July 21, 2003 11:29 AM PDT

Microsoft takes another shot at cable

Microsoft has signed up Comcast and Time Warner Cable to test out its set-top box technology, a back-to-basics package aimed at reviving the software giant's stalled cable TV push.

Comcast will begin testing Microsoft TV Interactive Program Guide (IPG) software in Seattle in the fall, Microsoft announced Monday. Time Warner Cable, a division of AOL Time Warner, will perform trials of the same software in Beaumont, Texas. The cable companies--the two biggest in the United States--will use Motorola DCT2000 set-top boxes for the tests.

The software, which offers less-advanced features than previous versions and is intended to be used with currently installed set-top boxes, promises to let cable operators present easily accessed video-on-demand and other features on devices such as set-top boxes.

The trials could signal a break in Microsoft's stalled attempts to convince the cable industry to use software in their next-generation digital programming boxes.

Microsoft's first digital TV products, released in the late 1990s, found the company running ahead of what buyers wanted. While cable operators initially supported Microsoft's strategy of offering advanced features, they quickly reversed course as it became apparent that subscribers weren't rushing to sign up for expensive services--such as online gaming, and e-mail or Web access--delivered via their set-top boxes.

In 2001, AT&T Broadband began giving indications that it would consider moving to including lower-end features in its set-top box interface. The move pushed Microsoft and its advanced software out of the running for AT&T's Broadband's subscribers, even though it had made a $5 billion investment in the cable unit in 1999.

Previously, in 1997, Microsoft had invested $1 billion in Comcast (which now owns AT&T Broadband). Both deals entailed the use of Microsoft's operating system in the cable companies' hardware.

However, the trials may provide only slight encouragement for Microsoft, according to Yankee Group analyst Aditya Kishore.

"In the cable industry, a trial is a good thing, but it doesn't necessarily mean a deployment," Kishore said.

A trial simply implies that a cable operator is checking to see if the software is compatible with its network, while a deployment would mean the operator plans to use the software with its set-top boxes.

Kishore added that the Time Warner Cable test isn't likely to be a major boost for Microsoft, because most of the cable company's set-top boxes come from Scientific Atlanta. Microsoft TV's IPG is validated for Motorola's DCT1000, DCT1700 and DCT2000 series set-top boxes.

The announcement Monday is noteworthy for Microsoft's cooperation with AOL Time Warner, its longtime nemesis. The Redmond, Wash., company in May agreed to pay AOL Time Warner $750 million to settle an antitrust lawsuit involving AOL Time Warner subsidiary Netscape Communications. The settlement included provisions for the companies to use each other's software products, potentially suspending a protracted war for control of the Internet.

Among Microsoft's other digital television efforts is Microsoft TV Foundation Edition software for cable operators to use with existing hardware and network systems. It promises to help package features such as video-on-demand and advanced parental screening. Comcast has already agreed to trial Microsoft TV Foundation Edition.

 

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