Interactive TV Pact Appears Near for Time Warner, TCI, Microsoft

Three of the nation’s largest technology and media companies are reportedly near an agreement in which they would join forces to create software for the next generation of video entertainment and information services.

Time Warner Inc., the nation’s largest media company; Tele-Communications Inc., the largest cable operator; and Microsoft Corp., the largest personal computer software publisher, are expected to announce by the end of the month that they will form a company called Cablesoft, the New York Times reported in today’s editions.

If formed, the new venture would be a potent force in the coming move to combine the worlds of entertainment, computing and communications.

At stake is control of the so-called cable converter box that sits atop television sets and regulates the flow of cable programming. Although cable sets are currently equipped with such boxes, their sophistication is expected to dramatically increase with the advent of interactive television.

With interactive TV, viewers would depend on the box to handle their orders for dial-up movies, at-home shopping and a host of new programs and services that would emerge to fill up to 500 channels that cable operators expect to be offered by the end of the century.

Earlier this month, Tele-Communications and Time Warner announced that they would create a joint venture to pursue development of standardized equipment, software and services that would be provided by other companies. They noted that the venture would invest in selected products, setting up the possibility of a deal such as Cablesoft.

“This has tremendous economic and social importance; it is the gateway for the popular culture,” said James F. Moore, president of Geopartners Research Inc., a management consulting firm in Cambridge, Mass. “This is the substitute for newspapers and magazines and catalogues and movies, and that gives it enormous economic potential for those who control the gateway.”

The chief executives of the three companies--Gerald M. Levin of Time Warner, John C. Malone of Tele-Communications and William H. Gates III of Microsoft--have been meeting to discuss the deal, according to several executives following the talks.

The companies have refused to talk about those discussions, but the newspaper reported that the agreement might include other businesses, including regional telephone and software companies.

Together, Tele-Communications, based in Englewood, Colo., and Time Warner, based in New York, provide service to about 30% of the nation’s 57 million households with cable TV.