Charter Deal Gives Microsoft an ITV Boost

In a first for a domestic MSO, Charter Communications Inc. will deploy Microsoft Corp.'s interactive-television software to 1 million subscribers over the next seven years.

The deal, announced on Nov. 7, is a boon for Microsoft, as Charter is the first U.S. operator to announce plans to use the software giant's middleware. The St. Louis-based operator said it would deploy Microsoft TV on Motorola Corp. DCT-5000 advanced digital set-tops.

The agreement comes after AT&T Broadband dropped plans to deploy ITV services on the DCT-5000 line in June. Charter thus becomes the first U.S. MSO to deploy interactive services on the advanced digital platform.

"We continue to see a lot of potential for customers there," Charter spokesman Andy Morgan said of the advanced digital platform. "Maybe our approach is a bit different."

Charter's service will include content from Digeo Corp. — a company owned by Charter's CEO Paul Allen — such as electronic mail, Internet access and on-demand news, weather, sports and entertainment offerings. The MSO said it would also eventually add Wink Communications Inc.'s interactive service, video-on-demand from Diva Systems Corp. and TV Guide Interactive, but set no timeline for rolling out those applications.

Morgan said Microsoft must still finish integrating its platform with TV Guide Interactive, a process that should be completed sometime early next year.

Charter has a smaller agreement to deploy Liberate's middleware to 300,000 set-tops.

Unlike its agreement with AT&T Broadband, which was tied to a $5 billion investment the company made in parent AT&T Corp. during 1999, Microsoft hasn't invested in Charter, said Microsoft senior vice president Jon DeVaan.

Allen has a vested interest in seeing Microsoft perform well in the cable industry. He's a cofounder of the software giant and one of its largest individual stakeholders, with more than 138 million shares, according to Thomson Financial Solutions data.

The MSO has been testing the Microsoft software in a small trial on its St. Louis system since the beginning of the year, said Morgan. A commercial launch of the advanced digital platform in St. Louis has been set for the middle of next year, but Charter has set no timeline for rollouts in other systems, he added.

In March, Charter announced an agreement to deploy Liberate's middleware on 300,000 DCT-5000 set-tops, but the MSO doesn't know when it will roll out the technology, Morgan said. The MSO is currently testing the Liberate software in a lab, he noted.

Liberate executive vice president David Limp downplayed the Microsoft deal, emphasizing that Liberate's software is already running on 2 million set-tops worldwide, including 250,000 in the United States — mostly on Insight Communications Co. systems.

"They [Microsoft] are in full-on, catch-up mode," Limp said.

DeVaan said Microsoft still has a commitment from AT&T to deploy Microsoft TV on 7.5 million set-tops, but does not know when the MSO will deploy the product.