The software giant wants to incorporate DSL (digital subscriber line) capabilities into myriad set-top boxes in the near future, Gates told a group of investors, analysts, and high-ranking technology executives during his keynote speech at a technology conference in January.
"You will see a WebTV box that has DSL in the coming year," he said. "You will see WebTV with cable; you will see a WebTV box with satellite."
But that's easier said than done. A detailed timeline for when these products will be available has not been established, according to a WebTV spokesman. Nor has a schedule has been set for when the new version of WebTV featuring Windows CE--the slimmed-down version of the Windows operating system--will be available.
"Gates is a visionary and WebTV is an online service company," the spokesman said. "We have a real product today that we have to concern ourselves with. A broadband solution across the country is something that we are definitely interested in. None are a reality yet, although we can't wait for that to happen."
Most analysts agree that the company has great potential, especially given Microsoft's wealth and ubiquity. They remain concerned, however, about the lack of a specific timeline for launching the upgraded products, as well as about whether a mass market will materialize anytime soon.
WebTV has sold about 300,000 units (including the original WebTV, dubbed the "classic," as well as the more interactive WebTV Plus), and the company has an average of 1.7 users per box. This means the total number of Web users could stand at about 500,000. So far, sales are better than expected, according to the company.
Since Microsoft bought WebTV for about $425 million, the start-up's prospects have brightened, said Sean Kaldor, vice president of consumer device research at International Data Corporation. The software giant has raised its profile, and unit shipments have been strong. On the distribution front, WebTV recently signed a deal with Mitsubishi to ship WebTV Plus. It has another deal with Hitachi, but the product from that alliance has not shipped yet.
As for the company's prospects for shipping DSL or cable versions of the products, Kaldor noted those versions don't offer much financial reward for WebTV, at least for now.
"Right now, those technologies don't offer a near-term or large-scale opportunity," he said. "Why in the world would you release a cable or DSL modem when you can't even get the service in most places?
"My fear, even though Microsoft has pumped a lot of money into [WebTV], is that it will keep pushing [its own] corporate objectives, such as going to Windows CE," Kaldor added.
WebTV, however, said it approached Microsoft about integrating CE into its box, not other way around.
CE will create a greater level of compatibility to develop interactive television, email, and games, according to WebTV executives. But analysts and executives are closely watching how Microsoft works to integrate the "cultures" of the Redmond, Washington, and Palo Alto, California, companies. Before Microsoft came along, WebTV largely was an Apple Macintosh house.
On March 24, the MIT/Stanford Venture Laboratory will delve into what role WebTV's technology plays in Microsoft's "navigation of the murky waters of the convergence of computers and television in the computer market."
The presentation will feature Steve Perlman, chief executive and cofounder of WebTV. He'll be joined by a panel of industry experts representing various points of view regarding the challenges posed by WebTV's integration into Microsoft's business plans, as well as regarding WebTV's general business strategy.