AT&T; Changes Cable Box Plans

AT&T; Corp. said Thursday that it is scaling back plans to develop a set-top cable box with Microsoft Corp.

The reversal comes after repeated delays by Microsoft in meeting its obligations under the software giant’s $5-billion investment in AT&T; two years ago. Under that agreement, AT&T; would use Microsoft interactive television software in up to 10 million set-top boxes.

“We have our partnership with AT&T;, which we continue to work on very closely,” said Microsoft’s Jon DeVaan, senior vice president of TV service and platforms, in a speech Thursday in Silicon Valley. “AT&T; has some turns in the road perhaps, but we’re very much committed as a strategic partner of AT&T; to deliver a service with them in the near future.”

AT&T;’s broadband division said its shift in strategy came in response to field trials over the last six months that demonstrated consumers weren’t ready for many of the sophisticated applications being built into these advanced set-top boxes. “It’s an evolution of our strategy to respond to test results showing that people want enhanced video services more than the ability to surf the Net over their TVs,” said Tracy Baumgartner, an AT&T; spokeswoman.

She said the company will continue to work with Microsoft on the advanced set-top box, called the DCT-5000, which was to have given customers the ability to make phone calls, shop, bank, e-mail friends and surf the Web over their TVs.

But she said it will no longer be the focus of 100% of the company’s efforts as AT&T; is preparing to develop a simpler advanced box. Among the features would be a hard disk that allows viewers to record TV programs, pause and rewind when they watch them.

The company already has deployed 3 million digital TV boxes to its 15 million cable customers.