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"WebTV Receiving Competition"

The dawn of interactive television has been excessively glorified for many years, and currently only a relatively small number of subscribers are receiving two-way set-top boxes. But if two industry heavyweights have their way, this will soon change.

America Online and Microsoft, already competitors in the battle to gain users for their respective Internet Services are at it again. Only this time, the competition is for subscribers in the Interactive TV marketplace. Microsoft and its already established WebTV service, is now getting some opposition from AOL in this small but growing market.

The service, dubbed AOLTV, is AOL's first attempt to extend email and instant messaging, to the TV screen. Much like Microsoft's WebTV, it will come in the form of a set-top box manufactured by Philips Electronics and as a product shipped with Hughes Electronics' DirecTV. It will be available at retail stores such as Circuit City and sold online at the AOL web site.

AOLTV will be capable of offering dial-up Internet access, online content, some enhanced TV features such as e-commerce, and some digital video recording through its partnership with TiVo, a hardware recording device for television. Subscribers using only AOLTV will not get all the perks of AOL's online service such as the ability to download files. AOLTV should have a significant effect on the market because of its relationship with cable provider Time Warner, not to mention the large base of clients they already have.

Along with wireless handheld devices, companies are targeting the television as one of the future access points for home Internet use. This market is expected to grow from 11 million units shipped in 1999 to 89 million units in 2004. The market will grow from revenues of $2.4 billion last year to $17.8 billion in 2004.

WebTV, which is the current industry leader, has about 1 million customers, although it continues to fall short of Microsoft's plans. Rather than a low-cost Internet alternative, the service continues to attempt to recast itself as a provider of "enhanced television". Recently, they have launched Ultimate TV, a high-end digital video recorder and satellite TV receiver offered in partnership with DirecTV. Interestingly, DirecTV is also an AOL partner and, starting this fall, will offer satellite Internet services to AOL's customer base.

Eventually, both WebTV and AOLTV are expected to offer high-speed Internet access, in addition to more sophisticated interactive content features. Although they are currently the biggest players, the battle has additional competitors. They will face opposition from digital cable set-to boxes and upcoming and existing game consoles. In fact, Sony envisions its upcoming PlayStation 2 as a digital hub for its home entertainment and content products.

  - by Clayton Crooks

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