Each Month, the Strategy Becomes More Clear . . .

Software titan Microsoft has big eyes and a big stomach, as evidenced by the company's announcements at the Western Cable Show in Anaheim, California, last week. It's no secret that the software giant has been eyeing consumers' living rooms for years, hoping to get Windows CE (WinCE), a junior version of the ubiquitous Windows operating system, into portable devices and TV sets.

The problem is, many cable companies are wary of the domination that Microsoft has exhibited in the computer biz. One comment from an industry insider: "A lot of cable-equipment manufacturers and operators don't want to use Microsoft products because they're afraid of being locked into a system like the desktop operating system."

Despite the industry's wariness, Microsoft is forging ahead with several technologies. The company says it will offer a set of television-based software products and associated network services to deliver a "complete digital solution for cable-system operators and broadband service providers." The products include a software platform for cable operators based on the Windows NT Server operating system, Microsoft Commercial Internet System, and WebTV technologies. The company is also offering services such as WebTV and the MSN network.

"Microsoft is committed to supporting the cable industry and its efforts to transition to a broader set of digital services," says Steve Perlman, president of WebTV Networks, Inc., a division of Microsoft. "By enabling the development of digital services and interactive programming, the Microsoft WebTV television-software platform and related service offerings will help cable operators to seamlessly deliver both an enriched television-viewing experience and additional new interactive and data services that will help build consumer loyalty and increase profitability." Microsoft hopes that cable operators will use these technologies to support broadband service, including cable modem support, basic Internet access, video on demand (VOD), e-mail, chat capabilities, games, interactive programming, electronic programming guides, and more.

One such arrangement revealed at the show involves Scientific-Atlanta. The two companies have signed a letter of intent to provide cable operators and their subscribers with the WebTV service for use on the SA Explorer 2000 digital set-top box and digital interactive network. "Scientific-Atlanta has had long-standing success in the cable industry, as Microsoft has had with software technology," says Michael Harney of SA. "Together, we have the necessary services, features, and tools to support a broadband service that will help multiple system operators serve their customers in a complete and customized way."

The two companies also announced they will collaborate on a next-generation set-top box that will run under WinCE and the WebTV software platform. According to Microsoft, this and future set-top designs based on WebTV will be OpenCable-compliant. OpenCable is an initiative of the cable-television industry being managed by Cable Television Laboratories Inc. (CableLabs). Its goal is to allow interoperable digital set-top boxes manufactured by multiple vendors.

In a separate announcement, StreamGate said it will begin to develop and implement an interoperable VOD system for digital cable-television systems based on the Microsoft NetShow Theater Server. StreamGate says it will integrate Microsoft's NetShow Theater Server with digital file servers, movie content, and a suite of content-management services to create a complete VOD system. The initial technical trial of this system is slated for early 1999, using a cable system owned by StreamGate in Montgomery, Texas. Microsoft NetShow Theater Server, running under Windows NT Server, supports data rates ranging from 500 Kbps up to 8 Mbps per video stream.