Microsoft Corp. announced that it will invest 51 billion in Comcast to help expedite the development of data and delivery services. The software publisher s investment in the fourth largest cable provider buys it up to n.5 percent of the company and a non-voting seat on its board. Comcast is also a business partner with @Home. which has been a major player in the rollout of high-speed access over cable lines throughout the country The announcement comes two months after Microsoft agreed to buy Web TV for $425 million, a deal that currently is being scrutinized by the Justice Department.
• Without Bill Gates's investment in broadband technologies, the evolution of the industry would be a longtime coming. In the fall of 1996, research firms projected that there would be 500,000 cable subscribers by 1998, and that the number would grow to 2.7 milllion households by the year 2000. At the time, they anticipated that cable's major impediment would be a lack of resources for the market to grow. Bidirectional cable is a costly and peripheral endeavor for both cable companies and telcos. If Microsoft continues to invest in and influence the growth of the cable modem market, those numbers will undoubtedly increase.
• Microsoft's investment will benefit PCs before TV s. TV s provide the best non-PC experience, with large-screen displays, high-fidelity audio, and highhresolution video. Although WebTV and other Net-top devices stand to beneefit from growth in the bidirectional cable space, they currently cannot commpete with the PC's processing power, high memory, and storage capacity. Also, TV s and net-top devices are currently not designed for cable moderns out of the box. The results of Microsoft's investment are likely to be improve- . ments in the quality of multimedia-rich content on the Pc. Down the road, the synergy between the software giant's Comcast investment and its Web TV property will result in the delivery of rich Internet content via TV s.
• Microsoft's attention on the advancement of bidirectional cable will likeely have a ripple effect for other broadband players. There are currently a number of broadband alternatives that are being tested nationwide. Among them, ADSI, (asynchronous digital subscriber lines) has been generating a good deal of attention for its speed and for its abilities to run over twisted pairs and switch voice and data. Others, such as digital broadcast systems (DBS), which provide fast downstream access via satellite, have also gained favor. If Microsoft shakes its money tree over the cable industry, it is likely that the te1cos and satellite companies will seek partners to stay competitive.
• Microsoft's partnership with Com cast may potentially take away yet another significant revenue stream from Netscape. In September. Netscape formed a strategic relationship with @Home (a joint venture between Tel and Comcast) to provide client and server software to suppport services such as e-mail and Internet news. Given @Home's roughly 50,000 subscribers, Netscape has been able to use the partnership to siggnificantly increase distribution. Netscape CEO Jim Barksdale sits on @Home's board, and both companies are backed by venture capital firm Kleiner Perkins Caufield & Byers. Despite these ties, Microsoft is likely to use the relationship between @Home and Comcast (announcing its keen interest in @Home) to one-up its rival in the software space. A precedent has already been set on the content side: the Microsoft Network (MSN) is offered to @Home subscribers for $6.95 per month.
• In addition to its desire to build the pipe expeditiously, Microsoft's $1 billion boost will also help it to ensure the safe passage of its own conntent. By helping to increase the speed at which content is delivered and by having influence over what platforms will be on the receiving end of the pipe, Microsoft will be in a good position to promote proprietary sites such as MSN and Expedia. In addition to providing MSN via @Home. Microsoft is likely to continue to leverage its newfound ties to carve simmilar deals with Comcast and, potentially, giants TCI and Cox.
