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Cisco looks to interactive TV

Cisco Systems has done rather well helping drive the Internet revolution, so why not help drive the interactive-TV revolution? The Internet-networking giant's $100 million investment in interactive-platform software provider Liberate Technologies will do just that.

"There are PCs connected by cable modems to our networks, and this allows us to extend that to the television set," says Larry Lang, vice president of marketing for Cisco's service-provider line. "There are tons more TVs than PCs, so we think there's a tremendous opportunity to deliver IP-based interactive-TV services."

The investment gives Cisco a 3.8% stake in Liberate and will enable the companies to jointly develop hardware and software.

"We're providing core infrastructure and platform foundation for the delivery of interactive services, and that's right in line with what Cisco does," says Liberate President and CEO Mitchell Kertzman. "It's just that they're a little deeper in the network and we're a little closer to the set-top box."

Kertzman says the two companies have worked on projects that involved the same customers, with each company doing different aspects of the project. "When we worked together, we were more successful in getting the systems implemented and delivered. So we feel that working closely makes the integration of the technology and things like joint marketing and selling easier."

Furthermore, he says, with the cable industry becoming increasingly IP-based and with Cisco being the leading provider in IP switching and networking infrastructure, the deal just made sense. Under the terms of the deal, Cisco's core broadband offering will be integrated with the Liberate TV Navigator client software and Connect server software. The combined architecture will include Cisco directory services and DOCSIS and network software stacks.

Another reason for the match is that the companies have a common vision when it comes to standards-based networking. "The software to the set-top box was the missing link to our providing a standards-based solution to the television," says Lang, "and Liberate's software opens up more opportunities."

Jupiter Communications Senior Analyst David Card is skeptical about how complementary the two companies are. "Liberate's software is not intrinsically complementary to what Cisco does, which is provisioning bandwidth and moving data around at the server before it goes to the client," he explains. "Liberate's software is built more for the creation of the programming rather than use at the backend."

Lang says, however, that Cisco is working with set-top box manufacturers like Pace to ensure that they offer a backbone solution that is standards based and can work with the headend equipment. "In terms of new joint developments with Liberate, we're just out of the gate," he adds. "But we have been working with Liberate for quite some time. The investment really confirms the commitment of the two companies to pursue these opportunities together."