Once the wide-open domain of a few pioneers, the television-based Internet appliance market is beginning to run low on elbow room.

Although WebTV Networks Inc. looked like a sure bet to dominate the market after Microsoft Corp. purchased the company last month, WebTV may need all of Bill Gates' money and marketing power to fend off challengers.

Crowding into the Internet appliance arena -- next to Diba Inc., NetChannel Inc., Spyglass Inc. and WebTV -- are relative newcomers PlanetWeb Inc., Teknema Inc. and Zilog Inc..

The spate of recent entries would seem to indicate the market is on the verge of a serious boom. However, recent reports from industry analysts Forrester Research Inc. and Jupiter Communications Inc. say that isn't so.

Although both research groups agree that large numbers of consumers will embrace Internet access devices that deliver the bounties of the Web to a television instead of a PC, it's not going to happen overnight.

"Web browsing is simply not compelling enough to attract today's TV viewers," says Josh Bernoff, an analyst with Cambridge, Mass.-based Forrester. "It will take three years for the industry to create hardware and content that can deliver what consumers really want -- interactivity that enhances their television experience."

Forrester estimates that it will be sometime after the three-year break-in period that television-based Internet appliances will crack the 1 million unit mark.

But with a dozen or so companies already staking a claim in the market and more expected, most players will have to live on crumbs if they hope to survive the coming lean years.

One company, however, won't wait around for consumers to answer the interactive call. Software developer PlanetWeb, which makes a miniature Internet browser capable of empowering consumer electronic devices with Web surfing capabilities, has a different target in mind: the 15 million or so PC users who already access the Internet from their homes.

Kamran Elahian -- founder, chairman and chief executive officer of PlanetWeb, which makes the browser for the Net Link Internet access device for the Sega Saturn game system from Sega Corp. -- says many PC users would gladly buy another access device for other members of the family or to browse the Internet in a more social setting.

To crack this market, Elahian says, PlanetWeb will pair its browser with a hardware device that costs less than $200 and is not tied to a proprietary Internet service, which is the restriction that WebTV subscribers face. Elahian says PlanetWeb has found the perfect partner in Zilog, a leading provider of semiconductors for the television industry.

Zilog recently announced the completion of a reference design for an Internet appliance that will sell for roughly $200 and, unlike the devices sold by Sony Corp. and Philips Consumer Electronics Corp. that plug into WebTV's proprietary network, Zilog's device is compatible with traditional Internet service provider, or ISP, services.

A similarly priced Internet appliance designed by Teknema is also capable of plugging into any Internet provider network.

ISP independence is a crucial requirement for reaching consumers looking for a second residential interactive device, says Elahian. Instead of buying an appliance that requires an additional access account, PC users can hook the device into the existing account, Elahian adds.

"The idea is to sell this device to users who understand how to attach a second device to an ISP account," Elahian says. "Who wants to pay another $20 or $40 a month?"

Rather than hanging its fortunes on one segment of the TV-based Internet market, PlanetWeb will match its browser with other devices. In addition to the Sega Net Link, PlanetWeb will announce a deal with another major game machine maker -- a transaction that will be made public around the end of the year, according to Elahian.

PlanetWeb has also struck a deal with a television manufacturer and is working on supplying the Internet access component for digital videodisc, or DVD, players.

And just for good measure, the company recently announced that 8x8 Inc. will add the PlanetWeb browser to its television-based video phone device.

"We're not putting all our eggs in one basket," Elahian says.

Source: Inter@ctive Week