News

UPC Gets Liberated, Still Backs Microsoft

9/17/2000 8:00 PM Eastern

Apparently frustrated with delays surrounding Microsoft Corp.'s "Microsoft TV" interactive-television software, United Pan-Europe Communications N.V. (UPC) selected Liberate Technologies as a second-source supplier.

UPC noted in a press release that using multiple vendors was part of its interactive-TV strategy all along. The MSO said it chose Liberate's software due to its open architecture and the fact that "it has already been deployed."

UPC said it will initially offer the "Liberate TV Platform" in Vienna, Austria, one of its largest systems, with approximately 480,000 subscribers.

Liberate said UPC plans to launch its interactive-TV platform on Motorola Broadband Communications Sector boxes during the first quarter of 2001 to offer a menu of "walled-garden" applications such as e-mail, chat and electronic commerce.

The move follows news that delays would cause Microsoft-which owns a 7.8 percent stake in UPC-to miss the European MSO's September deadline to deliver interactive-TV software for Philips Consumer Electronics Co. advanced digital set-tops in Amsterdam, Netherlands.

Instead, UPC opted to add Microsoft TV to those set-tops via software downloads when it's ready for primetime-likely the first quarter of next year.

Microsoft's software delays have created a window of opportunity for Liberate to generate business it might otherwise have not gotten, Liberate senior vice president of corporate development David Limp said.

For example, Cablevision Systems Corp. selected Liberate's middleware and Source Media Inc.'s interactive program guide earlier this month for its Boston system, which Cablevision is in the process of selling to AT & T Broadband.

"We've been talking to UPC since the first week [Liberate] was founded," Limp said. Those talks heated up after Microsoft told customers their software would be delayed, he added.

Liberate's presence on UPC systems might not be limited to Vienna, Limp said, adding, "They're allowed to roll out our software anywhere they see fit. We didn't limit the usage license to one particular territory."

Of course, UPC will have to pay Liberate for any additional rollouts, he said.

Limp added that there was no truth to rumors that Liberate gave away software or committed an "unnatural act" to get the UPC account.

"We're selling to our business model," he said. Cable operators "will pay per subscriber that we deploy to. Obviously, our big customers get discounts-the more they deploy, the lower the cost of the software gets."

Microsoft, hearing the news at the International Broadcasting Convention in Amsterdam, said it wasn't surprised that UPC selected a second interactive-TV-software company to fulfill its digital needs.

UPC "has always talked about an open-vendor strategy," Microsoft TV director of marketing communications Ed Graczyk said. "I don't think that does anything to our existing relationship with UPC. We're focused on winning the long term, if you will, rather than who's got the first city or the biggest city. We're not trying to fight the war of the press releases."

Graczyk-who noted that Microsoft has deals in place to deploy interactive-TV software to 15 million set-tops-was vexed about reports that classified Microsoft TV's software troubles as a delay in product shipment.

"We've never announced a ship date for Microsoft TV," he said. "We've been consistent in saying that we'll ship it when the software's ready."

Graczyk admitted, though, that each Microsoft interactive-TV-software deployment-whether with AT & T Broadband, DirecTV Inc. or UPC-involves "complex" and "significant" integration with new hardware because customer-user interfaces are rarely uniform.

"It's a brand-new generation of hardware components that have to be developed, tweaked and tested," he said. "A lot of work needs to be done before we can do the final steps of integrating our software onto this new generation of hardware."

Graczyk said he was confident that Microsoft's software would be ready to go in the first quarter of next year. "We're confident in our piece of the puzzle," he added, "but there are other pieces we don't control."

In the meantime, Microsoft will continue to focus on the long term when it comes to building market share. "Next year at this time, or two IBC shows from now, we can look at who's installed where and who's delivering the most innovative platform. That's what we're focused on, not who wins Vienna and who wins Amsterdam," Graczyk said.

Liberate also feels that its software is on trial, and that it must prove its mettle before attracting more contracts. "If we can outdeliver Microsoft, we can have the majority share of these accounts, but we have to deliver," Limp said.

Long-term, Limp added, he's more confident than ever that Liberate could be the No. 1 supplier of interactive-TV software.

Now that UPC has chosen a second middleware supplier, questions arose about whether AT & T Broadband-which will launch a pilot this year of Motorola Broadband "DCT-5000s," and which has planned a wider rollout next year with the more sophisticated software stack-will follow suit.

A company spokesman said AT & T Broadband has made no such announcements. He also restated that the MSO's set-top software arrangement with Microsoft is nonexclusive.

September