Microsoft TV Facing Uncertain Market

A shift in AT&T’s enhanced TV strategy might delay the largest planned deployment of the Microsoft TV (MSTV) platform. AT&T’s decision to focus in the near term on less-sophisticated set-top boxes (STBs) does not necessarily reflect a flaw or delay in MSTV technology. Rather, it reflects the uncertain market for enhanced TV in general, as well as some specific business pressures faced by the telecommunications conglomerate.

The decision has no effect on AT&T’s obligation to deploy between 7.5 and 10 million boxes with some sort of MSTV technology (an obligation spurred partly by Microsoft’s US$5 billion investment in May 1999). But it does place new commercial pressure on existing MSTV products, such as UltimateTV, and could lead to a coup for MSTV competitor Liberate.

Focus Moves to Existing Boxes

Originally, AT&T planned to deliver sophisticated services—such as broadband Internet access, multiplayer gaming, and e-commerce functionality—to subscribers via new, advanced STBs, such as the Motorola DCT-5000. Now, AT&T has decided to retrofit about 3 million already-deployed low-end STBs (DCT-2000s) to provide simpler services to existing customers. AT&T cited several reasons for its decision, including less demand for “Web-on-TV” services than for simpler services like video-on-demand and basic interactive games, and its newfound realization that the low-end boxes are capable of providing these features.