MS/Comcast deal fires PC/TV fusion

Microsoft Corp.'s $1 billion investment in Comcast Corp. will spur the cable industry to finally complete the construction of infrastructure that can bring broadband networks to homes across the country.

At least that's the hope of Comcast President Brian Roberts.

In a press conference today to discuss the investment, Roberts said that Microsoft's move could be the catalyst that spurs the nation's cable companies to action.

"We hope that one of the byproducts [of the deal] will be to galvanize all our colleagues in the cable industry to accelerate and expand the marketplace of opportunities that will come from finishing the construction of broadband networks," he said.

Several years ago, cable companies were seen by many as the industry that would usher in interactive television. But the companies have been busy holding on to their markets and fighting off direct satellite broadcast. Now, with the Microsoft deal, analysts said that at least one cable company may be positioned to finally merge the PC and television industries.

However, whether the move spurs other cable companies into Microsoft's camp is open to debate.

"There's a fundamental difference between the cable TV platform and the PC platform," said David Card, analyst at IDC/Link in New York. In PCs, he said, Microsoft and Intel Corp. essentially set a specification, and PC companies go out and try to exploit it. In cable TV, the companies who "own" the industry are the cable companies, not the platform manufacturers. "Nobody mentions General Instruments [Corp.] or Scientific-Atlanta [Inc.] with fear in their hearts," Card said. "Cable companies put out a proposal and the [infrastructure providers] bid to build it."

He said companies such as Time Warner Cable and Tele-Communications Inc. may not want to take orders from Microsoft, particularly since many of them are involved in media deals that compete with Microsoft in other areas.

"Time Warner is not some little cable company, and neither is TCI and neither is Cox [Communications Inc.]," he said.

Of course, Comcast, the fourth-largest cable company in the United States, isn't some little cable company either. It's holdings other than cable are also interesting to Microsoft. Gates, when questioned about Comcast's ownership of the QVC shopping channel, said it was an "interesting example of content that can have a new form in the interactive world. We're [going to be] sitting down to talk about how we can drive forward their interactive activities."

But merging television and PCs isn't exactly what Roberts and Microsoft CEO Bill Gates have in mind. During the call, Gates discussed both a connected PC and a connected TV. Both would be hooked up to cable modems for fat connections, but with different goals in mind.

"I don't think a couple of years ago a lot of us thought the PC and TV industries would come together this way. We thought the PC would turn into the TV, or the TV would turn into the PC," Roberts said. "I don't think that's the case. There will be a lot of devices in the home. All of that is possible when you have a broadband pipe."

The connected PC, for example, would offer users better management capabilities and richer support, and would be ready to go when it comes out of the box, Gates said. On the television side, Gates wants to meld his company's WebTV technology with cable, to provide faster and richer access.

Microsoft will continue to work with telecommunications companies in ADSL and in ISDN, Gates said. But the cable industry has "a strong advantage" in the connected TV, he said, adding that "the cable industry will be the primary way to get that."

The companies hope to begin trials of both connected PCs and connected TVs by 1998. But Roberts warned that "$1 billion sounds like a lot of money, but [when you're talking about] getting construction of the infrastructure done, unfortunately, it's not a lot of money."

But the 1998 timeline shouldn't be that hard to reach for trials, said Card.

"It's sensible. You take WebTV as it is and stick a cable modem on the other end," he said. It could take longer for the two companies to develop a complete version of Windows CE for the new devices, he said.

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