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But negative comments about the feature continued. A more recent factor was the highly publicized revelations about surveillance activities by the National Security Agency. “What pushed me over the hump was the whole NSA sort of thing,” Huggers says. “I don’t want to go there.”

Not that Intel doesn’t plan to offer plenty of ways to personalize the TV-watching experience. For example, the company cites a Personal Profiles feature that helps switch between individuals using the device, so they have access to relevant content and recommendations. Another option lets users add favorites so they have access to recently watched shows, with the ability to instantly pick up in the program where they left off.

Still another feature, called Spotlight, integrates recommendations based on what’s trending in social media as well as curating content based on a user’s age, interest and time of watching, the company says.

or Internet-based TV to be a competitive option, it either needs to be cheaper than cable and satellite or it needs to provide the content that subscribers want in a better way.

For the companies still working on Web TV, it would mean charging less than traditional competitors for a service while paying more than traditional competitors to offer it.

for a Web TV offering to be truly Web TV, it would need to offer all the channels consumers want alongside the "over-the-top" video capabilities like Netflix and Hulu that they associate with Internet viewing.

Intel will be launching a Web TV service sometime this year.

The service requires purchasing a new box (the name of which is yet to be announced), which Huggers says is needed to deliver “the full experience” Intel wants.

Intel won’t be offering “a la carte” programming, either. In other words, expect bundles of programming like those offered with other major TV packages.

Still, you might say a revolution is brewing in the living room — and this one will be televised. It portends not only a change in the TV viewing experience but also poses a threat to cable and satellite TV distributors. Even network executives' notions about scheduling — how positioning a new show adjacent to a popular program in the evening lineup to drive ratings — look anachronistic at a time when Nielsen estimates that 47% of all American households have DVRs and can watch recorded shows whenever they choose, and 55% of broadband homes have at least one TV connected to the Internet, according to market researcher the Diffusion Group.

Concerns about how to reach this group known as the "never connecteds" and count their viewing in a show's ratings adds to a list of headaches that include slumping prime-time broadcast TV ratings and the flight of advertisers to cable.

these smart TVs may look dated compared with what Silicon Valley giant Intel has in store for later this year, not to mention whatever Apple Inc. is planning with its mysterious but hotly anticipated flat-screen TV.

While Intel has not said how much it plans to charge for its TV service, Intel Media head Erik Huggers has billed it as a premium product, with small bundles of channels and an attractive user interface rather than as a cut-rate option for consumers hoping to save money by canceling their cable subscriptions.

Investors should keep tabs on Verizon's negotiations with Intel to see if Verizon acquires the OnCue Internet-based TV services. If the deal goes through, investors should pay attention to how Verizon plans to use the OnCue services. Bundling OnCue services with Redbox Instant would incentivize subscribers to use Redbox services as a complete TV and movie entertainment package. Outerwall would greatly benefit from such a bundle because more Redbox users translates into expanding revenue. Also, additional offerings under the Redbox name will improve the company brand.

OnCue would be a good addition to Verizon because the company is already in the content business with Redbox Instant and FiOS TV. The question is whether Verizon can negotiate a good deal with Intel. The OnCue service would work well bundled with FiOS and Redbox Instant, or left as a stand-alone product.

The features of this service resemble those of a DVR, but the main difference is every show is recorded and available at any time. The OnCue hardware and services are currently being beta-tested by Intel employees and select users.

With an Intel-designed set-top box, people won't have to own DVRs or even plan to record programs.

Negotiations with media companies for content rights could delay new services and limit some features, though Intel vows to enter some markets by the end of the year.

"I've never seen as much innovation in television as there is right now," says Ulf Ewaldsson, chief technology officer at Swedish telecom-equipment giant Ericsson, which plans to step up its own TV efforts

Intel executives, who have promised to launch a Web-based pay TV service by the end of 2013, are now looking for a strategic backer to help them fund and distribute the service. If they don’t find one soon, it’s possible the project will be scrapped.

Apple TV is reportedly developing ad-skipping technology so owners of a set-top box can watch shows commercial-free. The propsed deal with cable companies would reimburse programmers for skipped ads.

Google is really just hoping to beat Apple to the punch, despite the fact that the company already has its Apple TV streaming product on the market, according to The New York Times "Apple’s thinking… is that any next-generation television service must be set up in partnership with existing distributors, in part for quality assurance reasons. A future Apple service could include a user-friendly interface layered on top of Time Warner Cable or Cablevision’s channel lineup."

Adoption from the major networks is "very unlikely to support any service with their linear feed that allows for commercial messages to be skipped even if they get some form of compensation," Rino Scanzoni, chief investment officer for WPP's GroupM, told AdAge. "This is not a viable economic model and subscribers to the system would not pay an adequate premium to compensate for it." 

To Intel, and to some analysts, the behavior by the existing distributors — in some cases giving financial incentives to friendly channel owners, in other cases including punitive measures in contracts — has an anticompetitive whiff. The antitrust division of the Justice Department is looking into the issue as part of a broad investigation into cable and satellite company practices,