Ok, here's an article. The "TCI" here isn't the same ticker symbol as the TCI owner of ATHM. Hmmm, maybe it's not good news.
TCI In Talks With Microsoft, Intel, Others On New Cable-TV Boxes
Dow Jones Online News, Monday, December 15, 1997 at 03:03
By David Bank
Staff Reporter of The Wall Street Journal
Microsoft Corp., Intel Corp. and other major technology companies are
in negotiations with cable giant Tele-Communications Inc. to supply as
many as 10 million "network computers" for the next generation of cable
television, in a deal that could be valued at more than $3 billion.
The stakes in the competition for the advanced set-top boxes are
enormous. TCI's purchase, which could eventually grow to as many as 25
million units if TCI's extensive network of affiliated cable companies
follow suit, may set the standard for digital TV. It is also considered
crucial to the growth of the personal-computer industry, particularly
its two dominant players, software maker Microsoft and chip company
Intel.
With the size of the PC market stalled at about 40% of the nation's
households, hardware and software makers are looking to cable TV for
help in extending their customer base to include nearly all of the
nation's 100 million TV households.
TCI, of Englewood, Colo., has set Monday as the deadline for
submission of technical and financial proposals. TCI's would-be
technology suppliers are competing to provide what one industry source
described as "very creative financing." The dealmaking is intended to
provide debt-laden TCI with the ability to accelerate its schedule for
upgrading its cable systems and deploying the new generation of set-top
boxes. The deal, which could include an investment in TCI, pricing
discounts or revenue-sharing arrangements for future services, is
expected to be completed this month.
At the Western Cable Show in Anaheim, Calif., last week, there were
indications that Microsoft and Intel were going into final negotiations
with an edge over their respective competitors. Among other things,
Microsoft has so much cash that it could try to "buy the business."
Moreover, TCI has adjusted the specifications to make it easier for
Microsoft and Intel to compete.
But TCI executives repeatedly stressed that they won't give the
"Wintel" duopoly the same strategic hold over the cable industry that
they enjoy in the PC market. The executives said they would likely
select multiple vendors for each major technology included in the new
box. The vendors' products would have to be interoperable. Microsoft and
Intel are therefore likely competing for most of the business, not all
of it.
TCI's 140-page specification document called for a device that could
fundamentally alter the cable-TV business. It would be a platform for at
least a half dozen businesses other than regular analog TV, including
additional digital channels, video-on-demand, digital TV programming
enhanced with interactive services, high-definition programming,
high-speed Internet access and Internet telephony.
TCI is demanding concessions from its suppliers that would provide
all this technology at a cost of only $300 or so per unit. Commercial
shipments would begin in early 1999.
Computer chip makers, such as Intel, appear prepared to enter a round
of major price-cutting to meet the demand for inexpensive computing
devices. Software makers, such as Microsoft and Network Computing Inc.,
an affiliate of Oracle Corp., are seeking to dominate the market for the
development of applications and services that will be delivered through
the new generation of devices. At the same time, set-top box makers such
as NextLevel Systems Inc. and Scientific-Atlanta Inc. are trying to use
their traditional relationships with the cable industry to integrate the
new components into complete systems.
"If you can win the TCI business, you've won a very important chunk
of the cable operators' business," said Mike Aymar, vice president and
general manager of Intel's consumer-products group.
Mr. Aymar said the price for the new device is still under
negotiation. He acknowledged that for Intel, which is basing its
proposal on its relatively expensive Pentium MMX and Pentium II chips,
the $300 target is "a tough price to hit," but said the company has been
told its proposals are roughly in line with competing bids.
TCI Chairman John Malone and other top-level cable-industry
executives visited Intel's headquarters in Santa Clara, Calif., on
Friday, under the aegis of Cable Labs, the industry research group that
has spearheaded the standard-setting process for the new set-top
devices. Mr. Aymar said Intel, which is already investing approximately
$100 million a year in digitaltelevision initiatives, is willing to
spend more.
"To the extent there would be a business model where an investment
could kick-start deployment, we'd be interested in that," he said.
Microsoft, which helped to ignite much of the current enthusiasm for
a multipurpose set-top box with a proposal to the cable industry in
April, has been frustrated by the eight months of decision-making. But
the Redmond, Wash., software giant now appears to be close to becoming
the leading supplier of the device's operating system, graphics
capabilities and Internet technology.
Mr. Malone said at the cable trade show that TCI's specifications
required hardware makers to include enough microprocessor power and
memory to run Microsoft's Windows CE operating system and its WebTV
on-screen graphics functions.
Most attention has been focused on the selection of an operating
system for the new device, but Mr. Malone discounted the role of any
operating system in the new devices. To protect itself, Mr. Malone said
TCI is likely to select more than one operating-system vendor to avoid
giving any technology supplier the power to dictate to the cable
industry.
"If there were a single operating system, it would have to be
virtually owned by the cable industry," Mr. Malone said. "We don't want
to be slave to any proprietary system. ... We don't want any of them to
get such a strong proprietary hook that it's either junk $5 billion in
investment or go ahead with their next plan."
Mr. Malone said he hoped Microsoft would provide applications and
services for delivery over the new devices, citing as an example
Microsoft's Expedia travel service. Later, Mr. Malone speculated that at
least part of the cost of the box could be offset by exclusive deals
with advertisers or transaction-service providers, such as banks.
Microsoft has indicated that it is willing to make additional
investments in digital television, and the cable industry in particular.
In April, the company paid $425 million for WebTV Networks Inc., and in
June it invested $1 billion in Comcast Corp., the fourth-largest cable
company.
Copyright (c) 1997 Dow Jones & Company, Inc.
All Rights Reserved.
Companies or Securities discussed in this article:
Symbol Name
NASDAQ:INTC Intel Corp
NASDAQ:MSFT Microsoft Corp
NASDAQ:NCDI Network Computing Devices Inc
NYSE:NLV Nextlevel Systems Inc
NYSE:SFA Scientific Atlanta Inc
NASDAQ:TCOMA Tele-Comms Inc Sr A TCI Group
NASDAQ:TCOMB Tele-Comms Inc Sr B TCI Group |
