The House Bill Can't Build

Quick quiz question: Can you name the recent event that drew Bill Gates, Michael Jackson, Jesse Jackson, Mark Cuban and Barbara Eden all on the same day?
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Quick quiz question: Can you name the recent event that drew Bill Gates, Michael Jackson, Jesse Jackson, Mark Cuban and Barbara Eden all on the same day?

Toughie, eh?

Enough suspense-it was the annual National Cable & Telecommunications Association show at Chicago in early June. And no, Bill Gates and Michael Jackson didn't appear on a panel discussing alien technology and cosmetics. (For those who need to know, the Jackson pair pushed a new urban black cable network, MBC.)

An appearance by Microsoft Chief Software Architect Gates, who dissected broadband along with AOL Time Warner boss Dick Parsons, Comcast president Brian Roberts and Viacom chief Mel Karmazin on a panel moderated by CNN anchor Lou Dobbs, always generates buzz.

But what was remarkable about Bill's star showing this time, as opposed to years past, was how weak the glow has become. Though he headlined a panel titled "Leading the Digital Revolution," Gates doesn't seem to be leading us anywhere, anytime soon.

I'm by no means consigning Bill Gates or Microsoft to red dwarf status, but looking back at Microsoft's history with cable, perusing the present broadband challenge, and peering down the future path broadband will take, leaves me wondering whether we are witnessing a meteoric passing.

OPPORTUNITY KNOCKS

If you recall, just about five years ago, as the next generation of digital set-top boxes were on tap for rollouts into cable households and cable modems were the new toys on the block, Microsoft was poised to translate its dominance in PC operating systems to become gatekeeper (pun intended) of the wired broadband home.

Although Gates had earlier championed the PC as the controlling element, by 1998 it had grown obvious even to him that average folk would rather get their entertainment passively through the TV, and that in any case the fattest broadband pipe into people's homes was cable coax.

Realizing the set-top box was nothing more than a PC, Microsoft moved fast to develop its own middleware, Microsoft TV, and push it into the market. Gates must have figured the PC paradigm would hold up; interactive TV applications would ride on Microsoft TV and Microsoft would continue its dominance in the digital age.

To ensure Microsoft TV's success, the company bought up chunks of cable operators abroad and loaned U.S. operator Comcast billions. Of course no one came right out and said they would use Microsoft's interactive TV OS as a quid pro quo, but middleware competitors screamed mightily.

OVERWHELMED

They needn't have worried. Problem was, Microsoft TV just didn't work. That's right, despite all the hoopla and muscle behind it, the middleware just didn't please cable's engineering honchos. Pressed by competition from satellite, operators considering digital set-tops opted for slimmed-down (i.e., inexpensive) boxes they could bring to market faster and amortize more quickly. But those needed middleware with a small footprint, and Microsoft TV was just too big and clunky.

(Memo to FCC: this is why competition is good and you shouldn't have nixed the DirecTV-Echostar deal; it would have kept cable on its toes and rates down.)

Now Microsoft's investments are worthless. In just one shocking reminder of how far valuations have fallen, and how Microsoft's strategy is in shambles, it divested itself earlier this year of a 23 percent stake in U.K.'s Telewest Communications for a puny $5 million -- after paying $2.6 billion in 2000, before the bubble burst.

And what's replaced the old Microsoft TV in Bill's playbook is Microsoft TV Foundation Edition, to which the company announced pledges of allegiance from Motorola, Advance Digital Broadcast and VOD vendors SeaChange and Concurrent, among others, at the NCTA show. Too little, too late is what I hear from those same cable engineers who dissed Microsoft the first time around.

While I watched the panel and wondered how Microsoft would ever be a force in broadband, I was struck by an even more telling sign of Microsoft impotence.

Gates, Dobbs & Co. raised the biggest boogeyman in broadband digital content distribution: theft.

NAPSTERIZED VIDEO

Here you had Parsons and Karmazin, who each own Hollywood studios, bewailing the threat of Kazaa. (Perhaps they're not even aware of the next generation of Kazaa-type P2P programs, specifically designed for video, which at last report are being downloaded by the millions.) They're terrified that video will get Napsterized the same way music was, which is why they've held back from releasing first-run theatricals for VOD. Karmazin was so anxious he even suggested the government should step in.

And Gates even showed a deeper awareness of what's at stake: "If you don't provide the right flexibility (to access content) in a licensed form, then you'll get the habits around using unlicensed content," he said.

They all agreed that video content distributors, consumer electronics manufacturers, broadband network operators and IT companies need to huddle-and fast.

What is Microsoft? It's a software company, right? It's supposed to be able to help companies prevent digital copyright theft.

So why doesn't it have a solution to P2P after three years? Why isn't Microsoft taking the lead on developing one, with Gates using opportunities like the NCTA forum to issue a call to arms?

I have heard a lot of insights, but no answers.

You can reach Will at willworkman@hotmail.com