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Microsoft signs Mexican cable operators

The television division signs up three cable operators in Mexico to license its software as it builds momentum for its trials in the U.S. market.

Microsoft's television division is licensing its software to major cable operators in Mexico as it builds momentum for its tests in the United States.

Microsoft TV Division will announce Tuesday that it is signing three of the largest cable operators in Mexico to use its software in set-top boxes to be installed in subscribers' homes. The cable companies have already begun sending out boxes with Microsoft's TV software, such as its interactive program guide (IPG), its Foundation Edition software and Microsoft TV Advanced.

When the installations are complete, Microsoft TV software is expected to be in about 725,000 boxes by the end of 2004. The deals are nonexclusive, multiyear agreements, and Microsoft has not invested in any of these operators, according to Ed Graczyk, a director of marketing at Microsoft TV Division.

The announcements are a good sign that Microsoft's change in television software strategy--from promoting advanced television software platforms to simpler ones--is gaining an audience among fickle cable operators. But analysts say the Mexican market is still "tier 2," compared with the larger and more elusive U.S. market.

"Mexico is a good-size market, but it's more competitive in the United States for a reason," said Aditya Kishore, an analyst with research firm The Yankee Group. "The United States is make or break for them, and that's where they need to focus."

Microsoft started off with more advanced television software for set-top boxes, allowing cable subscribers to access e-mail, surf the Web and chat. But it scaled back the features of its software as cable operators--the main customers for television software--decided to go with less advanced and less equipped set-top boxes.

"We had to follow the market backward," Graczyk said.

Microsoft now has an IPG application, which offers detailed TV listings, as well as Foundation Edition software, which comes with an IPG and application environment for features such as video on demand and advanced parental screening.

Cablevision Mexico plans to use Microsoft's IPG and Foundation Edition in all its 450,000 set-top boxes by the end of 2004. Cablevision Monterrey and Megacable will use the software giant's IPG and Microsoft TV Advanced software. Cablevision Monterrey plans to install the software for its 100,000 subscribers, and Megacable plans to install the software for 175,000 of its 470,000 subscribers by the end of 2004.

Mexico's cable consortium PCTV and Costa Rica's Cabletica have also signed on to use Microsoft's TV software on their cable networks, but neither has begun testing the software yet.

In the United States, Comcast will begin testing Microsoft's IPG software in Seattle in the fall, and Time Warner Cable, a division of AOL Time Warner, will perform trials of the same software in Beaumont, Texas. Those cable companies--the two biggest in the United States--will use Motorola DCT2000 set-top boxes for the tests.