Microsoft unveiled its new look for television for the next millennium at a trade show in Amsterdam this week as part of the company's new emphasis on interactive television.

The interactive television platform will be available for both the Microsoft next-generation PC operating system currently known by its code name of "Whistler," as well as in cable television settop boxes using a streamlined version of the Microsoft CE operating system. Features announced at the International Broadcasting Convention (IBC) 2000 in Amsterdam include interaction with broadcast television and movies, checking e-mail, online shopping and chat, digital jukebox and recording programming.

The Microsoft TV package includes both home user technology and server technology, and the prototype demonstrated at the conference still lacks both a price tag and delivery date, although the company said it plans to have at least some user capability by mid-2001.

Industry watchers were far more interested in the dueling platforms, though, wondering if Microsoft was offering the MSTV package in both a settop box version and a PC version to hedge its digital television bets. MS spokesman Ed Graczyk, director of the Microsoft TV platform group, said at the conference that his company believes users demanding additional functionality such as the ability to download digital music files will create demand for interactive television services powered through a home PC.

CNET News.com quoted an anonymous source saying that hardware running Microsoft Whistler could be much less expensive than settop boxes, due to the mass quantities of PC components manufactured. If true, cable operators may also find the PC version more attractive due to decreased costs.

Some analysts have expressed skepticism, as cable boxes are mass market devices that already enjoy the cost savings of mass quantities. They point out that Microsoft could be looking for an additional market for their upcoming X-Box video game system, which is based on many current PC standards, including a Pentium central processor.

Microsoft was careful to point out that despite its PC offerings, the settop box is alive and well for the foreseeable future and there is room in the marketplace for both platforms. And the marketplace is potentially huge, with an estimated 250 million enhanced TV set-top boxes installed worldwide by 2004, a potential revenue market of $9.9 billion.

MS has inked deals recently to line up 1000 companies behind its interactive TV technology, including related product manufacturers and sales companies. Microsoft said the deals will have its software in 15 million set-top boxes as early as next year. One of the biggest deals MS has made was announced this week when Philips Consumer Electronics Co. said it will license Microsoft's ITV software for its line of "Nexperia" cable and satellite set-top boxes. Philips said the Philips/Microsoft platform would include hard disk-based video recording, Internet access and interactive digital television. Another deal recently signed brought News Corp. Ltd.'s NDS Group Plc, an open-access software and interactive applications maker, on board to increase its support for the Microsoft TV system. NDS' advanced toolkit for developing enhanced TV content will support the Microsoft TV software, the company said.

AT&T, which agreed to distribute set-top boxes running on the Microsoft TV software after Microsoft invested $5 billion in AT&T, is MS' biggest customer to date. But delays in the delivery of the Microsoft AT&T software have caused the cable giant to explore other options, including the use of MS competitor Liberate Technologies' settop software as an addition to or instead of Microsoft TV.

Delays in the delivery of test versions of MSTV have also resulted in the loss for Microsoft of a major contract in Europe. Europe's largest cable operator United Pan-Europe Communications, announced this week that it had chosen to use Liberate Technologies for its digital interactive TV service on the Vienna network, despite an 8% shareholder interest in UPC by Microsoft. Last month, Microsoft announced that it would miss this deadline for UPC's planned launch of digital TV services in Amsterdam. UPC said it would go ahead with a roll-out of Microsoft TV with minimal functions for the Amsterdam network in October, and would upgrade the software sometime in the first half of next year. Microsoft attributes the delays to the difficulty of offering advanced features in an interface that even users new to computers can understand and use.

Microsoft celebrates its 25th anniversary as a company this month and now considers interactive television as one of its most important initiatives. The recent company reorganization and announcement of the .NET initiative aims to create an Internet-connected web of appliances, PCs, televisions and digital devices to deliver software and services available to any platform via the Internet, a move away from the company's previous reliance on shrink-wrapped software. Microsoft CEO Steve Ballmer has been quoted recently as saying that he considers the .NET initiative to be the company's "most critical event" in its 25-year history.