Research. In addition, $3.2 billion in advertising that TV-based online advertisements are expected to raise.

AOL's knack for sensing popular uses of the Internet for mainstream customers will fare well for the new service. One can imagine communities of people chatting around popular shows. It means just brand extension for AOL as it does not have to explain AOL and its already popular services, such as chat or instant messaging. One could be watching "Dawson's Creek" and simultaneously, chatting on another screen. It also has the cash and resources to experiment, as well as an audience that has responded to its marketing.

Initially marketed as a low-end access to limited Web content, WebTV's early strategy was hit by dramatic price drops in computers and the resulting increase in PC purchases. Internet over TV did not appear to be a compelling service. Microsoft also has dealswith cable providers such as AT&T to put its Windows CE-based interactive TVsoftware on upcoming digital cable set-top boxes as well as agreements with satellite providers, including DirecTV and Echostar. In August 1999, THOMSON multimedia announced its JV with Microsoft in creating TAK, to provide interactive television services in Europe.

WebTV operation has become increasingly important to Microsoft and it was recently reorganized to face new challenge. Eventually, both WebTV and AOLTV will offer broadband and high-speed Internet access, in addition to more sophisticated e-commerce and interactive content features. They will face competition from upcoming and existing game consoles and from digital cable set-top boxes.

Many other companies are trying to position in the interactive TV market. National Semiconductor, has chip prototype designs ready for all-in-one DVD and digital video recorders. And Sony has said it sees its upcoming PlayStation 2 as a digital hub for its home entertainment and content products. The key players will need to offer more than just broadband Internet access through television, which Microsoft and AOL will be able to do through their relationships with AT&T and Time Warner, respectively. As AOL has proven in the PC-based market, access must be married with compelling content to draw paying subscribers. Sony—with a movie studio and record label—too will be in an enviable position to offer such a marriage, when it adds broadband Internet access to the PlayStation 2.

Game console makers, including Microsoft, Sega and Nintendo, have said they will offer online access through TV game consoles. However, AOL is still likely to have an edge because of existing relationships with broadcasters and content providers, and now Time Warner’s leadership in content and its delivery.

Replying to Federal Communications Commission’s (FCC) questions about the proposed merger, AOL and Time Warner said that the combined companies' interactive TV services would not dominate the market, instead they would spur innovation and growth. They asserted that AOLTV would be an "open platform", accessible to all programmers and broadcasters, unlike AOL's proprietary Internet system. According to them, AOLTV—based on open standards—will allow other video programming services to create unique interactive content that can flourish on AOLTV or competitive interactive TV platforms. Liberate Technologies' open platform should attract and spur broadcasters to develop interactive content.

So far, the interactive TV market has been like a chicken-and-egg problem, as both interactive-hardware manufacturers and programmers have been waiting for the other to make the first move.

Hope, he can soon use them too and watch his favourite TV programmes and simultaneously yahoo along with his folks!