Microsoft in Major Cable Deals

After years of struggling to enter the lucrative cable market, Microsoft this week announced major deals with cable giants AOL Time Warner and Comcast. Both companies will field test Microsoft's latest Interactive Program Guide (IPG) and Microsoft Foundation Edition software for cable set top boxes, which will let the cable giants deliver advanced client-side features, interactive advertisements, video on demand, and other functionality. Microsoft's software is geared toward digital cable services, a rapidly growing market.

AOL Time Warner will deploy Microsoft's IPG software on set top boxes in Beaumont, Texas, though the company isn't releasing further details of the trial. Comcast is also testing IPG, and the Microsoft Foundation Edition software, in Seattle and other markets.

Microsoft made its first stab at the cable market in 1997 with a $1 billion investment in Comcast. But after watching its first few generations of cable TV software languish as cable companies worked with long-time partners such as Gemstar-TV and Liberate, Microsoft retooled and dropped many of the advanced Web-related features that cable companies were uninterested in. Today, Microsoft's digital cable software is smaller, simpler, and faster than its predecessors and the cable industry is finally starting to take notice. Also hampering Microsoft's progress, of course, is its reputation as an 800-pound gorilla. Most cable companies are apprehensive about allowing a dominant and aggressive company like Microsoft into their market. However, since its epic antitrust trial, Microsoft's behavior toward partners and competitors has softened somewhat. No doubt this had an effect on the cable industry as well.

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