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Interactive Digital Television - BACKGROUND, A DEFINITION OF INTERACTIVITY, Local Interactivity, One-Way Interactivity, Two-Way Interactivity

services systems channel viewers

Margherita Pagani
Bocconi University, Italy


Interactive television (iTV) can be defined as the result of the process of convergence between television and the new interactive digital technologies (Pagani, 2000, 2003).

Interactive television is basically domestic television boosted by interactive functions that are usually supplied through a back channel. The distinctive feature of interactive television is the possibility that the new digital technologies can give the user the ability to interact with the content that is on offer (Flew, 2002; Owe, 1999; Pagani, 2000, 2003).

The evolution toward interactive television has not just an exclusively technological, but also a profound impact on the whole economic system of digital broadcaster—from offer types to consumption modes, and from technological and productive structures to business models.

This article attempts to analyze how the addition of interactivity to television brings fundamental changes to the broadcasting industry.

This article first defines interactive transmission systems and classifies the different services offered according to the level of interactivity determined by two fundamental factors such as response time and return channel band.

After defining the conceptual framework and the technological dimension of the phenomenon, the article analyzes the new types of interactive services offered.

The Interactive Digital Television (iDTV) value chain will be discussed to give an understanding of the different business elements involved.


The term interactivity is usually taken to mean the chance for interactive communication among subjects (Pagani, 2003). Technically, interactivity implies the presence of a return channel in the communication system, going from the user to the source of information. The channel is a vehicle for the data bytes that represent the choices or reactions of the user (input).

This definition classifies systems according to whether they are diffusive or interactive (Table 1).

  • Diffusive systems are those that only have one channel that runs from the information source to the user (this is known as downstream );
  • Interactive systems have a return channel from the user to the information source (this is known as upstream ).

There are two fundamental factors determining performance in terms of system interactivity: response time and return channel band.

The more rapidly a system’s response time to the user’s actions, the greater is the system’s interactivity. Systems thus can be classified into:

  • Indirect interactive systems when the response time generates an appreciable lag from the user’s viewpoint;
  • Direct interactive systems when the response time is either very short (a matter of a few seconds) or is imperceptible (real-time).

The nature of the interaction is determined by the bit-rate that is available in the return channel. This can allow for the transfer of simple impulses (yes—no logic), or it can be the vehicle for complex multimedia information (i.e., in the case of videoconferencing). From this point of view, systems can be defined as asymmetrically interactive when the flow of information is predominantly downstream. They also can be defined as symmetrical when the flow of information is equally distributed in the two directions (Huffman, 2002).

Based on the classification of transmission systems above previously, multimedia services can be classified into diffusive (analog or digital) and interactive (Table 2).

Digital television can provide diffusive numerical services and asymmetrical interactive video services. Services such as videoconferencing, telework, and telemedicine, which are within the symmetrical interactive video based upon the above classification, are not part of the digital television offers.

Local Interactivity

An interactive application that is based on local interactivity is commonly indicated as «enhanced TV» application. It does not require a return-path back to the service provider.

An example is the broadcaster transmitting a football match using a «multi-camera angle» feature, transmitting the video signals from six match cameras simultaneously in adjacent channels. This allows the viewer to watch the match from a succession of different vantage points, personalizing the experience. One or more of the channels can be broadcast within a time delay for instant replays.

This application involves no signal being sent back to the broadcaster to obtain the extra data. The viewer is simply dipping in and out of that datastream to pick up supplemental information as required.

One-Way Interactivity

One-way interactivity refers to all interactive applications in which the viewer did send back a signal to the service provider via a return path, but there is no ongoing, continuous, two-way, real-time dialogue, and the user doesn’t receive a personalized response.

The most obvious application is direct response advertising. The viewer clicks on an icon during a TV commercial (if interested in the product), which sends a capsule of information containing the viewer’s details to the advertiser, allowing a brochure or sample to be delivered to the viewer’s home.

Two-Way Interactivity

Two-way interactivity is what the technological purist defines as «true» interactivity. The user sends data to a service provider or other user, which travels along a return path, and the service provider or user sends data back, either via the return path itself or «over the air». Two-way interactivity presupposes «addressability»—the senders and receivers must be able to address a specific dataset to another sender or receiver.

What might be termed «low level» two-way interactivity is demonstrated by a TV pay-per-view service. Using the remote control, the viewer calls up through an on-screen menu a specific movie or event scheduled for a given time and «orders» it. The service provider than ensures, by sending back a message to the viewer’s set top box, that the specific channel carrying the movie at the time specified is unscrambled by that particular box, and that that particular viewer is billed for it.

Low-level two-way interactivity is characterized by the fact that the use of the return path back to the service provider is peripheral to the main event.

«High level» two-way interactivity, on the other hand, is characterized by a continuing two-way exchange of data between the user and the service provider (i.e. video-conferencing, Web surfing, multiplayer gaming, and communications-based applications such as chat and SMS messaging).


Interactive television can be defined as domestic television boosted by interactive functions, made possible by the significant effects of digital technology on television transmission systems (ETSI, 2000; Flew, 2002; Nielsen, 1997; Owen 1999). It supports subscriber-initiated choices or actions that are related to one or more video programming streams (FCC, 2001; Pagani, 2003).

A first level of analysis shows that interactive television is a system through which the viewer can ask something to the program provider. In this way, the viewer can transmit his or her own requests through the two-way information flow, made possible by the digitalization of the television signal.

The viewer’s reception of the digital signal is made possible through a digital adapter (set top box or decoder), which is connected to the normal television set or integrated with the digital television in the latest versions. The set top box decodes the digital signals in order to make them readable by the conventional analogue television set (Figure 1). The set top box has a memory and decoding capacity that allows it to handle and visualize information. Thus, the viewer can accede to a simple form of interactivity by connecting the device to the domestic telephone line. In addition, other installation and infrastructure arrangements are required, depending on the particular technology. In particular, a return channel must be activated. This can imply a second dedicated telephone line for return path via modem. The end user can interact with his or her TV set through a special remote control or, in some cases, even with a wireless keyboard.


The British broadcasting regulator Independent Television Commission (ITC) differentiates between two essentially different types of interactive TV services: dedicated and program-related.

  • Program-related services refer to interactive TV services that are directly related to one or more video programming streams. These services allow users to obtain additional data related to the content (either programming or advertising), to select options from a menu, to play or bet along with a show or sports event, or to interact with other viewers of the same program.
  • Dedicated services are stand-alone services not related to any specific programming stream. They follow a model closer to the Web, even if there are differences in hyperlinks, media usage, and, subsequently, mode of persuasion. This type of interactive service includes entertainment, information, and transaction services.

Interactive TV services can be classified further into some main categories (Table 3).


Electronic Program Guide (EPG)

EPG is a navigational device allowing the viewer to search for a particular program by theme or other category and order it to be displayed on demand.

EPG helps people grasp a planning concept, understand complex programs, absorb large amount of information quickly, and navigate in the TV environment.

Typical features are:

  • Flip: Displaying the current channel, the name of the program, and its start and end time.
  • Video Browser: Allows viewers to see program listings for other channels.
  • Multi-Language Choice
  • VCR Programming .

More advanced features under development concern:

  • Customization: Displaying features like favorites or reminders, which can be set for any future program.
  • Ranking Systems: Seen as preference systems, where viewers can order channels, from the most watched to the least watched.
  • Noise Filters: Seen as systems in which viewers block information (i.e., removing channels that they never watch). One related issue is parental control (filter), where objectionable programming can be restricted by setting locks on channels, movies, or specific programs.

Pay Per View

Pay per view services provide an alternative to the broadcast environment; through broadband connections, they offer viewers on-demand access to a variety of server-based content on non-linear basis. Viewers pay for specific programs.


Interactive Games

Interactive game shows take place in relation to game shows, to allow viewers to participate in the game. Network games allow users to compare scores and correspond by a form of electronic mail, or to compete against other players.

There are different revenue models related to the offer of games: subscription fee, pay-per play or pay per day, advertising, sponsorship, banner.

Interactive Advertising

Interactive advertising is synchronized with a TV ad. An interactive overlay or icon is generated on the screen, leading to the interactive component. When the specific pages are accessed, viewers can learn more about products, but generally, other forms of interactions also are proposed. Viewers can order catalogues; benefit from a product test; and participate in competition, draw, or play games.

The interactive ad should be short in order not to interfere with the program that viewers wish to watch. The message must be simple and quick. This strategy is based on provoking an impulsive response (look at the interactive ad) resulting in the required action (ordering the catalogue). A natural extension of this concept is to enable consumers to order directly.

TV Shopping

TV shopping is common both on regular channels and on specialized channels. Some channels are specialized in teleshopping (i.e., QVC and Home Shopping Europe). Other channels develop interactive teleshopping programs (i.e., TF1 via TPS in France). Consumers can order products currently shown in the teleshopping program and pay by inserting their credit card in the set-top box card reader. During the program, an icon appears, signaling viewers that they can now buy the item.

The chosen product is then automatically displayed in the shopping basket. Viewers enter the quantity and the credit card number. The objectives of such programs are to give viewers the feeling of trying products. The products’ merits are demonstrated in every dimension allowed by the medium. In some ways, we can consider teleshopping as the multimedia counterpart missing from Web shops.

Mixing elements of teleshopping and e-commerce might constitute a useful example of integration of TV and interactivity, resulting in a new form of interactive shopping. Consumers can be enticed by attractive features and seductive plots.

There is a difference between interactive advertising and interactive shopping. Initially, interactive advertising is triggered from an ad and concerns a specific product. Shops, on the other hand, are accessed directly from the TV shopping section and concern a range of products.

TV shopping presents a business model close to PPV and has a huge potential.

TV Banking

TV banking enables consumers to consult their bank statements and carry out their day-to-day banking operations (financial operations, personalized investment advice, or consult the Stock Exchange online).

Interactive TV gives financial service companies a new scope for marketing; it permits them to display their products in full-length programs rather than commercials lasting a few seconds and to deliver financial advice in interactive formats, even in real time. Such companies particularly value the ability to hot-link traditional TV commercials to sites where viewers can buy products online. In addition, service providers on interactive TV can tailor their offers precisely by collecting detailed data about the way customers use the medium.

Designing online services for TV requires video and content development skills that few banks have in-house, requiring them, in all likelihood, to join forces with television and media specialists.


The interactive digital television marketplace is complex, with competing platforms and technologies providing different capabilities and opportunities.

The multi-channel revolution, coupled with the developments of interactive technology, is truly going to have a profound effect on the supply chain of the TV industry.

The competitive development generated by interactivity creates new business areas, requiring new positioning along the value chain for existing operators.

Several types of companies are involved in the iDTV business: content provider, application developer, broadcasters, network operator, iDTV platform operator, hardware and software developer, Internet developers also interested in developing for television, consultants, research companies, advertising agencies, etc. (Table 4).

A central role is played by broadcasters whose goal is to acquire contents from content providers (banks, holders of movie rights, retailers), store them (storage), and define a broadcast planning system (planning). They directly control users’ access as well as the quality of the service and its future development (Figure 1).

Conditional access is an encryption/decryption management method (security system) through which the broadcaster controls the subscriber’s access to digital and iTV services, such that only those authorized can receive the transmission. Conditional access services currently offered include, other than encryption/decryption of the channel, also security in purchase and other transactions, smart card enabling, and issuing and customer management services (billing and telephone servicing). The subscriber most often uses smart cards and a private PIN number to access the iTV services. Not all services are purchased necessarily from the conditional access operator.

Service providers, such as data managers, provide technologies that allow the broadcaster to deliver personalized, targeted content. They use Subscriber Management System (SMS) to organize and operate the company business. The SMS contains all customer-relevant information and is responsible for keeping track of placed orders, credit limits, invoicing and payments, as well as the generation of reports and statistics.

Satellite platforms, cable networks, and telecommunications operators mainly focus on the distribution of the TV signal, gradually tending to integrate upstream in order to have a direct control over the production of interactive services.

The vast end device segment (Figure 2) includes two subsegments regarding the hardware and the software embedded in it.

The hardware manufacturers (e.g., Sony, Philips, Nokia, etc.) design, produce, and assembly the set-top boxes (STB).

The software subsegment includes:

  1. Operating systems developers (i.e., Java Virtual Machine by SunMicrosystem, Windows CE by Microsoft, and Linus) provide many services, such as resource allocation, scheduling, input/output control, and data management. Although operating systems are predominantly software, partial or complete hardware implementations may be made in the form of firmware.
  2. Middleware providers and developers provide programming that serves to glue together or mediate between two separate and usually already-existing programs. Middleware in iTV is also referred to the Application Programming Interface (API); it functions as a transition/conversion layer of network architecture that ensures compatibility between the basal infrastructure (the operating system) and diverse upper-level applications. There are four competing technologies: Canal+ Media Highway (running on Java OS); Liberate Technologies (Java); Microsoft TV (Windows CE); and OpenTV (Spyglass). These are all proprietary solutions acting as technological barriers trying to lock-in the customers. This situation creates vertical market where there is no interoperability, and only programs and applications written specifically for a system can run on it.
  3. User-level applications provider includes interactive gaming, interactive (or electronic) programming guides, Internet tools (e-mail, surfing, chat, instant messaging), t-commerce, video-on-demand (VOD) and personal video recording (PVR).


Interactive TV services are providing welcome opportunities for brand marketers who are keen to pursue closer relationships with a more targeted audience, with the promise of a new direct sales channel complete with transactional functionality. For broadcasters, garnering marketer support and partners can be a crucial means of reducing costs, providing added bite to marketing digital TV to consumers, while establishing new sources of revenue (based on carriage fees from advertisers, revenue shares for transactions coordinated via the digital TV platform, and payment for leads generation and data accrued through direct marketing).

From a strategic point of view, the main concern for broadcasters and advertisers will be how to incorporate the potential for interactivity, maximizing revenue opportunities and avoiding the pitfalls that a brand new medium will afford. It is impossible to offer solutions, merely educated guesses for how interactive TV will develop.

Success will depend upon people’s interests in differentiated interactive services.

  1. First, the development of a clear consumer proposition is crucial in a potentially confusing and crowded marketplace.
  2. Second, the provision of engaging, or even unique, content will continue to be of prime importance.
  3. Third, the ability to strike the right kind of alliances is a necessity in a climate that is spawning mergers and partnerships. Those who have developed a coherent strategy for partnering with key companies that can give them distribution and content naturally will be better placed.
  4. Finally, marketing the service and making it attractive to the consumer will require considerable attention, not to mention investment.

In summary, the development of the market generated by technological innovations forces the individual television firm to know increasingly its positioning and the state of the dynamic competition.

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