UPC Ireland, the new name for cable television companies Chorus and NTL, is investing €10 million to provide its new digital subscribers with a set-top box capable of supporting "two-way interactive services".

The move paves the way for UPC to begin offering video on-demand and other services that involve the viewer in a transaction. The new Digital4All box, which is manufactured by Pace, includes a built-in cable modem, which means that UPC will be able to upgrade it remotely with new software.

Simon Kelehan, UPC's head of TV, said that people switching to the company's digital services in most areas of Dublin, Galway and Waterford would be supplied with the D4A box. To encourage switching to digital, UPC is not charging any installation fee and there is no additional charge for the first six months of the service.

"We have an aggressive plan for 2008 to upgrade the network," said Mr Kelehan. "Our primary focus will be the Chorus towns where you couldn't get digital before."

UPC had almost 600,000 television subscribers at the end of September last, of which 312,000 are getting a digital service. It has more than 73,000 broadband customers and the service is currently available to about 383,000 homes in its catchment area.

The roll-out of the new set-top boxes is part of UPC's broader Digital4All strategy, which involves it upgrading its entire network around the State.

Mr Kelehan said the company needed to hit a "critical mass with the network upgrade" before it would introduce services such as movies-on-demand and catch-up TV. He estimated this was likely to be in late 2008 or early 2009.

Although UPC has no plans to switch off analogue services, it is continuing to encourage customers to switch to a digital service. Mr Kelehan said as it adds new stations to its line-up, such as the recently announced Setanta Sports News, they are only being made available on the digital platform.