New WebTV Chip Could Aim for Digital Cable

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Solo2, a new chip that Microsoft Corp.'s WebTV Networks division has designed to power its advanced "UltimateTV" interactive-television platform for DirecTV Inc., could eventually seek market share among digital-cable set-top-box vendors and digital-terrestrial-receiver manufacturers, a company executive said.

Microsoft struck a nonexclusive pact with Japan-based Toshiba Corp. to manufacture the powerful chip, which cost less than $20 million to develop.

Solo2 "can certainly be used in any product that needs a lot of digital-video and audio processing and graphics and display-everything you need in advanced set-top boxes," Microsoft WebTV vice president of consumer products Tim Bucher said.

"If [Scientific-Atlanta Inc.] or Motorola [Broadband Communications Sector] wanted to use this technology, we'd love to talk to them," he added.

The same goes for Broadcom Corp., a chip vendor that currently owns more than 90 percent of the U.S. cable set-top-box silicon market. Intel Corp. is currently suing Broadcom for patent infringement.

"If Broadcom wanted to license [Solo2], we'd be happy to talk to them, too," Bucher said, acknowledging that it will be challenging for Solo2 to carve a niche for itself in the cable market.

"It's hard to make inroads there. Have we been trying to make inroads? The honest answer is, not that hard, because it's not our core business," he added.

For the most part, cable set-top-box vendors appear to be riding the status quo with Broadcom components, but they haven't slammed the door in Solo2's face, either.

"We do not limit ourselves to one chip manufacturer," said Carl Vassia, director of product management for Motorola Broadband's digital-set-tops and services division. "We are not currently using Microsoft's new chip, but we are always evaluating new technologies, and we would certainly be open to using it if it offered the best solution."

Meanwhile, Pace Micro Technology plc-which has large orders under its belt in the United States from Time Warner Cable and Comcast Corp.-has no plans to use Solo2 at this time, according to Pace officials.

That's all fine and dandy for WebTV, at least for the time being. While the cable and digital-terrestrial markets could figure into Solo2's future plans, the chip's here- and-now involves UltimateTV and direct-broadcast satellite leader DirecTV.

Due out in about two months, the Solo2-enabled, rebranded UltimateTV receiver will come armed with two tuners, allowing customers to experience "the world's first picture-in-picture satellite system," Bucher said.

With an embedded digital hard disk, the UltimateTV/DirecTV box will also allow viewers to record one show and watch another, he said. And the receiver will house a "walled garden" of interactive-television capabilities such as e-mail, Web browsing and chat.

Those bells and whistles will help WebTV to gain some much-needed momentum, The Carmel Group vice president of business development Sean Badding said.

"WebTV has been slow to basically ramp up to new services and eventually capture new subs, and [Solo2] is just a piece of the puzzle to make UltimateTV the service Microsoft wants it to be," Badding said.

He noted that WebTV's current subscriber base-which has struggled to get very far beyond the 1 million barrier-has paled compared with initial expectations that it would be between 3 million and 4 million by now.

"I think UltimateTV, which has alliances with DirecTV and Thomson [Multimedia], is going to be a home run," he added. "It's going to be a powerful platform that will eventually compete with other types of boxes out there."

For example, EchoStar Communications Corp.'s "DISHPlayer" box combines a DBS receiver with a "WebTV Networks Plus" box to provide Internet access via the television, as well as digital recording features. The UltimateTV brand and the platform's capabilities could be added to future DISHPlayer products.

UltimateTV will also compete for subscribers with DirecTV's recently launched "AOLTV" service. AOLTV's receiver contains a narrowband, 56-kilobit-per-second modem for Internet connections, but it also houses universal-serial-bus ports for high-speed digital-subscriber-line or cable links.

"DirecTV is hedging its bets, basically lining itself up with other partners," Badding said. "They just want to make sure they can continue to capture more subscribers with advanced services."

That's a strategy cable operators obviously want to employ, as well.

However, MSOs such as AT & T Broadband and Europe's United Pan-Europe Communications N.V. (UPC) have been forced to curb their initial plans for advanced interactive-television products due to delays associated with the "Microsoft TV" software platform.

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