Report: Interactive TV To Dominate European E-Commerce

A report by Forrester Research (Nasdaq: FORR) projects that interactive digital television (iDTV) will replace the personal computer as the primary avenue for European e-commerce by 2005.

Last week, the E-Commerce Times made similar projections for the U.S. in a four-part series on the future of e-commerce and interactive digital television. By 2006, e-commerce revenues generated by iDTV users in the U.S. will match those generated by PCs, according to the E-Commerce Times forecasts.

Currently the European iDTV services are offered on private networks operated by satellite TV broadcasters CanalSatellite and BSkyB’s SkyDigital TV, leading Forrester to label them “walled garden” services.

According to SkyDigital TV, the company drew eight million viewers to its Open interactive TV service during the last holiday shopping season.

The firm says that seven percent of its 2.6 million subscribers have already made purchases on Open and that 550,000 have signed up for its free e-mail — with new subscribers jumping aboard at a rate of 100,000 per month.

Garden Walls Will Fall

While the “walled garden” iDTV systems are in vogue today in Europe, Forrester says that competition, broadcaster pressure and consumer taste for choice will cause the walls to tumble. The report suggests that when European iDTV allows Internet access, a virtual flood of e-commerce services will follow.

“Dominant players CanalSatellite and Sky Digital will have to change their business,” Dr. Therese Torris, director of European eCommerce at Forrester Research BV, predicts.

Facing a struggle that is strikingly similar to the iDTV conflict shaping up between cable TV providers and satellite companies in the U.S., European cable companies will also have to scramble to keep pace with satellite firms. The Forrester study suggests linking up with AOL Europe to provide interactive TV services as a possible solution.

Battle Lines Drawn

The jousting between cable and satellite firms and Internet-based versus “walled garden” services is likely to get very spirited. In a recent press release, Open claims that “people purchasing through Open regard it as more secure than the Internet and that the ‘feel’ of Open is more likely to encourage confidence than the World Wide Web.”

E-tailers will undoubtedly flock to the system that consumers prefer. If services like Open and CanalSatellite are able to generate substantial e-commerce revenues, they may not be as quick to open their services to the Internet as analysts project — or they may provide such access for an extra fee.

Back in the U.S.

While iDTV in Europe is now dominated by private “walled garden” systems, the situation is different in the United States. Although satellite provider DirecTV and several cable TV operators plan to offer a free “walled garden” iDTV service from Wink Communications, Inc., most other broadcast companies are planning Internet-based iDTV services.

Many of the cable providers that are slated to offer the free Wink service plan to offer fee-based Internet access as well. In this scenario, both types of services will have a chance to thrive.

Eyes on Georgia

The small city of La Grange, Georgia has taken a step that could change the equation. La Grange announced this week that it is providing free Internet access via iDTV to all of its citizens who subscribe to cable television.

While the city will initially pay for the access, it will most likely look to affiliate marketing programs operated by e-tailers on the Internet for a permanent subsidy. For example, participating e-tailers might voluntarily agree to grant the city a portion of their profits to keep buyers online.

If this strategy works, it could easily spark a trend. Other cities may follow the example and provide Internet access to their citizens for free. If successful, this approach could go a long way toward closing the “digital divide” by providing citizens at all income levels with equal access to the Internet.