As the software behemoth Microsoft revealed details of its $1 billion stake in the cable TV company Comcast last month, the company immediately found itself on the defensive. Some pundits likened Microsoft’s Bill Gates to the magnate Rupert Murdoch, suggesting that he wants to control the highways of the future to make more and more money. Others see in Gates something more sinister, a desire to control not just the sources of revenues, but the information that citizens receive about the world. At the Federal Communications Commission in Washington, however, and at the offices of ‘superhighway supremo’ Al Gore, an entirely different view is being taken. They are simply glad that there are still some major businesses prepared to overlook the short term troubles of the cable industry and make a strategic investment in cable-based broadband interactive networks.
Indeed, this was the way that Microsoft executive vice president Steve Ballmer presented the deal. He played down the influence Microsoft could get through controlling access to 4.3 million cable subscribers in the north-east of the US. Nor did he make much of the fact that Microsoft could clearly make use of Comcast’s shopping channel – QVC – the largest electronic retail outlet in the US. Instead, he says the company invested $1 billion in cable outfit Comcast, the fourth largest cable company in the US, in the hope that it will re- energize the cable industry as a whole. He noted that Microsoft’s (highly profitable) $16 million investment in UUNet, the internet service provider in 1995, helped to bootstrap the internet services provider industry at a time when many companies were struggling. UUNet later floated, and went on to form a key part of MFS, now a leading global services provider. With that investment, too, Microsoft was criticized, prompting the comment from Bill Gates that We’re just plumbers here. However Microsoft’s investment is viewed, it is hard to see the company as merely doing some plumbing. Microsoft, for example, has its $220 million investment in its MSNBC joint venture with NBC; it has the Microsoft Network, which might be compared to a nascent internet TV channel; Gates even has interests in building a global, satellite-based data and voice communications service through Teledesic Corp. Even so, there is no escaping the fact that the US, like almost every country in the world, badly needs some plumbing work to be done before it can claim to have the semblance of an information highway. With the exception of those organizations that have high-speed direct line access to the internet, virtually no-one accesses the internet today at a rate faster than 56 kilobits. Most of the telecommunications companies hope to upgrade their networks to solve part of the problem, but this will take money, time and will power. Microsoft doesn’t want to wait that long; it believes that, with the funding, mass market, high speed internet access can come more quickly from two rival sources: interactive cable services; and digital TV, which may of course use cable as a transport mechanism. Only when these are in place, can Microsoft really set about selling the software and packaging the content for the hundreds of millions of devices that will be hooked up. In April, Microsoft spent $425 million on the acquisition of WebTV Networks. This gives Microsoft a foothold in the set-top box market, enabling consumers to tap into the web via a TV using only a remote control and a telephone line. Later, when digital television is launched, the set-top boxes will deliver more channels and more interactivity. When combined with cable, the promise is even greater.