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INTERACTIVE TV GOES BIG-TIME
Feb 07 - 13, 2000
AT&T and Microsoft unveiled a new partnership few months ago which they said will speed the arrival of interactive TV, the long-touted Next Big Thing for cable viewers.
The partnership will bring interactive services to TV viewers in three undisclosed communities by June 2000.
But AT&T is hardly in the vanguard of interactivity, and its customers will lag behind a number of other cable systems when it comes to viewing movies on demand, sending e-mail or browsing the Internet on their TV. In fact, the technology will reach AT&T's cable systems much more slowly than Tele-Communications Inc. chief John Malone envisioned before TCI was acquired by the AT&T Corp.
Interactive TV is a marriage of television with computing and communications, enabling viewers to add customized information to shows, order products and services with the click of a remote, and gain more control over programming. For the cable TV companies, providing interactive TV means supplying customers with an advanced converter box, one that has much of the intelligence of a PC.
Unlike a PC, however, the new box can't be expanded by consumers with programs from the Internet or the software store. Instead, the world of interactive TV will provide only those functions that the cable company allows.
The deal between the largest phone company, which is buying its way to the top of the cable TV industry, and the world's largest software company, which is buying its way into the cable box, calls for AT&T to use a pocket-size version of Microsoft's Windows operating system the software foundation for interactive applications in more advanced converter boxes.
Set-top Windows CE
TCI had agreed to use the Windows CE operating system in 5 million of the advanced set-top boxes it was buying from General Instrument. Under the agreement announced, AT&T pledged to put Windows CE into 2.5 million to 5 million additional boxes up to about 70 percent of the homes that AT&T expects eventually to buy interactive TV service.
Beyond that, AT&T agreed to use an entire suite of Microsoft software not only all the programs in the converter box, but also back at the network's transmission point in two of the three communities where it will test interactive TV next year. In the third, Microsoft software will be used just in the converter boxes.
Microsoft said the agreement did not exclude other software, such as Sun Microsystems' Java technology, from the boxes. But in the first three communities, at least, Microsoft will be supplying the key software for consumers' homes and helping AT&T to define what interactive services to offer.
This privilege is costing Microsoft $5 billion, or almost 23 percent of the company's cash reserves, the New York Times reported. That money, plus Microsoft's contribution of personnel and expertise, will speed the arrival of interactive TV for consumers, AT&T Chairman and chief executive C. Michael Armstrong said.
Robinson said Microsoft's software is just one of several key pieces needed to solve the interactive TV puzzle, but it comes with an important distinction. Or, as he put it: "Mention another $5 billion key."
AT&T will take its first steps in 2000, but many other operators are edging into interactive TV this year. One of General Instrument's rivals, Scientific Atlanta, has sold its advanced set-top box and interactive network to 90 systems, 31 of which are up and running, Vice President of Marketing Steve Necessary said.
Already, other cable operators are trying out or deploying services such as entertainment on demand, e-mail and Internet access. For example, about 18,000 cable customers in Novato will soon be able to order movies, children's programming and documentaries. Starting the programs when they want them to start, and controlling them as if they were on tape.
Still, interactive cable is just in its infancy, held back in part by the complexity of the upgrades needed to transform a cable system into a two-way network.
LaRae Marsik, a spokeswoman for AT&T Broadband and Internet Services TCI's new name said the development of new technology is a fluid process that often takes longer to complete than its advocates hope. "We don't view this as any kind of lapse," she said, adding, "Quite honestly, it's not unusual . . . for new technology to be on development tracks that shift."
Also, AT&T's primary focus isn't interactive TV, but equipping the newly acquired cable networks for a full range of digital services, including phone calls and high-speed Internet access. The advanced set-top box could play a key role in all those services, though, making it all the more important for Microsoft to have an inside track.
Microsoft has been trying for several years to sell cable operators on the merits of Windows and its WebTV technology, with limited success. Its motives are clear: If interactive TV takes off, the television set could become a major rival to the PC, and an important new market for software companies.
Also, the advanced box could become a gateway for information into the home, linked to or even controlling many other electronic devices. By providing the operating system for the set top, Microsoft could gain an edge in providing software for those other devices as well.