WebTV co-founder Steve Perlman has announced the next generation of WebTV, the set-top box used with TV sets to bring the Web into the living room. The $300 unit, due in October, will include a 1.1GB hard drive (the original unit had no real storage to speak of), and video on demand, which uses a video port for a video camera so that WebTV customers can send video email.

"This is fundamentally going to change the way people use the Internet," Perlman said.

According to the company, which was recently purchased by Microsoft, WebTV has over 150,000 subscribers, up from 50,000 in March. Most are first-time Internet users. WebTV hopes to have 1 million subscribers by the end of the year.

Early next year, WebTV devices, which are marketed by Sony and Philips, will be upgraded to Windows CE 2.0. Mitsubishi has also signed on to create a WebTV Plus device that will include a built-in keyboard. Printers are now available from Hewlett Packard and Canon, making WebTV a suitable PC-replacement for many users when CE 2.0 becomes available.