NEW ORLEANS Insisting that Microsoft Corp.'s current confrontation with the Justice Department will pose no long-term difficulties, Microsoft president Steve Ballmer, Wednesday (May 10) detailed his company's plans for expanded partnerships in the broadband cable industry.
Speaking at the National Cable Television Association's annual convention here, rejected the notion that the Justice Department will succeed in dismantling Microsoft. "Our company will not be broken up. That will not happen," he said.
Ballmer was part of the NCTA panel discussion, "Cable's New In-Laws," that included George Bell, President and CEO of Excite@Home and Bob Pittman, President of America Online (AOL).
Ballmer noted that Microsoft has grown as a software company, not a cable company and not a media company, "and that won't change." This makes it necessary, he said, to partner with the cable industry as a supplier of horizontal tools that can serve the cable industry in a number of ways.
The software "opportunities," Ballmer emphasized, include the cable's need for a rich user interface. He said the cable needs software for "deep service integration" and coordination between devices. He also cited the expanded need for personalization in Web services, the value of software and the area of privacy and content protection.
Software like Microsoft's will aid in the rapid development and deployment of integrated cable and Internet services across television, personal computers and wireless space, he noted. He stressed Microsoft's commitment to developing a generic service platform that responds to all these needs.
"We've been doing R&D in this area for eight years. We are thinking about the movement to enhance television. There is no reason why we can't see a deployment of 15 million set-top boxes in the next three years," Ballmer told the audience.
Excite@Home's Bell explained that his company was started by Tele-Communications Inc. (TCI), later acquired by AT&T, part of the cable consortium. Although the cable consortium was not a success, Bell said that Excite@Home emerged as a success. Excite@Home has 87 million homes under exclusive contract at least until 2008, 57 million through cable partners and 15 million through DSL and the rest in the international market. In the last year, Bell claimed that 26 million homes have been upgraded and marketed. The company's global footprint is 2.5 times that of Time Warner's, he added.
Bell emphasized that Excite@Home is making a conscious shift in focusing to strategic growth. "More and more in the future the broadband content experience is going to be married to the narrow-band experience. We will be less concerned about the number of Web page views and more interested in getting people to spend more time engaged," he said. "Fewer clicks, but more retention."
"People have told us that they want more personalization," said Bell. "We want people to know that Excite@Home is your personalized dashboard and interface to the web."
Bell said that all these plans will be enabled by the infrastructure that his company is developing, including 16,000 miles high speed fiber. The company's current traffic flow is 2.5 gigabytes of data per second with expectations to scale up to 40 gigabytes by the end of this year. 1.5 million @Home subscribers right now generate traffic equal to half the traffic of AOL. Excite@Home right now is doing TV trials with Cox. The company has an interactive TV agreement with Microsoft. And it is looking into more and more integrated data and TV opportunities.
AOL's Pittman said, "The Internet century will be driven by consumer power. It will conform to the two basic laws of consumer behavior. Brands win. Convenience is king."
Pittman noted that the wrong view of the Internet is "it's a microwave oven," a household convenience that makes it possible to make travel plans faster than travel agencies or mail letters faster than postal services. He emphasized that the Internet in the long run is far more significant than just a time-saving gadget.
Right now every household has two boxes, said Pittman. The TV box is a passive story-telling box, the PC an interactive management box. The boxes are beginning to blur, but there will never be a time when all the functions of both boxes are combined in either box. Pittman said that some of the management functions now associated with a PC are now moving into TV but only those activities that can be freely shared by more than one person.
E-mail, for instance, is a private activity that people are reluctant to do on the television in the presence of other people, he explained. For those PC functions, however, that can move into TV, said Pittman, "The cable industry is in a very advantageous position with a device in already in the home and an established relationship with the consumer."
However, Pittman added that the cable industry cannot seize this advantage by itself because of the speed of change, the technologies needed to carry out the change, and the shifting expectations of consumers. "The consumer is always going to get what he wants, and no one company can provide it all."
Asked if the trend toward huge media mergers would turn America into one giant cable company, all three executives agreed that the size is likely to be a disadvantage.
Ballmer, whose company now faces the prospect of being broken in two, was most circumspect. He noted that companies who merge in the future will focus more on mutual compatibility, rather than on the bigness or the value of the transaction.
Bell said that quickening the pace of competition will discourage mergers. "Consumer demand will happen so fast that neither company contemplating a big merger will want to take the chance on losing the loyalty of consumers during the transition. If you go through protracted periods of time during which the plug gets pulled or business negotiations are going on, you will see three or four competitors jumping in to take advantage."