At a time when many people in the smart card industry have given up their search for a "killer app" that would spur mass-market acceptance, Pierre M. Combaluzier has decided that television is it.

"The only way to 'create float' for using smart cards is through mass media," said Mr. Combaluzier, president and chief executive officer of Interactive Cyber Television Inc., a Montreal company that goes by IC-TV. "We need to marry the smart card business with a friendly incentive system."

His company was formed two and a half years ago to marry the card's integrated-circuit chip with that most ubiquitous of home appliances. Consumer loyalty, payment services, and game-playing are seen converging at the TV set, with an assist from smart cards.

A subsidiary of Modern Computer Systems Inc. in Miami, IC-TV has developed a remote control with a smart card slot, and an interactive gaming system to go with it.

The device, Cashfinger, could be used by viewers to answer trivia questions about certain programs and commercials as they are aired. Loyalty points - or "TV Miles," as trademarked by the company - would be awarded for correct answers and recorded on the smart card, to be cashed in for coupons, certificates, or other rewards.

Mr. Combaluzier, 44, is convinced that North America's couch potatoes- Nielsen Media Research estimates average daily television use in the United States at seven hours and 40 minutes-are the best target market for advanced plastic cards.

"The media's power to capture attention from people during a six-hour time period on their couches can create a real natural incentive market for smart cards," Mr. Combaluzier said in an interview.

The company envisions consumers' being able to order movies or download coupons onto their cards by way of Cashfinger.

Also embodied in the IC-TV business plan is the concept that advertisers will pay consumers to watch their commercials, in keeping with the "permission marketing" and "information intermediary" philosophies that are among the current rages in the Internet business community.

The big challenge for this fledgling five-person company-not different from others involved in smart cards-is getting financial institutions and media companies interested in its novel ideas and persuading them to invest in the necessary infrastructure.

IC-TV is dwarfed by broadband giants that may be able to impose their own ideas about smart cards, pro or con. Satellite pay television, for example, a province of News Corp. chief and global media mogul Rupert Murdoch, relies on smart cards and data encryption technology to authenticate home subscribers.

Chip cards play a similar security role in wireless phones built to the Global System for Mobile (GSM) communications standard.

A corollary of Mr. Combaluzier's bold vision for interactive television is that point of sale payment terminals and automated teller machines be able to accept smart cards, so that consumers can redeem the points they win at home.

It is a classic "chicken and egg effect," Mr. Combaluzier said. "The problem is that the (point-of-purchase) reader for smart cards isn't ready. We need to show the retailer the benefits" of investing in new point of sale terminals.

Allan McGale, vice president of smart cards at Royal Bank of Canada, said IC-TV's concept is logical and fits in with his own view of the future of chip technology.

Royal Bank, an early supporter of MasterCard International's Mondex smart card system, was considering working with IC-TV on a project, but Mr. McGale said it "did not work out."

The young company's main hurdle, Mr. McGale said, is that lack of a chip-compatible acceptance infrastructure.

"The cost to change every POS in Canada and make it chip-compatible is in the ballpark of a billion dollars," Mr. McGale said. "It's a heck of a big investment and it's going to happen some day," he said, but it is not feasible "for one company to move forward on its own."

Mr. McGale said IC-TV could initially skirt the infrastructure dilemma by setting up a smaller proprietary network where its gaming participants could go to redeem points.

To pique interest, IC-TV is launching a monthly CD-ROM gaming magazine and will provide subscribers with virtual accounts on their home computers.

Participants would be able to accumulate cash or TV Miles credits and apply electronically to a secure transactional Web site to claim rewards. IC-TV would then reconcile the winnings on its data base, calculate the balances, and send TV Miles smart cards to the participants for use with future television programming.

"This is the initial phase to educate the new generation of TV viewers with smart card technology," Mr. Combaluzier said.

IC-TV has caught the attention of one major television station: CFCF12, Montreal's most popular English-language channel, owned by Western International Communications.

The Cashfinger gaming system is to be presented next week at CFCF12's fall programming launch. It is being billed by the station as its "Millennium Project."

IC-TV is also in discussions with a major credit card issuer from the United States to create a cobranded TV Miles card, similar to the airline mileage concept, Mr. Combaluzier said.

Mr. Combaluzier sees a future for chip-based credit cards cobranded with a cardholder's favorite television program-such as a "Seinfeld" Visa or an "Ally McBeal" MasterCard.

The cardholder could then earn points through purchases or by playing trivia games with Cashfinger during the shows.

IC-TV has received some welcome endorsements. It won an $11.3 million (Canadian) grant from the Government of Quebec in February to develop smart card-based interactive television and Internet services for the Canadian broadcast market.

Mr. Combaluzier said he is also in talks with American Broadcasting Co. and Chase Manhattan Corp. to start an interactive TV project in the United States.

Some industry experts said they expect IC-TV to be an easier sell in Canada.

"There is a higher take-up of interactive TV in Canada versus the U.S.," said Brian McKinney, president of Audesi Technologies Inc. in Calgary.

Mr. McKinney, whose company specializes in technology for integrating smart cards into home and Internet appliances, said IC-TV's concept might help stimulate subscriptions to cable companies.

IC-TV has also developed a cellular phone with a smart card slot that can be used for on-line data exchanges, which fits in with Audesi's vision of using different appliances for network access.

The French smart card giant Gemplus Group has formed a strategic alliance with IC-TV and will supply smart cards and related technology for loyalty programs. Gemplus executives have joined IC-TV's advisory committee to help explore global business opportunities.

Mr. Combaluzier worked as a consultant for Gemplus from 1988 to 1994. He owns several patents and has also worked as a consultant to the Ministry of Telecommunication and Postal Services in France and for host of TV organizations in Europe.

Earlier in his career, he spent two years at Battelle Memorial Institute in Columbus, Ohio, conducting research on smart cards and customer loyalty.

Battelle has been a behind-the-scenes influence on smart card developments. One result of its work is an ownership position in Cybermark, a company noted for college campus systems, which Battelle founded with Huntington Bancshares and the student loan agency Sallie Mae. First USA, Bank One Corp.'s credit card arm, recently took an equity interest in Cybermark.

Mr. Combaluzier started IC-TV in January 1997. It was acquired last August by its holding company, Modern Computer Systems.

"We view the standard television as the digital convergent appliance of the future and expect our technology will be widely adopted throughout the world as consumers recognize the excitement and diversity of our smart- card-based systems," said Robert Vivian, president and chief executive officer of Modern Computer Systems.

He said synergies between the mass media and smart card applications will open the door for a wide variety of applications that could have a profound impact on the future of commerce.


PLANO, Tex.-NDS, a News Corp. subsidiary specializing in pay television technology, has joined the Entrust Alliance Developer Program, Entrust Technologies Inc. announced.

The NDS AccessGear system, which relies on smart cards to assure network security, will be tested and made available with the Entrust/PKI public key infrastructure system for data encryption and authentication.

As a member of the Entrust developer alliance, NDS will be designated an Entrust Hardware Partner, supplying the smart card as a digital signing device in two-factor authentication, with the hardware enhancing ordinary passwords.

Included in the NDS offering is AccessGear Manager, a complete system for handling the entire smart card life cycle, from card issuance and digital certificate management to user revocation.

"We have incomparable experience (over 10 years) in creating proprietary, highly secure smart card chips based on standard and non- standard algorithms and protocols, and with extra protection in the physical layer," said NDS new-product development director Moshe Kranc. "Our experience in working with government and financial institution partners in a CommerceNet pilot have shown the need for an integrated smart card-PKI solution, which this offering will provide."

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