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Microsoft, AOL call for broadband partners

InfoWorld

By Matt Berger

(IDG) -- After a sluggish start, leaders in the Internet and software industries continued this week to prod cable broadcast executives about adopting new technology for the television.

Microsoft President and COO Rick Belluzzo detailed the company's broadband initiatives during a keynote address Tuesday at a broadband conference here, promoting its network and system software as a way for cable operators and content providers to take the broadcast industry digital.

Walk on the Wired Side, the conference sponsored by CTAM, a trade group for the cable television industry, this year is promoting a number of new technologies for cable broadcasters including the long-anticipated interactive television, video on demand, and home networking.

Belluzzo demonstrated Microsoft's Interactive television platform, the forthcoming Xbox video game console, and the Windows XP operating system during his keynote. Each of the technologies has been built with broadband in mind, he said.

At launch, the Xbox will be broadband-ready, although the company won't have any services to offer right away. The company's new desktop operating system, which will include new instant messaging technology and a beefed-up media player, will also include functions to make use of high-speed Internet access. It is built with home networking capabilities and related security functions.

Belluzzo promoted the developing products, as well as its .NET initiative, as drivers for new partnerships with cable operators.

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"Broadband has really played an important role in our business," he said. "And we're trying to put our money where our mouth is in terms of developing products" to take advantage of that.

Monday, Barry Schuler, president and chief executive of the online arm of AOL Time Warner, pitched his ideas at cable executives in search of similar partnerships in the high-speed Internet market. (AOL Time Warner is the parent company of CNN.com.)

"We've got all these assets but we need partners," he said. "The companies that will win will be the ones that sit down and work together."

AOL Time Warner has technology and services in the Interactive television market with its AOLTV. The company said last week it plans to incorporate DVR (Digital Video Recorder) technology from TiVo in its next-generation set-top box, as well as satellite television services from Hughes Electronic subsidiary DirecTV. The AOL Internet service is also already the most widely used with more than 30 million paying subscribers.

Now the company is looking for partners in the cable industry to expand its reach into the coveted living room. Schuler signaled that AOL Time Warner is pushing to reach the customer base of local cable operators.

"They are the one's with the infrastructure and the assets," he said. "They are in a position to become a supplier of our services."

Local cable operators also have access to a huge installed base, and have the workers in place to physically install complex home networks and broadband technology in peoples' homes.

Looking beyond the current cable modem, cable operators will have the opportunity to potentially host more extensive services such as the ability to send voice data, and offer expanded media services such as videos on demand and digital music. Schuler positioned home networks as a promising technology that will host such services.

Home networks, which route one high-speed Internet connection to multiple computers and Internet-enabled devices throughout a house, are still complex systems to set up, however, especially for the average consumer.

Similar to Microsoft and other small software vendors, AOL Time Warner is competing to become the software du jour for these home networks as well as for set-top boxes.

But continued pitfalls are in the way of quick adoption.

AT&T is slowing its efforts to upgrade its cable subscribers to the next generation of digital broadband services. The company cancelled plans this month to roll out next-generation set-top boxes from Microsoft.

"The role out of the advanced set-top boxes have been slower than anyone has liked," Belluzzo told reporters following his keynote, noting AT&T's scaled-back offering. "We're staying with our vision. We've always played these markets with the long-term in mind."

That long-term outlook, however, has come with some steep investments in hardware and software development. With commitments from cable operators around the world to roll out about 50 million of its set-top boxes worldwide, Microsoft continues to compete for new partners, especially in the young U.S. market, which has been slower to develop than other regions of the world such as Europe.

AOL Time Warner also faces its own problems as it struggles to make deals with competing ISPs such as Earthlink. The company has to work with rival ISPs before it can role out advanced services on its own Time Warner Cable service.

While the market for high-speed Internet and digital television services has been slow to take off, a ripe market is imminent, the executives said here. AOL and Microsoft are struggling to be in the fore when the market takes hold.

"Broadband is going to be as fundamental as electricity or plumbing," Schuler said. "I won't tell you when, but it's coming."





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