Will AOLTV Turn On Cable Customers?

The impending merger of America Online and Time Warner could help jump-start AOL’s fledgling interactive TV service if, as expected, it is incorporated into Time Warner Cable’s TV business.

But while the service, dubbed AOLTV, might become more attractive, the benefits to Time Warner’s cable customers are not so certain.

That’s because AOLTV doesn’t provide the one new feature that Time Warner Cable is most eager to deliver: movies on demand.

“Interactive TV gets popular every fifth or sixth year, and there’s no sense that consumers or viewers are holding their breath for this stuff,” said consumer electronics consultant Gary Arlen.

AOL’s proposed acquisition of Time Warner is expected to get its final approval soon from the Federal Communications Commission.

Officials from both companies declined to say what role AOLTV would play in Time Warner Cable’s future. Industry analysts, however, said they’d be surprised if the cable company didn’t make AOLTV a standard part of an interactive TV package.

Time Warner spent millions in the mid-1990s on a much-publicized interactive TV trial, but it’s been slow to deploy interactive services since then.

Nevertheless, the company has put powerful digital set-top TV boxes in more than 1.3 million customers’ homes nationwide, laying the foundation for a widespread roll-out of new services.

Locally, about 360,000 homes have Time Warner Cable, including the west San Fernando Valley, the South Bay and portions of Orange County.

By the end of March, the company plans to offer movies on demand, a pay-per-view service that lets viewers start, pause, rewind and replay films as if they were on videotape.

Time Warner already has the service running in three markets across the country and is expected to offer it to many of its 12.6 million customers next year.

Also in the works for the Los Angeles area is a food-on-demand service, which will enable viewers to order pizzas and other takeout items from local restaurants, said Time Warner spokesman Tom Feige.

The main thrust of AOLTV, at least in its first version, is adding Internet-based communications and content to TV programming.

The add-ons range from instant electronic messages to online shopping, and from program-related chat rooms to electronic photo albums.

Arlen said he was generally impressed with the concept but not with AOL’s implementation.

“It doesn’t take us a long way beyond WebTV yet,” he said, referring to an Internet-on-TV service from Microsoft Corp. that has attracted only about 1 million customers after four years.

“As the WebTV experience has shown, it doesn’t seem to be a solid consumer offer.”

One problem for both AOLTV and WebTV is that they hook into the Internet through a slow dial-up phone modem.

That means viewers can’t take part in any two-way services, such as chat or network gaming, without dialing in and tying up a phone line.

Another issue is that AOLTV relies on a separate set-top box, adding to the growing equipment clutter in the living room. The boxes sell for about $250, plus $15 per month for AOL subscribers, $25 for nonsubscribers.

Incorporating AOLTV into Time Warner Cable’s digital set-top boxes would solve both of those problems.

Those devices can provide a two-way link to the Internet through the cable network, eliminating the need for a phone line and a separate set-top box.

By providing an always-on, high-speed connection to the Net, the digital cable boxes also would allow more services that could make AOLTV more compelling.

Charlie Tritschler of Liberate Technologies, a San Carlos, Calif., company that supplies software for AOLTV, said examples include interactive advertisements, video clips from the Web and games for viewers to play along with a broadcast.

Some of those applications already are popping up on interactive cable systems.

But developers don’t have much incentive to write them for AOLTV, Tritschler said, because there’s only a dial-up version of the service.

Most of Time Warner’s cable boxes come from Scientific Atlanta, which uses software from PowerTV of Cupertino, Calif. Although problems with software integration have delayed some interactive TV roll-outs, officials at PowerTV and Liberate said they’ve already shown their ability to work together in a Scientific Atlanta box.

In fact, said Steve Necessary, chief executive of PowerTV, his company could have AOLTV running in a Scientific Atlanta box within three months.

Within six months, he said, Time Warner could be rolling it out to customers.

Analyst David Card of Jupiter Research said Time Warner AOLTV isn’t the top choice for “delivering a great TV experience.”

That would be an interactive service such as the personal TV recorder from TiVo Inc., which allows viewers to pause and rewind shows as they are broadcast, Card said.

However, Card said, AOLTV could lead people who already have e-mail to sign up for Time Warner’s digital cable.

“There’s a huge customer base for AOL. . . . That’s really what they bring to the table,” he said.