Plans interactive system with Hewlett-Packard

Pacific Telesis Group will offer 100,000 California subscribers video-on-demand, one of the great promises of the coming interactive multimedia age, by the end of the year.

The San Francisco Baby Bell said Monday it signed a memorandum of understanding with Hewlett-Packard Co. to develop an interactive video system that it hopes will help it supplant video stores. PacTel said it will be the first commercial offering of video-on-demand in the state.

“This section of the communications superhighway will be open by the end of the year,” said Roland Wolfram, executive director of Pacific Telesis Video Services, a new PacTel unit.

The service promises to let viewers tap into a library of movies, TV shows and special events with a remote control, select one and start and stop it much like a videocassette.

Pending FCC approval

Initially, the service, which still needs approval of the Federal Communications Commission, will be available in Los Angeles, Orange County, San Diego and Silicon Valley. It’s part of the company’s seven-year, $ 16 billion plan announced in November to develop an interactive multimedia network in California.

Wolfram said the company has not yet determined the price consumers will pay for the service. But in addition to paying for each movie, consumers will also likely have to subscribe to the service for a fee and rent a set-top converter.

Additionally, Wolfram said PacTel has yet to line up programming for the service.

Cost factor

Some analysts are skeptical of the system. Perhaps the biggest hurdle for PacTel will be the cost. It may be too much to ask consumers to pony up a subscription fee and rent a converter box in addition to paying for a movie, particularly when there are alternatives.

“The great thing about Blockbuster is you already own a VCR,” said Michael Elling, a telco analyst with Oppenheimer & Co.

And pay-per-view purveyors and video stores aren’t likely to sit still as a competing service eats away at their businesses. They will match or beat any price from a competing service.

“In theory, it’s great to get video-on-demand,” Elling said. “But I don’t know if this is the answer. It’s still too expensive.”

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