April 3, 2005 6:15 PM PDT

Cable and tech feeling closer

SAN FRANCISCO--The long-standing icy relationship between high tech and the cable industry may be thawing.

Kicking off the National Cable & Telecommunications Association's annual convention, a panel that included tech luminaries Jerry Yang, a Yahoo co-founder, and Microsoft co-founder Paul Allen, sounded off on ways cable and Silicon Valley can collaborate. Cable companies are now the nation's largest broadband Internet providers, giving the industry considerable power in dictating what consumers can get over their pipes. But both sides believe that "convergence" could push the two together.

"Convergence means what's the future of hardware and software and how do you get connected with more bandwidth," Yang said during the panel discussion.

Allen, who owns a controlling stake in cable company Charter Communications, viewed the concept as a question of how to bring broadband to more devices in the living room. He added that compatibility between the cable network and a variety of devices, be they cell phones or set-top boxes, is essential for the industry to evolve.

"There are many things you can do by combining the set-top with broadband content," Allen said.

The tone between technology and cable appears to be improving. Tech companies have long viewed cable as an important partner, but the cable industry has largely given them a cold shoulder. Previous attempts by tech companies to establish a closer relationship with cable has resulted in some high-profile flops, most notably the disastrous merger between America Online and Time Warner.

For tech companies, cable's pipes represent valuable real estate. Cable's long-standing presence in the living room has helped it sell more services, such as broadband Internet access and voice calling, to its customers. Now that cable is offering new digital services over its pipes in the form of high-definition TV and video on demand, Internet companies are trying to figure out how to play in this changing world.

Yahoo, for example, remains dancing without a major cable partner in the United States. Despite its partnerships with phone companies SBC Communications and Verizon Communications, cable's archrivals, Yahoo is still trying to establish a presence on cable's pipes.

Up to now, cable companies have largely tried doing it themselves. Comcast, the largest cable company in the United States, has invested heavily in creating its own portal-like home page, filled with video clips and other high-bandwidth applications. These efforts have left other Internet media giants, including Yahoo, MSN and Google, without cable partners.

But that could change. In January, Time Warner Cable began offering free AOL accounts to bolster its home page programming and drive more subscribers. Competitive pressures are heating up now that SBC and Verizon are spending billions of dollars upgrading their decaying copper networks with speedier fiber-optic lines to offer video services similar to cable. With these upgrades, the Bells hope to add faster broadband speeds, Internet voice calling and cell phone compatibility to pluck subscribers from cable.

Could this lead to more tech-cable partnerships down the road?

"I want to make it clear that cable wants to work with other industries in ways we didn't five to 10 years ago," Steve Burke, Comcast's chief operating officer, said during a press conference after the panel.

 

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