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Time Warner set-top box ahead of TCI

TCI has lately stolen the limelight, but Time Warner and Comcast will soon begin testing two-way service.

While TCI (TCOMA) has lately stolen the limelight by inking TV set-top box technology deals with Sun Microsystems (SUNW) and Microsoft (MSFT), some cable companies are ready to field test advanced boxes similar to the ones proposed by TCI.

Time Warner Cable (TWX) and Comcast (CMCSA) are planning service in some areas that's based on the Scientific-Atlanta's (SFA) "Explorer 2000" digital set-top box. Foreshadowing set-top boxes of the future, the Explorer 2000 uses a low-cost MicroSparc processor from Sun and an operating system from PowerTV.

Advanced set-tops are--or will be--able to offer video on demand, the ability to send and receive email, perform basic computer tasks, browse the Internet, and play back high-definition television signals. Priced between $200 to $500, the "information appliances" would be within range for anywhere from 60 percent to 80 percent of U.S. households, according to International Data Corporation.

"TCI has been making the most noise" but Time Warner is the leader for the most interactive technologies and services, according to Michael Harris, president of Kinetic Strategies.

"TCI has been the most aggressive to date in terms of deploying one-way digital set-top boxes, but if you are talking two-way, Time Warner is ahead on that curve now," said Harris. Two-way services allow the user to send information back to the cable company, a necessity for offering high-speed Internet access.

While TCI and Microsoft talk of the future, Time Warner is ordering 500,000 advanced set-top boxes from NextLevel--soon to be renamed General Instrument--and the media giant has already ordered over 500,000 of the same devices from Scientific-Atlanta and Pioneer.

Time Warner expects to begin testing its digital set-top boxes soon. "Field tests will begin shortly, with a launch of commercial services by mid-year. Then we'll go to a handful of additional community launches with broader deployment in 1999," said Michael Luftman, vice president of public affairs for Time Warner.

"This particular platform will be what we use for the foreseeable future precisely because this is able to be turned into fully interactive boxes. We expect to be able to switch on that interactive capacity sometime next year."

Initially, Time Warner hopes to roll out video-on-demand service, and will later add email and basic Internet browsing.

According to Kinetic's Harris, "TCI is much farther behind in terms of their [broadcast plant equipment] upgrades. [TCI's] box won't be available until later in 1999," said Harris. Only after that can the company begin testing its services.

In the meanwhile, TCI will be attempting to aggressively lobby its design and try to build support from other cable operators for it, Harris surmises. TCI so far has decided to use the Windows CE operating system from Microsoft (MSFT) in at least 5 million digital set-top boxes, although the company may yet incorporate software from Oracle's Network Computer Incorporated in addition to Sun's Java technology.

TCI is widely expected to choose Intel processor technology for use in its devices within the next 60 days. Analysts say the deal hasn't closed yet because TCI has balked at the price of Intel's processors.