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MicrosoftTV Sees Rollout Static

With much of the interactive-TV market in the United States still a blurry
picture, word has it that Microsoft Corp.'s 'MicrosoftTV' has static problems in
its rollout with Portuguese cabler TV Cabo.

In June, Microsoft trumpeted the deal with TV Cabo as the first rollout of
its advanced interactive-TV platform, in Lisbon.

The initial rollout has used digital boxes supplied by Portuguese vendor Novabase SA. A rollout using boxes
supplied by Britain's Pace Micro Technology plc has been pushed back to
the first quarter of 2002.

The Pace box will support the Digital Video Broadcast standard and offer a
range of interactive services, including digital-video recording.

'This is a very interesting development because TV Cabo is going for such a
high-level system,' said Neil Gaydon, president of Pace's Americas division.

The scaled-back rollout does not spell doom for the Microsoft platform, and
'from everything I hear from our team and from the Microsoft team, I don't think
it is at that stage at all,' he added. 'I think it is just a complex system that
has lost a couple of months.'

But earlier this week, Abilio Anca Henriques, chairman of TV Cabo's PT
Multimedia parent corporation, told reporters technical problems have forced the
cabler to scale back MicrosoftTV's advanced platform deployment.

So far, the Microsoft system claims only 2,500 subscribers, compared with the
100,000 projected by the end of 2001. Henriques did not elaborate on what kind
of technical problems there were.

The delay marks yet another bump in the road for MicrosoftTV, which has been
trying to build a business for its advanced platform mixing Internet functions
such as electronic mail and Web browsing with TV functions including digital
recording.

Although Microsoft recently landed a deal with Charter Communications Inc. to
deploy interactive-TV services to 1 million customers over the next seven years,
it still faces uncertainty with its biggest U.S. client to date, AT&T
Broadband.

Earlier this year, the nation's second-largest MSO announced that it was
rethinking its interactive-TV strategy, shifting focus from a more advanced
set-top-box design to one concentrating on simpler units already deployed and a
future midrange box.

The MicrosoftTV platform was targeted for higher-end
Motorola Broadband Communications Sector 'DCT-5000' units.