TCI Opts for Java, Foiling Microsoft’s Cable TV Bid
Sun Microsystems Inc. outflanked archrival Microsoft Corp. on Friday, as Sun announced that its Java software will be installed on millions of set-top boxes purchased by Tele-Communications Inc., the nation’s largest cable television company.
The deal gives Sun a lucrative portal into the nation’s living rooms, as its software will now be a key to delivering a new breed of interactive services via television, including e-mail, personalized news, online banking and home shopping.
TCI said it expects to install the Java software on as many as 10 million boxes it plans to purchase over the next several years and will pay Sun an undisclosed royalty on each device. But that is only part of the victory for Sun, because other cable companies are likely to follow giant TCI’s lead and also embrace Java.
The agreement was seen as a painful blow to Microsoft, which hoped to expand its monopoly of the computer industry into the vast, untapped television market by making its Windows CE operating system the software linchpin of set-top boxes.
“If you believe in the vision of interactive television, Sun has a huge win here,” said Peter Krasilovsky, vice president of Arlen Communications, a Bethesda, Md., research firm. “More importantly, Microsoft may not be able to insert itself into the box.”
According to sources close to the talks, Microsoft tried desperately to keep Java out of the boxes and came close to doing so with a deal that would have included a $1-billion investment in TCI.
While Microsoft’s operating system still could be chosen by TCI to run in tandem with Java, sources say the software giant no longer has a favored position stemming from its Chairman Bill Gates’ lengthy relationship with John Malone, TCI’s chief executive.
They say TCI has cooled to the idea of an investment because of Microsoft’s increasing demands, its own improving financial condition and most importantly, a secret attempt by the software giant to buy a controlling block of TCI behind Malone’s back this summer.
Wary of giving Microsoft too much control over this emerging market, TCI is pursuing open standards that will render almost insignificant which company provides the operating system, microprocessors and other components of its set-top boxes.
The cable industry has been negotiating since summer with Silicon Valley to develop industrywide standards for an advanced box that would allow it to plug in to any cable system in the United States. Those standards were delineated this fall, with the industry--led by TCI--agreeing in December to place an order for 15 million advanced digital boxes based on the new standards from General Instrument.
TCI said it would take between 6.5 million and 10 million of the 15 million boxes. The company is the nation’s most influential cable operator, with 10 million subscribers of its own and an additional 15 million through partnerships with other companies, including Long Island-based Cablevision and Los Angeles-based Falcon Communications. Bruce Ravenel, senior vice president of TCI’s Ventures Group, said the set-top boxes are likely to hit the market early next year.
Java is a computer programming language developed by Sun with a unique quality: Programs written in the language can run on any operating system. That’s a liberating proposition for software developers, who have long had to march to Microsoft’s commands if their programs were to run on its best-selling Windows operating system.
Because Java represents such a threat to Microsoft’s industry control, the Redmond, Wash.-based giant has tried to undercut the budding language. Late last year, Sun filed a suit accusing Microsoft of violating its Java licensing agreement by creating its own, proprietary blend of the language.
There are already thousands of developers writing programs in Java, mainly for use over the Internet. But the deal with TCI is an important new endorsement of Java that could speed the spread of the language. With potentially millions of more users, the number of developers writing programs in the language could mushroom.
Analysts speculated that Sun could collect about $1 per set-top box under the deal, but that the company is poised to make more money supplying servers and other technology used by cable TV companies to deliver digital services.
Analysts said they still expect TCI to license Microsoft’s Windows CE operating system, a version of the Windows software that runs about 90% of the world’s computers.
