Microsoft signs deal with Rogers

Microsoft Corp. and Rogers Communications Inc. recently signed a series of agreements the companies say will help accelerate the deployment of interactive television to Canadian homes.

Frank Clegg, Microsoft’s vice-president for Central Region (U.S.) and Canada, said in a teleconference there are three core elements to the agreements: Microsoft will invest $600 million (US$400 million) in Rogers for a 9.2-per-cent stake in the company; Rogers will support one million set-top boxes on Microsoft’s television software platform; and Rogers will deliver content and services including “a Rogers-branded e-mail product powered by MSN Hotmail and other services based on Microsoft properties including Microsoft Passport, MSN Search and MSNBC.”

“The phased rollout of these products and services is planned to begin next year,” Clegg said.

However, Rogers is not guaranteeing use of exclusively Microsoft products, according to John Tory, president and CEO of Rogers Cablesystems Ltd.

When questions were raised during the teleconference accusing Microsoft of bribing the cable company with a large cash infusion to use its products over other set-top box technologies, both companies denied the charges.

“I have no doubt whatsoever that the Microsoft investment in Rogers…will turn out to be an astute investment entirely separate from the technical agreements we have,” said Ted Rogers, president and CEO of Rogers Communications.

“And as a matter of interest, yes, I would have signed the agreements with Microsoft on the technologies without an investment.”

Jordan Worth, a telecommunications and Internet analyst with IDC Canada Ltd. in Toronto, said both companies come out of this deal as winners.

“Rogers gets some money and an established technology partner that will boost their product deployment next year…Microsoft gets their hands into the Canadian consumer market for trying out e-commerce down the road,” Worth said.

Worth said the presence of Canadian content and ownership laws will prevent Microsoft from being able to tamper with broadcast content, but noted that if other cable companies sign on with the same technology, it could be easier in the future for cablecos to move beyond their traditional geographical borders to undercut each other.

Overall, however, Worth said he found the announcements unimpressive since the rollouts are at least a year away.

“They talk about one million set-top boxes, and when someone asked how long they think (it will take) to get there, they said five years. That’s only one-third of their customer base. So they’re clearly not looking to make this a blanket application for all of their customers. They’re probably just targeting the big spenders and the early adopters,” Worth said.

Tory and Rogers both said these announcements have no bearing or relation to corporate cable networks.

“This is an interactive television product and I don’t think it’s related at all to the possibility of us doing things in office buildings,” Tory said.

“The cable company is basically a residential company…we do not plan to serve large corporations and so on. We have allies who handle that job,” Rogers said.