Microsoft Makes Its Way Into Your TV

Microsoft has finally made it into television, and its software could be running on a cable network near you.

After six years of auditioning its Microsoft TV software platform to cable providers from the United States to China, the Redmond, Washington software maker has finally landed a few leading roles. Its software runs the servers that several cable TV networks are now deploying to enable interactive TV services and set-top boxes used in homes to access these services.

But it hasn't come without the typical entertainment--and technology-- industry struggles.

Jon Devaan, senior vice president of Microsoft's TV division, admitted in a speech Thursday that the company has missed two opportunities to be first to test its interactive TV platform in some U.S. and European markets, and many of its current projects have taken much longer than expected. Adding the latest blow, AT&T on Thursday reportedly scaled down its interactive television deal with Microsoft. Devaan spoke at Microsoft's Mountain View, California, campus as part of the company's Silicon Valley Speakers Series.

Devaan quickly moved to skirt the issue, however, by demonstrating new functions in its platform that will run on the cable networks in three new markets, two of which he announced at the event.

Around the World

In Portugal Thursday, Microsoft went live with its high-speed interactive television service. Viewers there are the first in the world to be able to access services based on Microsoft's server and set-top box platform, the latter device manufactured by Portuguese hardware maker Octal Engenharia de Sistemas. It allows users to do everything from pausing live television to accessing their bank accounts using a smart card.

Also Thursday, Mexico's largest cable provider, Cablevision, said it would test Microsoft TV software on as many as 350,000 Motorola set-top boxes to offer similar services to as many as one-third of its cable TV subscribers. In addition, Israeli cable provider Matav Cable Systems Media agreed to use the Microsoft platform to rev up its current set-top boxes with low-end software Microsoft acquired through its purchase of Peach Networks last year.

The news is good for consumers who have been waiting to order interactive television from their local cable providers.

Eventually, Devaan said, "every TV is going to be a computer and have a computer in it." The technology is available, advertisers like the financial opportunities it brings, and the networks are just waiting for someone to take the first leap.

Watching Windows TV

For Microsoft, the incentive is equally great. The Windows CE and Windows 2000-based television platform integrates closely with the Internet and plays right into Microsoft's plans with the .Net software platform to bring Web services to users on any device.

"The TV is a very important part of this dream of digital services presented to consumers anywhere they want them," Devaan said.

The platform already delivers e-mail, banking, calendar functions, and Web surfing. As Microsoft lures more third-party developers to create services for its TV platform, the television will become just as connected as a personal digital assistant or desktop PC.

But what role cable providers, content developers, and Web services companies will have in Microsoft's vision of connecting users on the coveted TV set still remains uncertain.

Business as Usual?

Microsoft's aggressive effort to deploy its technology in theUnited States through AT&T continues to hit more snags. After Microsoft invested $5 billion in the phone and cable giant two years ago, plans to deploy its advanced software on as many as 10 million set-top boxes have been put on hold. Also, AT&T signed on rival Liberate in September 2000 to develop its own platform for the cable giant.

A Microsoft spokesperson says that the company had always expected AT&T to test other platforms. And much of the delay, Microsoft counters, has been on the part of U.S. cable operators who are taking small steps in the market. The New York Times reported Thursday that AT&T ditched plans to roll out Microsoft's advanced TV platform, opting for a more scaled-down version.

Microsoft did not confirm the news, but Devaan said, "like a lot of businesses they want to take some caution." He noted that Microsoft is still "very much committed to continuing our partnership" with AT&T.

Microsoft continues to look elsewhere for partners. Europe's mature market is the first place to start, Microsoft said. It already delivers some Internet and interactive services with Thomson Multimedia Inc. subsidiary TAK, a hardware maker in France that makes a TV set embedded with Microsoft software. It also is making inroads in the U.S., where DirecTV runs its UltimateTV service, as well with operators in Canada, Central America and South America. Devaan said markets in Asia would be Microsoft's next major target.

"The software industry is very competitive," he said. "We have a great service; Our product is shipping now, so we're going to compete in the market."