Microsoft, AOL Shortchange Programmers

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Two major rivals, AOL Time Warner Inc. and Microsoft Corp., are wooing potential partners in the cable industry and offering new visions of the broadband future.

A top executive from each company — America Online chairman and CEO Barry Schuler and Microsoft president and chief operating officer Rick Belluzzo — made their respective pitches at last month's Cable & Telecommunications Association for Marketing Summit in San Francisco.

Their presentations encompassed just about everything that's right — and wrong — about the current thinking in broadband.

The two executives appeared at CTAM shortly after their companies abandoned discussions over a personal computer software partnership. Neither executive directly addressed their rival's plans, but the presentations illustrated the many high-stakes businesses in which they compete.

In many respects, their conceptions of broadband are about as different as Time
and Newsweek
— meaning they're pretty similar.

Both companies see broadband as a ubiquitous communications and distribution service, providing consumers with high-speed Internet connectivity, easily accessible electronic mail and instant messaging, electronic commerce and an array of content services.

"Convenience is the driver," Schuler told the audience. "Convergence is the technology."

Belluzzo, seeming to skirt CTAM's prohibition on overt sales pitches, presented Microsoft's latest products, including Windows XP, which provides home networking, digital photography and rich communications; the Xbox game player; and Microsoft TV advanced digital set-tops, related equipment and software.

Each presenter stressed that his company must create partnerships with cable operators and related support companies to turn its broadband dreams into a reality.

But there appears to be what we call "a disconnect" in both companies' line of thinking.

Their broadband visions are too far removed from today's bread-and-butter cable business. You know: television.

While the presenters were working hard to win over operators, they overlooked the fact that a large portion of the audience was made up of cable programmers — people who primarily provide video service.

Schuler and Belluzzo barely acknowledged the role of cable programmers, who could be integral in creating content applications that drive consumer interest in broadband connectivity.

The presenters talked about how broadband would enable new content — but seemed to refer mainly to Internet-based content that is owned, controlled or routed through AOL or Microsoft's MSN online service.

The omission of programmers was particularly surprising in Schuler's presentation, since his parent company, AOL Time Warner Inc., is a major cable programmer.

Only when interviewed later by Time Warner Cable president Glenn Britt did Schuler acknowledge that "what's missing on broadband is [the] applications to drive it."

Yet Schuler did not mention that some of those applications may be under his parent company's domain, through Turner Broadcasting System Inc., or Home Box Office Inc.'s new HBO On Demand service or the interactive service AOL TV, which was given scant attention. Instead, Schuler said the recipe for success is to aggressively grow the online audience.

Operators are finding Internet access to be an attractive business, but they're also busy rolling out digital programming packages.

The two companies' plans reflect the sort of thinking about cable offered by many computer-industry wonks — a philosophy which defines broadband as almost exclusively an Internet experience.

The computer industry embraces a future of rich-media content, but it often takes cable's programming for granted. That's partly because of competitive positioning by many computer-based content providers. At its worst, it stems from the arrogant attitude that the Internet is superior to television.

Somehow, there must be greater integration between the vision of broadband that's built upon high-speed connectivity and Internet-based media, and the future of television, which is based upon multiple digital networks, on-demand programming and interactive enhancements.

In their presentations, the two rival companies seemed mainly interested in jockeying for position in what each foresees as a future battleground: home networking.

Home networking? You mean the cable industry is spending all this money to build broadband pipes so that consumers can connect the PCs inside their homes? Whoop-de-doo.

Schuler conceded that home networking is presently a "tech weenie" idea, but added that it means much more than connecting PCs.

Broadband connectivity will become as fundamental as plumbing and electricity, he said, and enable everything from music downloads to a network-linked alarm clock. And he did mention programming here, citing the ability to access an on-demand episode of The Sopranos
— on a PC.

While Schuler and Belluzzo talked home networking, cable programmers at CTAM were sweating about the current soft TV-advertising market.

Programmers need to embrace broadband by recasting their role more broadly, as "content providers" that can serve any distribution platform. But the idea is difficult for them to ponder while slashing their budgets in a slow market.

If these visions of broadband and the future of TV truly converge, they'll provide consumers with a new form of broadband experience — one that not even the visionaries at Microsoft and AOL can clearly foresee.

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