MS spends $5 billion to boost CE cable presence

But the price of a user has gone up spectacularly in the last year...

Update Partners Microsoft and AT&T sweetly described yesterday's $5 billion interactive cable deal as a series of agreements "to accelerate deployment of broadband services to millions of consumers" (see MS to take $5bn stake in AT&T). But from where we're sitting it looks a lot more like Microsoft using its money pile as a huge lever to carve out market share for Windows CE. The AT&T deal comes at the same time as a confusing series of Microsoft deals in the UK (MS Telewest deal), but the bottom line is clearly that Microsoft, having failed to win widespread adoption of CE as a platform for cable TV one way, is trying another. AT&T was of course already committed to 5 million CE set-top units, but there's a story attached to that number. That 5 million commitment came along with AT&T's purchase of TCI's cable business. TCI itself came by that commitment over a year ago after it adopted Java as its standard open platform for interactive TV. It threw Microsoft a bone by promising to buy those units, but that bone was a poisoned chalice (as it were...) -- TCI was still committed to Java as the standard, so those MS CE units were going to have to work with Java. The complexities of the megadeals in the cable market are therefore likely to be mirrored by twists and turns in Java versus CE contractual arrangements, and of course will be affected by what the courts finally say Microsoft can or cannot do with Java. If they reckon Microsoft can't do its own thing, then the company will either have to give in and make its peace with Sun, or use a lot more money to 'persuade' the cable outfits that they don't like Java after all. AT&T might be a little bit persuaded, but before the deal was announced yesterday was wriggling more than a little, insisting that it wasn't going to switch entirely to CE. In the end Microsoft got a commitment to a further minimum of 2.5 million to five million units, but as AT&T will have a potential US customer base of 25 million, there's still a lot to play for. And funnily enough, the cost per unit is going up. When TCI made fivemillion unit deal, it had just told Microsoft to get lost over a proposed MS $1 billion investment in TCI. That proposal certainly included strings, and may have included an exclusivity deal. For $5 billion, Microsoft has made some ground, but hasn't got exclusivity -- yet. ®

Sponsored: 10 ways wire data helps conquer IT complexity