Comcast Teams With Microsoft

Microsoft thinks long-term. It has kept a watchful eye on the U.S. cable market, but it wasn't until its recent deal with Comcast that the software behemoth hooked a cable systems operator. Comcast purchased 5 million licenses for Microsoft's Foundation TV version 1.7 software and plans to deploy it on Motorola set-top boxes—the exact number is undecided—later this year.

The software will provide digital video recording, electronic program guide, and interactive services. "As a platform, it has flexibility and is fairly robust," says Mark Hess, Comcast vice president of Digital Television. "We can move to games, polling, commerce."

The roots of the Comcast deal go back to the National Cable & Telecommunications Association show in 2003, when the two companies announced a trial in Seattle. Foundation 1.7 will go through a similar trial before the cable operator decides on deployment for fall.

While Foundation 1.7 does have electronic- program-guide capability, it's unclear whether it will displace the TV Guide and Scientific-Atlanta "Sara" programming information.

Comcast does see the competition between Microsoft and TV Guide as something that is technically and economically healthy, helping to drive improvements as well as costs. The deal's financials, however, were not disclosed. Comcast has already paid, according to Hess, a "chunk" of the money due, with more payments for the multimillion-dollar deal forthcoming.

Microsoft's attempts to get its software out of PCs and into the living rooms of cable subscribers has run into a number of challenges since it tackled the market in the late 1990s.

First, there was the company's WebTV effort, designed to give viewers a chance to surf the Net through their TV. It was a market that both Microsoft and AOL, with its AOLTV venture, badly misread, costing each company millions.

"Over time, they'll blend into one seamless experience," Microsoft CEO Steve Ballmer told BROADCASTING & CABLE in 2000.

Ballmer then laid out an ambitious vision of combining Internet and TV viewing. This would allow audiences to participate in TV shows, whether voting for their favorite stars or particular storylines. This electronic marriage would also allow viewers to click the TV remote for coupons, brochures, etc. At-home viewers could even manipulate camera angles on their sets.

But those opportunities proved ellusive.

In fact, only now are they beginning to surface as realistic considerations. As a result, when Microsoft centered its efforts on high-end set-top boxes, it encountered resistance.

The software required so much memory, it had little room for things like interactive-TV or programming-guide applications.

Here in the U.S., however, the demand is for less robust software that can reside in digital set-top boxes with smaller storage capacity. So Microsoft rolled out Foundation 1.7 last year and announced trials with Comcast.

Finally, the effort is gaining some traction.

But the real reason Comcast has finally tapped into the software is bottom-line business reality: It's encountering competitive pressures from satellite.

With News Corp. taking over DirecTV, word on the street is that rich interactive services similar to those found on News Corp's U.K.-based BSkyB service will soon arrive in the U.S. And that means cable operators need to be ready for interactive TV.

"There's no question that the satellite folks have had experience with interactive services in Europe," says Hess. "I think it's a good thing for us to get a platform out there that is a little more capable and flexible."