News Article: 1993-04-03: Battles Loom for Control Of TV's Portal to Cable From The New York Times

April 3, 1993

Battles Loom for Control Of TV's Portal to Cable

The unobtrusive cable control box that sits atop many television sets is about to become a new battleground for the nation's computer, telephone and cable television companies. The ultimate prize: control of the access to all the video entertainment and new types of electronic information that enter and leave the home.

The struggle will move to a higher plateau, perhaps as early as next week, when three companies each dominant in their fields -- Microsoft, Intel and General Instruments -- are expected to announce that they are jointly developing a set-top device that combines the functions of a cable converter box and a personal computer, according to industry executives. The three companies are still working out final details of their agreement.

The new device is expected within a very few years, when cable television systems will probably offer as many as 500 channels and set-top units like the one envisioned may be the portals through which virtually all video signals flow. Viewer in Command

The power of a personal computer will be helpful not only for selecting from all the movies and countless clones of popular television programs that are sure to evolve. But the computer might also make possible "interactive" television tasks like assembling newscasts tailored to a viewer's particular interests, browsing through video versions of the encyclopedia or summoning on-screen shopping services in which the models in the Eddie Bauer or Victoria's Secret catalogues parade their wares at a viewer's command.

"There really aren't any bigger battles than this," Mark Stahlman, an industry analyst at New Media Associates in New York City, said. "Telephone companies, cable operators and computer manufacturers are racing into your bedroom."

Besides Microsoft, Intel and General Instruments, a range of computer makers are anxious to form partnerships with both cable and telephone companies to attack the new interactive market. In addition to Apple Computer and I.B.M., which is each still looking for a teammate, video game makers such as Nintendo and Sega are each exploring relationships, and 3DO, a Silicon Valley start-up company with an advanced video player, is also looking for alliances. Industry Standard

Each company vying to establish the industry standard for the devices that will control all this action is buoyed by the knowledge that whoever seizes control of the set-top stands to make billions of dollars and help determine what type of information pulses into and out of millions of homes.

But of the teams formed so far, the one made up of Microsoft, Intel and General Instruments may be the most powerful and seems closest to bringing a product to market. General Instruments, a leading provider of set-top cable television decoders, has already been at work with the largest operate of cable systems, Tele-Communications Inc., to create the data-compression technology that Tele-Communications has said will make it possible to squeeze 500 channels into a single cable by 1994.

And now, Microsoft, which dominates the personal computer software market, and Intel, the world's largest computer chip maker, will cooperate with General Instruments in designing the computerized set-top device that will contain a version of Microsoft's popular Windows software and be powered by Intel's 386-series personal computer chip.

A model geared to today's cable systems, priced between $250 and $300, is to be available later this year. Next year, a more advanced version will add the digital-compression technology. In both cases, the set-top device will be operated with a remote-control unit that is similar to control devices used for today's cable boxes and televisions.

"Interactive multimedia is just a wild frontier," said Bishop Cheen, a senior analyst at Paul Kagen Associates, a media research firm in Carmel, Calif. "We have dozens of players out there from garage chipheads to major media corporations all converging on trying to give consumers 21st century technology. Most of them won't be standing eight years from now, but the ones that will will be the superpowers."

Tests of interactive television are already under way in several cities using simpler versions of the set-top controllers than are envisions by General Instruments, Intel and Microsoft. Time Warner, for example, is testing "video on demand" movie services on its cable systems in Queens and Orlando, Fla. Similar tests are under way in Denver by Tele-Communications in league with the telephone companies U S West and A.T.& T.

But the first successful commercial interactive system is not American. In Montreal, Groupe Videoway is already giving cable viewers a glimpse of what digital interactivity will mean in the future.

When Videoway customers watch Montreal Expos baseball games, for example, they can use a set-top converter made by Zenith Electronics to watch the game from up to four angles, jumping at will from camera to camera. As a camera behind home plate watches the radar gun that tracks the speed of each pitch, for example, a small window on the screen shows the path of each ball as it crosses the plate. Viewers can also switch to two other channels that show a continual stream of statistics like batting averages and star players' salaries, while a fourth channel carries the game on a 10-second delay, to permit instant replays of any play. Decisions, Decisions

But none of these services or tests involve the full-fledged computers that General Instruments, Microsoft and Intel mean to place on the set-top. Among their other functions, these computers will offer a solution to what may be the most anxiety-inducing problem that will face the Information Age viewer: deciding what to watch when there are 500 channels to choose from.

A personal computer will rapidly sort through lists of programs, helping viewers select programs or even automatically turning on the videocassette recorder when they are away. Morevoer, it will be possible to use the computer as a personal research assistant to watch for programs on certain topics and tape them without pre-planning.

"This confluence of technologies is really going to be good for the viewer," said Richard Green, president of Cable Television Laboratories, the industry's research arm. "We used to call it the 'I'd have watched it if I knew it was on network' problem. This will solve that."

Although an announcement by the General Instruments team will herald the arrival of the first all-digital commercial television systems, whether Microsoft and Intel will be able to thoroughly dominate the television market as uniformly as they dominate the office computer market is far from certain. 'Very Different'

"The principles are going to be very different than those that applied to the personal computer industry," warned John Sculley, Apple's chairman. "I don't see too many others in the computer industry who get the whole picture and who have resources to attack this market."

Mr. Sculley said that he believes that Apple's best opportunity would be in developing appealing consumer-oriented control systems -- called "user interfaces" by computer designers. "It has to be as intuitive to use as today's telephone and television," Mr. Sculley said.

Despite industry executives' enthusiasm for interactive technology, deep uncertainties remain. For one thing, cable operators are under new pricing pressure in light of the Federal Communications Commission's order on Thursday that will force about two-thirds of the nation's cable systems to lower their rates by 10 percent. And some cable executives wonder whether there is truly a market for services that might add substantially to monthly cable bills.

"I'm not sure that the pay-per-view market is as rosy as people think it is," said John Kelley, president of Palo Alto Cable Co-op, a small cable system in California. "And it's not clear to me that people want their TV to be a computer."

Moreover, many analysts believe that interactive television in the home will present new marketing -- and sociological -- problems that technology hasn't addressed.

"One of the big promises is that they will be able to tailor information to personal profiles," Denise Caruso, publisher of Digital Media, an industry newsletter, said. "But what if you're in the living room with your family. Who's holding the remote? Are you going to have five TV's in the room with everyone with their own remote? I don't think so."

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