French IPTV pioneer Free unveiled a new feature [PDF release] Friday for its subscribers, TV Perso, which allows anyone to plug an S-Video cable into their “Freebox HD” set top and create their own channel. Anything from a live camera feed to pre-recorded video can then be broadcast to other Free subscribers. In other words, two-way television.

The service broadcasts in standard definition, though HD may become available. It’s currently just an experimental beta project. In terms of content restrictions, the release only warns “The subscriber is responsible for all content that they make available on the electronic communications network. Pirating damages artistic creation.” So go crazy!

The video is encoded at 3.5 Mbps but uploaded at only 1 Mbps according to tipster Charbax — still, that’s a lot more upstream bandwidth than most American ADSL providers make available. Free’s IPTV service includes 2 million subscribers. Charbax adds that the community is discussing the new feature at Univers Freebox and Free News.

There’s lots going on in France in terms of online innovation these days. Dailymotion certainly isn’t intimidated by YouTube’s entry into the market, and Vivendi is incubating a new web video startup. French viewers are some of the most enthusiastic viewers of online content.

Thanks to Loic Le Meur for forwarding the initial release.