TCI-Microsoft Talks Near End

1/11/1998 7:00 PM Eastern

Tele-Communications Inc. late last Friday was close to
selecting the operating system that it will use in the 11.5 million set-tops on order from
NextLevel Systems Inc.

In a related move, TCI executives worked through the better
part of Thursday night to close a deal with Sun Microsystems Inc. for its
'PersonalJava' suite of client-server applications.

Executives with TCI, NextLevel and Microsoft Corp. were
unavailable for comment or declined to comment on the negotiations at press time. Sun was
scheduled to hold a press briefing after deadline late Friday afternoon.

At press time, negotiations were nearing the finish line,
with a Friday-afternoon conference call scheduled between Microsoft chairman and CEO Bill
Gates and TCI chairman and CEO John Malone, according to sources familiar with the matter.

For its part, Microsoft has been pitching the adoption of
its slimmed-down Windows CE operating system for use in the boxes. At press time, sticking
points included control issues. TCI wants to be able to manage electronic transactions and
other control points using the set-top, sources said.

Meanwhile, Gates was hoping to announce the selection by
TCI of the Windows CE platform at his keynote speech during the Consumer Electronics Show
last Saturday (Jan. 10), according to reports.

If the deal craters, TCI has a trio of backup options: one
from PowerTV Inc., which is supplying an operating system to Scientific-Atlanta Inc.; one
from Sony Electronics Corp.; or one from a different division of Sun.

One thing is certain: Sun, through its JavaSoft arm, will
provide either its 'PersonalJava' or an embedded version of Java into the
NextLevel set-top package. TCI will decide later which version to use, sources said.

JavaSoft, which administers the application program
interface for JavaScript, has described PersonalJava as being targeted toward
'nondesktop' devices, like set-top boxes.

JavaSoft has repeatedly asserted that it is 'operating
system-agnostic,' meaning that it can run on the Windows CE platform and on any

One example of a PersonalJava application: customized
access to TV programs. For example, each member of a family could get their own version of
a smart card that knows who can watch R-rated programs and who cannot. Parents could also
purchase, in an almost debit-card fashion, specific dollar amounts per child for use
toward pay-per-view programs.

'We're working very hard to get PersonalJava APIs
all the way to the set-top box,' said Curtis Sasaki, group product manager for
consumer technology at JavaSoft, during an interview last month.

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