WebTV does Windows on new box

Microsoft and General Instrument will demonstrate the WebTV service on GI's next-generation digital set-top boxes at the National Cable Television Association trade show, a harbinger of new WebTV technology coming from Microsoft as it tries to muscle into the digital TV set-top box business.

The companies also will show the use of Windows CE, Microsoft's slimmed-down operating system, in the prototype set-top boxes. The software giant is striving to get its Windows for consumer electronics devices running on the next wave of digital set-top boxes from General Instrument, one of the largest TV set-top box manufacturers in the United States.

GI, Microsoft, and WebTV Networks said they "have begun working together" to integrate Microsoft's Windows CE and graphics technology from WebTV into GI's DCT 5000 digital set-top box, now under development.

Current cable set-tops rarely do anything other than change TV channels, but with devices such as GI's DCT 5000 and the development of the appropriate software programs, consumers will be able to access services such as electronic programming guides, video on demand, email, and Internet browsing. The WebTV service already provides some of these features through a device sold in retail stores that connects to the Internet via a phone line.

"If you look at the retail space, no one has really succeeded with Internet set-top boxes," said Sean Kaldor, an analyst with International Data Corporation. "[Now that WebTV competitor] NetChannel has just gone under, WebTV has some momentum, but it had to invest an enormous amount of money. The bigger opportunity is integrating these services into cable set-tops," he surmised.

The demonstration today is intended to show Microsoft's progress in building a device with Windows CE in hopes of gaining new deals with cable operators. In December, a number of cable operators announced their intent to purchase up to 15 million set-top boxes from GI over the next three to five years as they rolled out advanced interactive services.

Just today, Microsoft said it closed a deal with Tele-Communications Incorporated to supply Windows CE in at least 5 million of the GI devices ordered by TCI. Talks to close the financial terms of the deal hit several roadblocks after the original announcement in January as TCI sought to limit the software giant's clout.