August 28, 2000
Delays by Microsoft Could Slow AT&T's Interactive-TV Rollout
By REBECCA BUCKMAN
Staff Reporter of THE WALL STREET JOURNAL
Delays by Microsoft Corp. in providing interactive-television software to AT&T Corp. could further slow AT&T's planned rollout of
interactive services and prompt the company to consider other vendors for part of its project deploying 10 million TV set-top boxes,
people familiar with the matter said.
Losing any part of the AT&T deal would be a black eye for Microsoft, which long has touted its commitment to supply high-end
software for as many as 10 million AT&T cable boxes. The pact is the cornerstone of Microsoft's fledgling efforts in digital TV, one of
the many new businesses the Redmond, Wash., company is targeting for growth as its Windows and Office computer-software lines
age.
But Microsoft's TV project recently has run into snags, many of which were disclosed in a meeting between Microsoft and AT&T
executives about a month ago, the people familiar with the matter said. Those technical issues -- which also have thrown a wrench into
Microsoft's deployment of advanced TV software for a European cable company, United Pan-Europe Communications NV -- are now
on AT&T's mind as it figures out how many boxes it will allow Microsoft to outfit.
"We're evaluating that with Microsoft and we're moving forward with them to get this trial done as quickly as we can," said Rich
Fickle, AT&T's senior vice president and program director for interactive TV. The first technical trials for the software now aren't
expected until around the first of next year, people familiar with the matter said; last year, both companies had hoped to wire up
"showcase cities" for interactive TV by this summer.
AT&T has said for several months it hopes the showcase-city project will launch next year.
Still Committed
Mr. Fickle said the software Microsoft is developing for AT&T, based on the Windows CE operating system, "is a very complex
product, and the Microsoft guys are, I think, pretty focused on working hard on this and are reacting well to the fact that there have
been some unexpected bumps in the road. They're coming back strong ... we're going to stay committed."
Still, Mr. Fickle stressed that AT&T's agreement with Microsoft, hammered out last year and sweetened by a $5 billion Microsoft
investment in the New York phone and cable company, always has been nonexclusive and wouldn't give Microsoft a lock on future
AT&T cable business. And while Microsoft often touts its commitment to provide software for 10 million boxes, it only has a deal to
equip 7.5 million; the other 2.5 million boxes are optional, Microsoft acknowledges.
Asked if Microsoft had talked with AT&T about whether it would get to outfit the other 2.5 million boxes, or if any other part of deal
was in jeopardy, Microsoft official Alan Yates said: "That's pretty far down the road ... We assume that they evaluate virtually every
vendor in the marketplace all the time. They've been very clear from the beginning that their network is open to alternative technology
suppliers." Mr. Yates is head of marketing for Microsoft's TV-platforms division.
His boss, Jon DeVaan, the senior vice president in charge of all Microsoft's TV efforts, remains upbeat about the project and notes
that TV software involves "a very complicated development process. We'll take our time and do it right."
Web of Technology
Unlike personal computers or even satellite-TV systems, interactive-TV software involves several layers of technology that must work
with multiple hardware providers, computer servers, companies that supply actual TV shows and Web services, as well as other
"plug-ins," such as home-video cameras, Microsoft said.
But competitors such as Liberate Technologies Inc. and OpenTV Corp. say they have been able to surmount such difficulties and
already have shipped software for set-top boxes. United Pan-Europe, based in the Netherlands, plans to test software from those two
companies as it scrambles to meet a looming deadline for deploying about 30,000 boxes.
Mr. DeVaan says Microsoft "will still be rolling out early trial versions with UPC," though the boxes won't offer "advanced digital
services," as Microsoft and UPC originally hoped. And Microsoft only recently received the hardware for the boxes from another
vendor, Mr. Yates said.
A 'Discouraging Omen'
Microsoft owns about 8% of UPC, so its stake "may be buying them a little more tolerance than they usually get," said Josh Bernoff,
an analyst with Forrester Research Inc. in Cambridge, Mass. Microsoft has been criticized in the industry for trying to buy its way into
interactive TV.
All the same, the delays in Europe are a "discouraging omen" for Microsoft's deal with AT&T, Mr. Bernoff said. If the AT&T project
succeeds, "they've got a place to start from. And if they don't, they might as well fold up and go home."
Executives of Liberate and OpenTV declined to say if the recent Microsoft delays had sparked any new conversations with AT&T,
saying they talk to major cable companies all the time. With regard to UPC, however, "I think we're optimistic about winning some
further business from them," said Randy Livingston, OpenTV's chief financial officer.
Write to Rebecca Buckman at rebecca.buckman@wsj.com |
