Maya, here is another version of the same news;
y 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 This seems kind of an expensive soln. to the problem doesn't it, would INTC use only soft decode or is their a chance that they would still need CUBE? If INTCs proposal wins who would manufacture the STB? What does everyone think?.
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. |
