Microsoft's product delays are legendary, but interactive TV waits for no software. In late summer, Microsoft announced that delivery of its Windows CE-based OS for interactive TV boxes would be late, causing European cable access provider United Pan-Europe Communications (UPC) to drop Microsoft from its initial rollout. Microsoft's delays had already caused UPC to lose months of potential business, so UPC decided to go with Liberate Technologies for its initial trial rollout of interactive TV in Amsterdam.

UPC describes its product, which the company dubs a set-top computer, as "very advanced." The product provides much of the functionality of a PC and includes cable modems for broadband Internet access, as well as support for interactive TV. "The set-top computer is ... upgradeable to accommodate new interactive services that will evolve," UPC declared. "These \[services\] can be downloaded to subscribers without having a person/technician go to a home to change the box."

Microsoft has been working on interactive TV projects since the mid-1990s, when its Windows NT-based Tiger project commenced. The company bought WebTV in April 1997 to bolster its presence in the consumer TV market and has invested in numerous cable companies in the United States and Europe. Interactive TV is expected to be a huge market in the coming years, and Microsoft naturally wants to extend its reach into this crucial area. Current Microsoft products, however, run on Windows CE, which has found little acceptance in the handheld market. But Microsoft has added interactive TV features to the next Windows 2000 version (code-named Whistler), and Whistler-based software could be available by late 2001. Whether these products will arrive in time to affect the market's momentum remains to be seen.

In the meantime, companies such as Liberate promise to pick up the slack. The California-based company is providing OS software to control UPC's first-generation set-top computers, which will provide email and Web browsing functionality as well as video on demand and e-commerce features. For Liberate, the UPC contract is a major coup. "UPC has turned into a 'show me' company now," said Liberate CEO Mitchell Kertzman. "They want to make decisions based on results instead of promises."

UPC seems to agree. "Microsoft is slow, but that doesn't mean we are going to be slow," said UPC CEO Mark Schneider. Microsoft, which owns 8 percent of UPC, lost any "rights" it might have had when it failed to deliver this summer. "We are not going to trade off schedule for quality," said Ed Graczyk, director of marketing for the Microsoft TV platform. Soon after the public spat with UPC, Microsoft announced that it had contracts to deliver software for more than 15 million interactive TV set-top boxes. However, this figure represents commitments from various cable operators (most notably with AT&T and Philips Electronics), some of whom are looking at non-Microsoft solutions as well.