Excerpted from Multichannel News 6/17/1996. Vol.3, No.25

U S West Taking Lessons to the Web


. . . O'Farrell said programming production is better left to small, entrepreneurial companies. They are usually located in the right places, hire the right people and are more willing to defer profits now in return for a big payback later.

In part, that's how Interactive Video Enterprises was supposed to work.

Announced in March 1994, IVE was a separate subsidiary headed by U S West veteran Robert Grant and featuring a pair of chief operating officers from outside of the business: cable programming executive Andrew Orgel and computer industry executive Kevin Randolph.

Orgel and Randolph set up shop in San Ramon, Calif. -- cheekily close to Pacific Telesis Group's video services arm -- while Grant remained at U S West headquarters in Englewood, Colo. Orgel and Randolph said they had shopped their expertise around the phone industry, and they chose U S West partly because of its track record with CityKey, a multimedia information service aimed at hotel guests.

"That product was out the door in about nine months," Randolph said admiringly at the time. Added Orgel: U S West executives "haven't gone out and made commitments they can't keep and haven't hyped."

The first (and only) IVE project was U S Avenue, announced in July 1994. It was supposed to be a glitzy, "interactive, on-demand marketing and merchandising service," combining TV-quality entertainment and shopping pitches. It was supposed to launch on U S West's TV trial in Omaha, Neb., and be in 10,000 homes by the end of 1995. It never launched, and it was scrapped in the summer of 1995 -- a victim, U S West said, of few homes wired for interactive TV.

Big companies like Ford Motor Co., J.C. Penney Co. Inc. and Hallmark signed on as charter advertisers.

People involved with IVE say the business plan was based around projections of 100,000 interactive TV homes by the end of 1994, 750,000 by 1995 and 500,000 a year every year after that. They say projections called for IVE to be a multibillion-dollar business within five years.

But almost immediately, buildout estimates started slipping, and they continued to slip throughout the months. IVE staffers say they pushed for "platform independence," or the capability of running on networks other than the one planned for Omaha.

Ideas were presented that included a concept similar to Intercast, the Intel Corp.-backed concept for streaming World Wide Web content along with TV signals. "We built it and made it work in a live environment" in February 1995, creating an interactive MTV, one person at IVE said. But U S West executives nixed the project.

According to one staffer, IVE even had a chance to invest in Netscape Communications Corp. in late 1994, at a time when $10 million would have bought a 15 percent stake. U S West took too long to act, and Netscape raised the cash elsewhere.

O'Farrell said he was not aware of any opportunity to buy into Netscape, "and I think I would have known."

Even if U S Avenue had transferred to the Internet, O'Farrell said, it still was a transaction-oriented service, and shopping services still have not been proven on the Internet.

Another IVE staffer said it would have been helpful to have experts in-house to advise on how to make interactive TV content work on such platforms as ADSL (asymmetrical digital subscriber line), a method of sending video over copper phone lines. "We easily could have gotten [to market] on other channels."

But in retrospect, the person said, "we spent too much money in support of [interactive TV] before we found out if it was going to take us anywhere."

IVE was dissolved, and Grant, Orgel and Randolph all left U S West. Randolph, who is partnered with Orgel in their own firm, Interactive Enterprises, said: "I think IVE was the right idea, had a great group of people involved in it, built a great product in U S Avenue that got all dressed up and had nowhere to go because we didn't get the distribution we needed."

GOtv was abandoned, and CityKey was scrapped last year because of lack of distribution on specialized platforms, U S West officials say.

Robin Baca, a spokeswoman involved with all three projects, said it was sad that GOtv and CityKey, which was tested extensively in hotels, were used heavily when available but never got enough access to customers. GOtv, for example, is in a mere 4,000 homes.

CityKey required a dedicated platform at a time when the Internet has become the development standard, O'Farrell said. Like GOtv, which U S West has licensed to the Orlando Sentinel, U S West might be able to find buyers for the concept or technology. "We have had some interest," Baca said.

O'Farrell said U S West's expertise is in distribution, and it should limit its content ventures to core-business extensions, such as Internet Yellow Pages.

"I think we're really on a very sound strategy right now," he said.

Meanwhile, an IVE veteran saw bitter irony in IBM's announcement last week of an "electronic mall" concept that seems to borrow heavily from what IVE tried to do more than two years ago. The IBM venture's name: World Avenue.

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Copyright 1996 Multichannel News