• by Paul Gough , July 22, 2003

In what could be a boost for its strategy to gain a foothold in interactive television, Microsoft announced Monday that two major cable companies had agreed to test its digital TV software.

Time Warner Cable, owned by Microsoft rival AOL Time Warner, and Comcast Cable will independently test the Microsoft TV interactive program guide. Comcast's trial of the Microsoft TV software had been announced during the National Cable & Telecommunications Association annual conference last month. But a Microsoft executive said in a speech Monday morning that Time Warner had signed on for a trial of the IPG. Comcast also agreed to test the IPG.

Microsoft's IPG offers a one-stop guide to television, pay-per-view and video-on-demand listings, all for set-top boxes that use a Motorola platform. The software that Comcast will test is designed to be used with both today's set-top boxes and also with future technology. Comcast said that the added functionality would allow it to deploy enhanced offerings for its digital cable subscribers.

"It [the IPG and foundation software] makes it faster and easier for consumers to find the programming they want to watch. It's really easy to scroll through listings, to surf through digital TV channels, to conduct a search for shows," said Laura Norman, marketing manager for the Microsoft TV Division at Microsoft Corp. "Microsoft as a company has an awful lot of experience in doing usability studies for software ... We've put an a lot of that usability and design talent around this."

For cable operators, Norman said the interactive-television platform provides the opportunity to create new marketing platforms without the need for downloading new software to set-top boxes. She said it allows them to be more flexible and to be more targeted with expanded advertising opportunities.

"With MSOs, an issue is that they're so fragmented with set-top boxes made by different manufacturers and all operating under different standards," said David Tice, vice president of Knowledge Networks/SRI. "If Microsoft can come up with something that will be to be scalable and able to be used across a variety of set-top boxes, I think that would be a positive."

Tice said that the different standards hadn't been a big issue in the past but with the advent of digital cable and initiatives, the lack of standards is becoming a problem. About 40 million of the estimated 106 million television homes have an IPG, through either cable or satellite, according to SRI/Knowledge Networks.

Tice doesn't think the interactive television aspects of the platform are going to be a big selling point in the short-term. He said there are other aspects of interactive television that have more appeal to the viewer right now.

"From our research in interactive TV, probably the highest thing on their list is to have some type of PVR functionality. People aren't buying TiVos at the store but they do want to have that kind of recording and live pause," Tice said. "I think that's where they need to start, with an IPG and the functionality available, and go on from there. People are still digesting an IPG."

A Comcast spokeswoman said Monday afternoon that the IPG trial would be conducted with an as-yet-undetermined number of digital cable subscribers in Seattle. Comcast has just over 1 million basic-cable subscribers but it doesn't release the amount of digital-tier subscribers. In any event, the trial wouldn't involve all of the Seattle digital-tier subscribers.

While Comcast uses Scientific Atlanta and a limited number of TV Gateway set-top boxes, the majority of the digital-tier subscribers have Motorola units. Many of those units now use the TV Guide/Gemstar interactive program guides.

Time Warner Cable's test will be conducted in Beaumont, Texas, said Time Warner Cable spokesman Mark Harrad. The Beaumont system services about 100,000 subscribers. Harrad said it wasn't clear yet how many of them would be involved in the trial. It's Time Warner's first deal with Microsoft.

The Microsoft TV IPG has been commercially deployed in two small cable operators in Oregon. Over the last several months, Microsoft TV has signed deals with two cable operators in Mexico.

Tice said that the deals announced today and previous ones represent a scaled-down form from the technology announced a year ago. He said that Microsoft has had to reassess where the cable companies were now compared to when the project was first announced. In Monday's announcement, Microsoft stressed the scalable aspects of the platform.

"If they're going to build the software, it's got to be able to work with the set-top boxes that aren't as sophisticated as well as the ones that are very sophisticated," Tice said.