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WebTV unveils major upgrade

WebTV unveils a major upgrade of its TV-based Internet access system with a second-generation system that melds the Internet and television.

    Two leaders in the embryonic Net TV market have taken the wraps off new technologies this week as the market splinters into two incompatible camps, one led by Microsoft, the other by Oracle.

    Net TV technology is typically offered as a set-top box which home users can connect to their TV to surf the Web and use electronic mail.

    WebTV Networks, a subsidiary of Microsoft (MSFT), today unveiled an upgrade to its Net TV box that allows consumers to simultaneously watch television and surf. Yesterday, NetChannel, a start-up making services for network computers (NC), got a jump on its rival by introducing a new personalized service that offers information via TV.

    Both NetChannel and the upgraded WebTV have a suggested retail price of $299 for the box, and charge an additional $19.95 a month for Internet access.

    While the Net TV market is young, heavyweights like Microsoft and NC backers Oracle have made the segment yet another battleground in the war for how home users access Net-based information. NetChannel's services are bundled with Thomson Consumer Electronics' RCA Network Computer, which will begin a national rollout this month.

    "We've got a classic two-party system developing here," said Greg Blatnik, vice president at Zona Research.

    Though an established leader, WebTV Networks has yet to sell more than 100,000 of its consumer devices since they were launched last year. Industry observers have said the formula for how to deliver Net content to the mass of consumers who are not computer-savvy is still being determined. Currently, offerings from the competing companies in the market are not compatible.

    The WebTV upgrade that debuted today, called the WebTV Plus Receiver, is a new box that incorporates a television tuner into the device, letting consumers watch television while simultaneously surfing the Web. Previously, WebTV users could not access the Internet and watch TV at the same time.

    The device also allows viewers to download Web data through the cable used for cable TVs, and upgrades the phone modem connection (used for sending browser commands and email) to 56 kbps. Before the entire connection was limited a lower-speed telephone-line hook-up.

    WebTV, based in Palo Alto, California, further described a 1.1GB hard disk for local multimedia storage, the capability to print directly from the TV screen, and picture-in-picture capability, which would allow viewers to watch TV and surf the web simultaneously. The WebTV service further includes a TV listings feature.

    In an effort to trump WebTV, NetChannel yesterday announced a new service that includes online programming for TV-based information sources, a program guide for Net and TV viewing, and email capabilities.

    Blatnik, for one, believes that over time the method used to make money in the Net TV market could be determined by what services are offered on top of the hardware itself. He sees the market eventually evolving in a similar manner to cellular phones, where the hardware (the phone) is essentially offered for free, allowing consumers to shop for the best deal on services.

    In the meantime, the nascent market may leave consumers more than a little befuddled.

    "All at once, consumers are going to be confused," said Gary Arlen, president of Arlen Communications in Bethesda, Maryland. "[The products] are similar but they are not compatible," he said. "It looks to me like a beta vs. VHS fight," he added, referring to the standards wars when the VCR was a nascent consumer electronics device.

    For WebTV, its upgrade is the company's second-generation system, with improvements that some analysts have said were necessary for these Internet/TV devices to reach a wider market and eventually become a big consumer electronics item.

    "The original WebTV was hamstrung by having the Internet on your television,'' said Josh Bernoff, a Forrester Research analyst. "No one wanted that. They are now putting themselves in a position to have Web-enhanced television."

    Earlier this year, Microsoft paid $425 million for WebTV, and sources said that in mid-1998, the software in the WebTV box will switch to hybrid software based on both Microsoft's Internet Explorer browser software and the Windows CE operating system for handheld computers.

    Also today, Sony Electronics and Philips Electronics, WebTV's manufacturing licensees, announced a price reduction on WebTV's older model to $199; WebTV further announced a $100 rebate for a limited time, meaning that for the moment a first-generation WebTV box effectively costs $99.