Digital TV Ready To Switch On E-Commerce

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December 08, 2000 (10:03 AM EST)

By John Salak,

HONG KONG -- The long-held promise of digital television may become a reality in the next 12 to 18 months, profoundly affecting service providers of all stripes, according to a report from the Hong Kong arm of Andersen Consulting.

The study noted the impact will be felt worldwide, but is likely to take hold first in the infrastructure of well-developed Asian markets such as Hong Kong, South Korea, and Singapore.

Britain will also feel the more immediate affects of the technology before it moves on to U.S. markets.

Ultimately, the development should spur e-commerce levels, promote some bundling of services, and possibly give early-adopter service providers a leg-up in competing against carriers who lag behind the trend, according to the study.

Exactly what form digital television services take will vary but, from Andersen's standpoint, the bottom line is that it involves allowing subscribers to interact with television programming through a remote or wireless keyboard.

The technology will allow viewers, for example, to order products during commercials, visit websites, or view information related to a show through their television.

There are several reasons for the predicted emergence of digital television both globally and in Asia. They come down, however, to cost -- for providers and end users.

Lower costs, obviously, will make the service more attractive to deploy and receive.

"Physical costs are coming down along the entire network," explained Stephen C. Snyder, a partner at Andersen's Hong Kong office, who helped author the report.

Snyder noted that the technology required to upgrade broadband networks and provide the required set-top boxes has been available for some time.

What has changed, particularly in Asia, is the cost of getting the service ready and securing the content necessary to make it attractive.

"Deregulation of telecommunication and cable companies throughout Asia has helped," he said. "The networks here are also newer, so there is less retrofitting required."

Beyond this, Snyder said, the cost of set-top boxes has fallen drastically to about $300 to $500 each, making them more readily accessible.

Despite the advances, Synder warned that challenges remain. Companies need to develop business models that provide a sound rationale for offering the service.

That involves finding ways to pass the cost of the set-top boxes on to consumers, something cable companies will be reluctant to do, given their traditional belief that controlling set-top boxes is the way to control the consumer.

Synder noted that one advance will come in the release of Sony Corp.'s new Playstations. Those game systems will include an outlet for broadband connections, as well as a slot for discs.

Companies might be able to leverage these units and promote their digital television service by offering rebates to any subscribers buying a Playstation. They might also offer a discount on set-top boxes.

In the future, all providers will have to develop systems that are not only properly targeted in terms of content, but which are easy for subscribers to use.

The advantage to providers who learn how to offer digital television could be substantial.

It will not only give them a chance to develop stronger ties with their subscribers and offer e-commerce services, it also gives them a chance to supply a greater range of services -- Internet access, interactive programming, and possibly voice and fax over IP.

Some might even extend their packages -- probably through reselling efforts -- to offer the likes of mobile-phone services.