PC-TV convergence heating up:
Wednesday January 27 12:25 AM ET
Microsoft Europe Deals Focus On PC-TV Convergence
By Dick Satran
SAN FRANCISCO (Reuters) - Microsoft Corp. (Nasdaq:MSFT - news) has done two deals in two days with European companies that it says share the software giant's ''roadmap and vision'' of digital television's future.
Microsoft invested $500 million in Britain's NTL Inc. (Nasdaq:NTLI - news) and completed a technology-sharing agreement Amsterdam-based United Pan-European Communications NV (UPC), saying it will work with both companies on interactive television using their cable technology and systems. The companies did not disclose a dollar value for the UPC deal.
''There will be new commercial products by midyear 2000 out of these ventures,'' aimed at the digital television arena, Microsoft's director of digital television strategy, Alan Yates, said in an interview.
Cable technology is becoming increasingly attractive with the emergence of digital television, because the cable wires can carry
two-way multimedia transmissions, Yates said. That allows for the evolution of a system more sophisticated than the widely
used satellite TV systems in Europe, he said.
''Satellite does provide lots of benefits in terms of providing more digital channels through a wide footprint (coverage area),''
said Yates. ''But in areas where cable is laid, is it is a complete two-way network, as opposed to satellite which just goes downstream and telephone is needed to carry messages back upstream.''
The vision is to use cable's two-way wiring into homes so television and personal computers can become two-way devices connected to the Internet, offering a wide variety of services.
''Consumers are going to really love the synergy between the PC and the TV that this will bring,'' said Yates. ''They will be able to get their e-mail from either the PC or the television and go to their favorite Web sites either on the TV or the PC.''
While Europe has lagged America in the development of the Internet over telephone lines, it is well-placed to jump ahead in internet-connected digital television, which will carry multimedia to a new level, said Yates.
Microsoft chose UPC and NTL as the companies to work with because they will be able to work quickly in the highly competitive and fast-changing digital market.
''With both NTL and UPC, the thing that attracted us was their aggressive commitment to digital deployment,'' Yates said.
With the new deals, Microsoft appears to be moving ahead of its U.S. competitors in creating a presence in the growing ''broadband'' market in Europe.
It has been less dominant in the United States, where high-speed Internet service deals have reached a frenzied pace. In the
biggest deal so far, telephone giant AT&T Corp. (NYSE:T - news) will acquire cable leader Tele-Communications Inc. (Nasdaq:LBTYA - news), the majority owner of cable modem technology leader AtHome Corp., which in turn is acquiring Internet search service Excite Inc. (Nasdaq:XCIT - news)
America Online Inc. (NYSE:AOL - news), meanwhile, has aligned with Bell Atlantic Corp (NYSE:BEL - news) to offer high-speed service and programming to its 14 million customers.
All are betting that the convergence of the Internet and broadband wiring will be an unbeatable combination for consumer offerings and a focal point of the growing e-commerce business.
Microsoft's European deals follow the same thinking. Indeed, Yates noted, UPC even has a cable modem venture, Cello, that follows the exact same model as AT&T's new affiliate, AtHome. And Microsoft in 1997 invested $1 billion in Comcast Corp. (Nasdaq:CMCSA - news), the large cable provider that once owned NTL and later sold it off.
Microsoft views the ventures in Europe as a way to promote its development tools -- such as its Windows NT server software
-- and also its consumer products ranging from Windows CE, the pared down operating system being used by some cable operators, to the Microsoft Network, the umbrella for its numerous Internet services, and WebTV, a set-top box that turns
televisions into Internet stations.
''It's quite possible we will partner (with UPC and NTL) around common services or a set of common services,'' Yates said. ''They could be services that originate with Microsoft, as well as each having their own unique set of services, or a mixture.''
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