Microsoft's biggest investment ever - a US$1 billion stake in Comcast Corp., the USA's fourth-largest cable television operator - shows that the software giant is betting that Internet and TV technologies will soon converge.
The cash deal, an 11.5% stake in Comcast for Microsoft, is designed to enhance the integration of broadband pipes and content to expand services offered to consumers.
"Our vision is one where not only is the PC experience better with a high-speed connection, but of a new generation of TV experience," Microsoft Chairman Bill Gates said, pointing to Microsoft's pending $425 million deal to buy WebTV Networks.
Comcast provides cellular telephone service on the East Coast; owns the QVC Network, the cable TV home-shopping network; and is a major investor in @Home, which provides high-speed Internet access over cable systems. @Home plans to offer The Microsoft Network to its subscribers for US$4.95 per month.
Although Gates was quick to note that Microsoft is "not in the cable business ourselves," the company is doing all it can to promote the union of computer technology and digital TV, with cable supplanting telephone lines as the pipeline of choice.
The next version of Windows 95, code-named Memphis, is being tooled to add interactive Web pages and data to television broadcasts.
For Comcast, the deal will likely hasten the rollout of its Internet services specifically tailored to businesses. Comcast's commercial strategy includes a telecommuting service, currently in beta testing in New Jersey, and a service to link businesses directly to the Internet.
"We are very close to coming out with a product for Internet access for small to medium-size businesses," says Mark Coblitz, Comcast's vice president for strategic planning.
In Comcast's existing @Home offerings, customers see data speeds "north of 1M bit per second to 1.5M bits per second," Coblitz says. "It is possible to get numbers like 4Mbit/s."
Cable television companies eyeing the data communications market must revamp their back-office systems from the one-way broadcast model of cable TV into the two-way communications model required by businesses and Internet users.
Comcast Corp., in Philadelphia, can be reached at http://www.comcast.com/.