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Microsoft Revs WebTV for Windows CE

New Windows CE-ready WebTV set-top box debuts as the competition to deliver interactive television heats up.

By Tom Spring, PCWorld   

The move comes at a critical time for Microsoft as the battle heats up with companies such as America Online, which are scrambling to get the next generation of set-top boxes to customers.

Microsoft's new WebTV Classic and WebTV Plus set-top boxes are noticeably smaller than the earlier version, thanks to the removal of a mostly neglected 1GB hard drive in original systems. WebTV Classic and Plus are the size of small paperbacks and rely on flash-based local data storage provided by Israel-based M-Systems.

WebTV Gets Revved for Speed

WebTV Classic ($99) gets a new 56-kilobits-per-second V.90 modem--replacing older 33-kbps ones--along with an added port for plugging in a printer. WebTV Classic service is $21.95 a month--up from $19.95. Existing customers will not be affected by the rate increase.

Microsoft says it has simplified services with WebTV Plus set-top boxes, which have centrally located ports for plugging in things like home video cameras, are beefed up with more memory, and, Microsoft claims, integrate more easily with other home entertainment devices.

Both Philips and Sony will deliver WebTV Plus products with a suggested retail price of $199. The WebTV Plus service subscription will remain $24.95 per month.

Both Classic and Plus systems are compatible with Microsoft's Windows CE operating system. WebTV has also revamped server-side software of its network and improved its WebTV start page. Consumers will find WebTV Centers for sports, finance, and shopping. Under a partnership with FirstUSA, all credit card purchases through WebTV's shopping center are protected 100 percent against fraud.

Microsoft Wants Your TV

WebTV is a recognized leader in the set-top box market with an installed base of more than 800,000 subscribers. Competition is heating up as cable providers and high-speed Internet access firms rush to provide interactive services for televisions.

Among WebTV competitors is America Online. The 18-million-member service is moving into Internet television and interactive TV programming as part of its "AOL Anywhere" strategy to deliver AOL services to televisions, screen phones, and handheld devices.

WebTV also competes with OpenTV, partly owned by Sun Microsystems, and with cable companies who are anxious to offer customers more than cable television. So far, cable providers and set-top box makers have been leery about working with Microsoft out of fear that it will someday dominate the cable industry as it does the computer industry.

Microsoft has made no secret about its intentions to sell the WebTV technology as a platform for a new generation of television set-top boxes. In 1997 it invested $1 billion in cable provider Comcast, and more recently it said it would take a $5 billion stake in emerging cable superpower AT&T, which plans to roll out a TV set-top box that runs the Windows CE operating system.

Still, Microsoft has yet to get its WebTV service onto cable menus, including Comcast's.

"A lot is riding on this new rev," says Jay Srivatsa, Dataquest analyst.

Because WebTV's newest set-top boxes can be retrofitted with the Windows CE operating system, many analysts have speculated that later this year Microsoft will upgrade its WebTV boxes with the operating system.

"Microsoft needs to prove to the industry that these WebTV boxes work if they want to sell any of them," Srivatsa says. "This will be its chance."

Dataquest predicts worldwide units for Internet-enabled set-top boxes to be 1.6 million in 1999 and jump to 4.9 million in 2000. The expected exponential growth in the market is attributed in great part to the increasing demand for Internet accessibility from the home.