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To: T L Comiskey who wrote (15860)	5/8/1999 9:54:00 AM
From: Glenn D. Rudolph	Respond to of 41369

ANALYSIS-UK cable gets Microsoft<MSFT.O>jump start By Jeff Daeschner LONDON, May 7 (Reuters) - From its birth, Britain's cable industry has been behind in the fast-moving pay-TV game. Faced with regulatory obstacles and high start-up costs, cable operators have failed to establish themselves as serious rivals to the dominant force in British pay-TV, Rupert Murdoch's satellite broadcaster BSkyB <BSY.L>. But that may be about to change. With U.S. software giant Microsoft Corp <MSFT.O> behind it, Britain's cable industry could finally be transformed from an also-ran into a winner as the country leads the world in the launch of digital television, telecoms and media analysts say. Microsoft's move this week to buy a controlling stake in Britain's second-biggest cable company, Telewest Communications Plc <TWT.L>, is widely expected to boost consolidation in the fragmented industry and help drive take-up of the sector's new technological weapon -- digital cable. NTL Inc <NTLI.O>, which is five-percent-owned by Microsoft, has said it plans to be the first to launch digital cable in the UK, while Cable & Wireless Communications <CWZ.L> plans to start rolling out its digital services this July, followed by Telewest in the fourth quarter. The launch of digital cable will make Britain the first country in the world to have digital TV in its three forms, after last year's launch of BSkyB's digital satellite service and ONdigital's <GAA.L> <CCM.L> terrestrial platform. Although the cable industry will yet again be lagging its pay-TV rivals, digital cable is widely seen as a superior platform that will give its competitors a run for their money. As a broadband two-way pipeline, digital cable will be able to offer true video on demand, as well as much higher speed Internet access, superior interactive services, and more channels than its pay-TV rivals, analysts say. And now that Microsoft magnate Bill Gates has taken minority stakes in two of Britain's three cable companies, the industry may finally overcome one of its main problems -- fragmentation. "Clearly, this will force the cable industry to get its act together. Because if it doesn't, then he's not going to benefit at all," one analyst said, predicting that Gates' involvement would help drive the rollout of digital cable. "It's no good for Gates to be a minority holder in a minority end of the business. He wants to be an influencing investor in a consolidated industry to basically standardise the software used in that industry," he added. CWC and Telewest are currently in strategic talks that could include a merger, and Gates' new 29.9 percent stake in the latter has sparked speculation that he might try to broker a marriage between the two. However, analysts doubt that this is Gates' endgame, noting that Microsoft's Telewest stake is something of a windfall as part of its much bigger U.S. deal to buy a $5.0 billion stake in AT&T Corp <T.N>. Rather than focusing on being a major player in UK cable industry consolidation, Microsoft is trying to ensure that its software, which already dominates the world computer market, will also be a major force in digital TV. "I don't think this is about the consolidation of the industry. I think this is about Microfost trying to control their customers," Commerzbank telecoms analyst Justinian Clifford-Bowles said. As a result, Britain's digital cable battle could be a proxy war for the rest of Europe, given that CWC's new platform relies on software developed by Microsoft's archrivals -- Oracle Corp <ORCL.O> and Netscape <NSCP.O>. "It's certainly possible that Microsoft will carry on taking stakes in cable operators in Europe. But so far, it has expressed no appetite in actually running a cable company," Clifford-Bowles said. "All it's interested in doing is making sure they choose a Microsoft platform -- it's influencing cable companies' customers, rather than wanting t...