Liberate Gets HITS: AT&T Next?

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As expected, Liberate Technologies and Headend in the Sky struck a deal
Wednesday morning to offer interactive-television services and applications to
HITS' 140 cable-system affiliates. Financial terms were not disclosed.

As part of the multiyear deal, HITS plans to tap Liberate's 'TV Platform
Compact' software platform, which is designed to run on widely deployed Motorola
Broadband Communications Sector 'DCT-2000' digital set-tops.

That deal could quickly evolve into a larger relationship with AT&T
Broadband, according to sources familiar with the situation. HITS is a wholly
owned subsidiary of the MSO.

Perhaps ironically, the HITS deal did not give Liberate's stock a boost soon
after it was announced. Liberate shares were down 3 cents to $12.13 each in
early trading Wednesday.

As part of its ongoing interactive-TV strategy, AT&T Broadband is
currently exploring how to leverage HITS to deliver interactive-TV applications
to about 3 million DCT-2000s that are already deployed in customer homes.

HITS and Liberate said they will begin to offer a suite of interactive-TV
services in the fourth quarter of this year, using a broadcast, satellite-based
model to deliver news, enhanced TV and games to cable headends.

The companies said they have already completed a technical trial and are
currently finalizing the technical integration into the HITS satellite-broadcast
center in Littleton, Colo.

The initial interactive-TV offering will not require two-way cable plant or
additional billing-system integration, the companies said, noting that future
upgrades will enable operators to add two-way services such as video-on-demand,
interactive advertising and electronic commerce.

'By enabling this offering through HITS, our affiliates can immediately
provide their customers with compelling new applications without having to
invest in costly server infrastructures or set-top upgrades,' HITS senior vice
president Rich Fickle said in a press release.

The HITS-Liberate deal is not exclusive, keeping the door open to other
set-top software companies such as Microsoft Corp. and OpenTV Corp.

In late July, OpenTV chief operating officer Jim Ackerman said his company
was in discussions with HITS to deploy games, information-on-demand and commerce
services to low-end digital boxes. So far, a final agreement between OpenTV and
HITS has yet to materialize.

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