U.K. Regulators Scrutinize Microsoft WebTV Pilot

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March 19, 1998 (12:00 AM EST)

U.K. Regulators Scrutinize Microsoft WebTV Pilot

By Sarah Johnstone,

Microsoft has gained a precious toehold in Britain's fledgling interactive television market, by teaming with British Telecom to offer its WebTV service in a limited trial.

But the pilot scheme immediately came under the close scrutiny of Britain's telecommunications regulator, which fears Microsoft is intent on securing a monopoly of access to the Internet for consumers.

The trial, run by British Telecom's BT Internet subsidiary and Microsoft's subsidiary WebTV, will begin next month and will allow 200 homes across the United Kingdom to access the Internet through their TV sets. Viewers will be able to access the service with set-top boxes, provided by the Netherlands-based Philips group and Pace Microtechnology, a U.K.-based electronics supplier.

Plans by the British government to license digital TV -- in the terrestrial as well as satellite and cable markets -- this autumn have made the U.K. an attractive target for Bill Gates' broadcasting ambitions.

"Killer Application"
BT itself has a strong interest in promoting Internet use -- it considers the Net to be the "killer application"" that will pay for the upgrading of local telephone lines with asymmetrical digital subscriber line technology.

However, the two companies' plans to offer a commercial WebTV service by the start of 1999 has immediately the concerned interest of Oftel, the U.K.'s telecom regulator. "We are watching this with great interest. We naturally always have concerns when two dominant players come together," an Oftel spokesman said Thursday.

Oftel's director-general, Don Cruickshank, publicly voiced his fears recently that Microsoft would use its control over technologies such as Windows and set-top operating systems to gain an unhealthy control over access to information networks such as telecom networks and the Internet.

WebTV does not require the expensive new equipment required for digital television, however. The service will give viewers the chance to experience most of the benefits of digital TV -- Internet access, e-mail, and electronic program guides -- on old-fashioned analogue sets. They will also be able to bring up linked websites on part of their screen while watching TV shows.

WebTV Trial Period
A BT spokesman said the WebTV trial, due to begin in four weeks' time, would run for several months to test local demand for these services -- and to see how much audiences are willing to pay. Previous BT pilots with interactive TV have generally produced disappointing commercial results.

There are also questions as to whether the service would infringe on the long-standing British government ban on BT's offering broadcast services. "We are looking into exactly what it is they're offering," the Oftel spokesman added.

BT Internet is the U.K.'s fifth-largest ISP, with about 100,000 subscribers, according to recent estimates by Internet Magazine, a British magazine.

Announcement of the BT pilot come just days after the WebTV product was snubbed by BT's main U.K. rival, cable giant Cable & Wireless Communications, which chose software from Netscape and Oracle affiliate Network Computer for its forthcoming Internet set-top box device.

Microsoft said there were 300,000 WebTV subscribers in the United States. The service is divided into two offerings -- a basic one for $199, and another for $299 that offers an on-screen program guide.