Set Top Boxes at CES

Leading trade show may reveal AOL’s set-top plans
By JimDavis
Staff Writer, CNET
January 4, 2000, 4:00 a.m. PT

PC makers, online service providers and consumer electronicsmanufacturers will be showing all manner of products designed to access theInternet this week at a trade show in Las Vegas, each hoping to capture thepublic’s imagination.

Among the possible showstoppers on tap: America Online isexpected to finally join the information appliance game, showing off TV set-topboxes and Web terminals designed specifically for its online service. Microsofthas been displaying both for months.

Set Top Boxes at CES
Set Top Boxes at CES

“AOL’s entry into the consumer box business is going tosend shivers up the backs of traditional box suppliers because they don’t havethe marketing reach that AOL does,” said Jon Peddie, president of JonPeddie Associates. “Every time one of their [19 million] customers touchesemail, they could get a marketing message to buy this box.”

In the span of a few short years, the Consumer ElectronicsShow has become an excellent glimpse into the efforts of high-tech companiesvying to push digital technologies into everyday life. As always, the questionwill be: Which of these next-generation devices will catch on with consumers?

In what would be its first public move in this arena innearly 10 months, AOL is expected to show off the fruits of its relationshipwith DirecTV, according to people familiar with the matter. Last March, thecompany announcedit intends to provide interactive TV services in a deal with the digitalsatellite programmer. Hughes Electronics and Philips Electronics will make theboxes based on processors based around the Intel architecture and software fromLiberate Technologies.

It is not yet clear whether the companies involved will bepublicly demonstrating the technology or showing it to retail partners behindclosed doors, sources said. Neither AOL nor DirecTV was immediately availablefor comment.

The move would present new competition for Microsoft’s WebTVand a variety of other companies looking to meld the TV and Internet experiencetogether via devices ranging from DVD players to digital televisions.

There is also a likelihood that AOL in the near future willget into the other growing fad among hardware makers: Web terminals. Microsoft,Compaq, IBM and others plan to deliver easy-to-use terminals to consumers by themiddle of the year. These simplified computer systems will allow users to surfthe Web, exchange email and even make phone calls from a device with a keyboardand a small screen. Intel and NEC announced plans for a similarservice in Japan in September.

The Dulles, Va.-based company’s move into hardware has beenmuch-anticipated by the rest of the industry, analysts say, because of theimmense power the online service company wields with its enormous user base.

In other TV set-top news, Intel-powered boxessold by Nokia for use in European markets are expected to be shown.Manufacturer Philips was not immediately available for comment.

Meanwhile, Microsoft is expected to further elaborate onplans to market the scaled-down Windows CE as a platform for digital televisionservices, said Peddie. The push to become a major software purveyor in consumerelectronics devices is significant for the software company because digitaltelevision offers broadcasters the ability to send video and data not only toTVs, but to PCs, game consoles, cable set-tops and portable devices.

Microsoft could also detail its plans for yet anothermarket. The Redmond, Wash.-based giant is developinga game console that might compete against the likes of Sony’s PlayStation II andSega’s Dreamcast, although the likelihood of an announcement at the show seemsto be fading, analysts say. A spokesperson for Microsoft declined to comment.

“Microsoft very much wants this [game console] tohappen,” and is spending lots of money on the project, said RichardDoherty, president of Envisioneering Group, a consultancy. The company has beenseeking opinions from game developers and others as to how to enter into thebusiness, but still hasn’t decided on a course of action, he said.

The trade show also will be the place where less-familiarcompanies will be competing for attention in the market for informationappliances.

As previously reported,Acer has been conducting trials with service providers on its Internetappliances such as Internet set-tops and “smart” phones in NorthAmerica. Acer will be showing off these and other gadgets at the show as thecompany attempts to make a comeback of sorts in the U.S. market.

Acer once had a respectable presence in the U.S. PC market,and analysts say it still holds around a 3.5 percent share based on PCs still inuse. Still, mounting losses at the Acer America division forced the company tolargely withdraw from the retail market earlierthis year.

“Acer wants to have more brand presence so as to raisethe value and margins on its Internet appliances. Whether or not they can extend[consumer familiarity with their PCs] into success in the info appliance spaceis not clear at this point,” Peddie said.

Like the set-tops from DirecTV, Acer’s TV set-top boxes arebuilt around traditional PC hardware technology but use an interface that is notsupplied by Microsoft, officials have said.

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