Microsoft tunes in to Internet TV

AMSTERDAM, The Netherlands (Reuters) -- U.S.-based software maker Microsoft says it will develop software to deliver standard television over the Internet, targeting telecoms operators wanting to expand their business.

A prototype of the software will be shown next week in a speech by Microsoft founder Bill Gates at ITU Telecom World 2003 in Geneva, one of the world's largest telecoms trade shows.

Bell Canada and India's Reliance Intercomm will work with Microsoft to develop a commercial product by the end of 2004, said Ed Graczyk, Microsoft TV Platform marketing manager.

"Bill (Gates) on Monday will be talking about software innovations for the telecoms industry. We think there are a lot of benefits in Internet-based television," he told Reuters in a telephone interview.

Telecoms operators across the world see selling television as a way to boost the take-up of fast Internet connections such as Digital Subscriber Line (DSL). Most European carriers are known to have run trials last year, but very few are offering a commercial service for quality reasons.

Microsoft said that through the compression technology of its Windows Media Player 9 it can now offer standard broadcast quality television over an Internet connection of 1 Megabit per second (Mb/s). High definition TV will be offered if a consumer has a broadband Web connection that allows four to five Mb/s.

Most DSL offerings in Europe and North America offer slightly lower speeds than 1 Mb/s, but in South Korea and Japan average broadband speeds can be as high as 10 Mb/s.

Microsoft said Internet television should be cheaper to bring to consumers than current cable TV which is transmitted over a separate video network with MPEG compression technology.

A set top box to receive and decode Internet TV could cost as little as $50 in four years time, down from a bill for materials of $150 now. The current $150 already puts it on a par with some of the cheapest digital TV set top boxes.

Set-top box makers such as Britain's Pace Micro Technology, France's Thomson and U.S. chip giant Intel will work together to create these cheap set-top boxes in which the video decoding will be baked into semiconductors.

"Ultimately it can be so cheap that it can be built into a DVD player, a personal computer or a gaming platform," Graczyk said.

Transmitting TV over the Internet should also be beneficial to cable TV operators, many of which also offer broadband Internet as a separate service. At the moment, they need to maintain two different networks, one for MPEG video and one for Internet.

"Over time, most cable TV operators want to move to a single Internet infrastructure which is easier and cheaper to manage," Graczyk said.

Microsoft has been active in TV software for some five years, targeting cable TV operators. Only recently it has started to win deals and carry out trials with some of the major cable operators after it launched a dressed-down version of its software, designed around electronic program guides and video-on-demand such as films.

Its initial interactive TV software had many more features, such as email, games and web browsing, which suffered from teething problems and required expensive set top-boxes. After the burst of the tech bubble, cash-crunched cable companies could no longer afford to subsidise these boxes.

Microsoft TV competes with News Corp-owned NDS, OpenTV and Liberate Technologies.

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