January 11, 1998 in Nation/World

Microsoft At The Gates Of New TV Generation Deal Signed With Cable Giant Tci Will Provide ‘Set-Top Box’ Software

Washington Post

Microsoft, the creator of the operating system software that powers most of the world’s personal computers, has bid to take a similar role in the television sets of the future.

The Redmond, Wash.-based computing giant signed a deal with Denver-based Tele-Communications Inc., the largest cable television company in the United States, to provide system software for TCI’s future “set-top boxes” - small computers, replacing today’s cable boxes, that will serve up interactive services, including Internet access, to home users.

Microsoft Chairman Bill Gates announced the deal in a keynote speech at the Consumer Electronics Show here, saying, “Digital TV, when it comes, will be more than just a better picture and sound.” He then demonstrated how tomorrow’s TV viewer could switch from watching a football game to getting statistics and buying a team’s jersey at various Internet sites.

Microsoft will license at least 5 million copies of a version of its Windows CE operating system - an offshoot of the widely used Windows 95 desktop-computer software tailored for smaller, consumer electronics devices such as hand-held computers - for use in TCI’s advanced set-top boxes.

“We don’t contemplate trying to license other operating systems,” said TCI chairman John C. Malone. Microsoft “is the horse we’ve chosen.”

The companies didn’t disclose the financial details of the arrangement. Contrary to persistent rumors about a $1 billion investment by Microsoft in TCI, neither company bought a stake in the other.

The deal helps Microsoft, which aims to make its Windows CE operating system as widely used in consumer electronics devices as Windows 95 is in desktop personal computers. Windows 95’s popularity has given Microsoft great power over the desktop-computer market, but TCI has tried to limit Microsoft’s influence over the nascent set-top box industry. As part of the deal, Microsoft has promised to publish the core specifications for Windows CE, the “application programming interfaces” - something that it doesn’t do with Windows 95.

“The APIs are fully published and that’s one of the most critical aspects in TCI’s mind,” said Craig Mundie, Microsoft’s senior vice president for consumer platforms. “We’re interested in supporting a broad development community.”

Malone said that TCI chose Microsoft “because we thought they were the furthest along in the convergence of TV and Internet.” Beyond customizing Windows CE to fit TCI’s requirements, Microsoft also pledged to make available some of the technology at the heart of its WebTV boxes, which let people browse the Web on regular televisions.

The new set-top boxes are not expected to become available until 1999.

TCI has yet to identify what computer chip it will use in its box, nor has it clarified what it might cost consumers, although it has said that it would cost about $300 to manufacture. But picking Windows CE “is a key decision,” he said. “Until you pick an (operating system) your hardware vendors are treading water.”

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