Two of Canada’s biggest cable companies are preparing to launch their own Internet-based television services in the coming months.

By the summer, both Shaw Communications and its biggest competitor, Rogers Communications, say they will be offering customers the ability to surf the Web and tap into a greater stream of interactive content through their television sets.

With its ability to merge broadcast quality video with the interactivity of the Internet, Web-enabled TV is seen as the Holy Grail for digital content providers. Ultimately, consumers are going to be able to watch television, download movies, music and other programming as well as shop, bank and communicate through their television sets.

According to a study by Forrester Research, North American interactive television will generate an estimated US$11 billion in advertising revenue, US$7 billion in commerce and at least US$2 billion in subscription revenue by 2004. More than 24 million people in the U.S. and Canada are expected to tap into the enhanced broadcasts.

For Rogers, the move is the first major step in its partnership with Microsoft, which last year invested $600 million in the company to help it establish digital TV services in Canada. Shaw, meanwhile, has partnered with San Carlos, Calif.-based Liberate Technologies, which is providing the technology required to upgrade the cableco’s current set-top boxes to allow subscribers to surf the Web.

With the addition of a keyboard, both Shaw’s and Rogers’ current set-top boxes give viewers the ability to surf the Net on their TVs. But Shaw will be introducing a new set-top box that will allow more Interactive-television functionality, says Peter Bissonnette, president of Shaw Cablesystems.

Shaw is aiming to have the service up and running by July or August, he says. In preparation for the launch, Shaw will be promoting the new service using bill stuffers, interstitial television advertising and point of purchase advertising at its retail locations.

‘We see our target as people who don’t already have a computer and may have been intimidated about getting on the Net or people who already have a computer but want to be able to tap into the Net through their TV,’ says Bissonnette.

Rogers would not reveal precisely when it plans to launch its interactive TV offering. However, Mike Lee, Rogers’ vice-president and general manager of interactive television services, says the service should be up and running in the next several months.

‘We aren’t ready to name a date yet, but we will be ready to announce our program in the very foreseeable future,’ he says.

Shaw is hoping to offer the service to its more than 300,000 digital subscribers. When Microsoft made its multi-million-dollar investment in Rogers, it said it hoped to deploy at least one million set-top boxes powered by the Microsoft TVPak software bundle.

Rogers has been hiring people to head up the new media venture. In the next month, the company plans to name a marketing manager for its interactive division.

‘We have to market this service both to our customers as well as to partners and advertisers,’ Lee says.

Rogers has been in discussions with numerous content providers in an attempt to beef up its offering with more interactive content, he says. No deals have been finalized as of yet, says Lee.

Canada’s cable companies view interactive TV services largely as a means of upselling consumers from their current analogue cable service to the more pricey digital cable option, says Jordan Worth, a telecom analyst at International Data Corporation (Canada).

‘Growth in new cable customers is pretty much flat,’ he says. ‘For the cable companies, this is primarily a way for them to enhance their revenue stream.’

Cable companies are anxious to stake their claim to the potentially lucrative interactive television marketplace before the country’s telephone-based Internet providers, says Worth.

This month, Saint John, N.B.-based NBTel announced the launch of VibeVision, its own interactive television offering which provides digital television along with Web browsing, e-mail and a host of other interactive features. NBTel is a division of Aliant, a telecommunications provider that is now majority owned by Canada’s largest telephone company, BCE.