Microsoft Adds Charter to TV Team

Microsoft Corp. announced a major win Wednesday for its troubled interactive TV program, lining up a U.S. cable operator ready to deploy the company’s long-delayed software: Charter Communications, the cable company controlled by Microsoft co-founder Paul Allen.

Charter, the nation’s fourth-largest cable operator, announced Wednesday that it has begun testing Microsoft TV software with a limited number of consumers in St. Louis. It plans to put the software in 1 million advanced set-top boxes, with the commercial roll-out expected to start early next year.

Microsoft has a much bigger contract with AT&T; Corp., which announced plans in 1998 to put Microsoft’s software in at least 7.5 million advanced set-tops. But despite Microsoft’s $5-billion investment in AT&T;, Microsoft TV software hasn’t made it out of AT&T;’s labs, and AT&T; has shifted to less expensive digital set-tops offering more TV-oriented services.

Other cable operators also have pared back plans to deploy the advanced boxes, which cost about $400--twice as much as the basic digital set-tops. “With the exception of Charter, there’s not another U.S. [cable operator] that I know of that has major plans to deploy high-end set-tops in the short term,” said David A. Limp, a senior vice president at San Carlos-based Liberate Technologies, a leading Microsoft rival.

To date, Microsoft’s only commercial deployment with a cable operator has been in Portugal, although it has trials launched or pending in Mexico and Brazil. It also supplies a version of its TV software, called “UltimateTV,” to satellite TV powerhouse DirecTV in the U.S.

To win over more U.S. cable companies, Microsoft is developing software for the basic digital boxes they’re already deploying. It got off to a late start, though, because its initial focus was on advanced boxes that provided two-way high-speed Internet access, a large amount of storage and relatively fast computer chips.

“Charter’s really one of the first cable companies to roll out a truly broadband solution,” said Ed Graczwyk, director of marketing for Microsoft TV. Using software from Microsoft and Digeo Inc., Graczwyk said, Charter will be able to offer e-mail, Web browsing, Web-based audio and video, local information and online shopping through the TV set.

Charter spokesman Andy Morgan said the ability to “stream” audio and video from the Internet was one of the features that led Charter to license Microsoft TV software. “We feel it’s critical to making this more like an entertainment service than an information service,” Morgan said.

“The Paul Allen-Microsoft connection really had nothing to do with this,” Morgan said. “We were looking for the software that would provide us the best service for customers.”

Allen left Microsoft in 1983 and runs a vast business empire through his Seattle-based investment firm, Vulcan Ventures.

Charter announced in March that it would use software from Liberate in its advanced set-top boxes. But Liberate, which has teamed with RealNetworks for its streaming technology, doesn’t expect to deploy that feature until early next year, Limp said.

Noting that Charter and Microsoft will start with a trial run, Limp said, “Trials have a way of fleshing out a platform to decide what works and what doesn’t. I’m not convinced they’re not going to run into similar problems here with their software that they’ve seen elsewhere.”

Morgan said the company hasn’t ruled out deploying both Liberate and Microsoft software.

Meanwhile, AT&T;’s latest set-top gambit is to offer customers in the Bay Area, New England and Denver the chance to buy a TiVo Inc. personal video recorder for $300. San Jose-based TiVo makes digital recorders that store programs on a hard disk instead of tape, enabling viewers to pause, rewind and replay programs.