BY RICH TEHRANI
Group Publisher

Bill Gates In Your Bedroom

Microsoft is the company that people love to hate. They are continuously innovating and always looking to exploit their dominance in one area to help them become leaders in another. Often, this means they are able to steal tremendous amounts of market share from previously entrenched players. Regardless of your viewpoint on Microsoft, you must respect the fact that they have grown by leaps and bounds without succumbing to traditional problems of a huge technology company: the inability to change course rapidly in order to keep up with the evolving computing and telecommunications markets. Indeed, this ability to move quickly and take over markets is why it is so important to track the major shifts in Microsoft's business plan in order to ascertain where they see the future of technology. Often their view becomes every one else's!

Last week, Microsoft made a surprise announcement that they would invest $5 billion in AT&T as part of an agreement that will provide Windows CE in all those cable set-top boxes through which AT&T will supply telephony, fax, video, and other enhanced services. These are the same cable boxes that were once supplied by TCI and MediaOne, two cable companies that AT&T recently purchased.

Microsoft knows how important it is to own the OS -- leveraging the operating system has been a tremendous factor in ensuring Microsoft's success in the desktop computer market. The cable set-top box market will offer Microsoft a similar business model. With Microsoft in position to provide the technology for the last mile, expect them to be an even bigger player in IP telephony and CTI.

Other important and related telephony offerings from Microsoft include the eventual release of TAPI 3.0 [read a CTI article on TAPI], as well as the licensing of Dialogic's CT Media [more information can be found in my May CTI Publisher's Outlook].

Furthermore, expect Microsoft to leverage their cable box dominance into other areas such as video games, enhanced services, and software products that will benefit SOHO and consumers alike. I expect Sony PlayStation's video game supremacy to eventually be challenged as Windows CE propagates throughout cable boxes above the television sets of America.

Microsoft has also begun to explore the establishment of Windows CE as a player in the wireless arena by working with Qualcomm to develop a Windows CE-based wireless phone. It seems clear that Microsoft wants its OS to be anywhere that you access telephony, video, or fax.

To that end, Microsoft announced this week that it would also invest $600 million in Nextel Communications Inc., one of the last "medium size" cellular companies. This arrangement is designed to give Microsoft an expanded audience for its MSN Internet services. The wireless offerings will provide Nextel customers access to MSN services, including e-mail, address book contacts, and access to World Wide Web information such as news and weather. The wireless Internet service is scheduled to be available later this year in conjunction with the next major upgrade of Microsoft's MSN site.

There have been industry forecasts that as the computing paradigm shifts away from PCs to set-top boxes and wireless devices, Microsoft's dominance in the OS and software market would wane. But as Microsoft has shown with its recent announcements, the company understands how the market is evolving and is determined to evolve with it. By throwing around insane amounts of cash and leveraging their core strengths in the desktop OS market, they will certainly be major players as computing and telephony move from the PC and POTS phones to palmtops and cable boxes in both our homes and offices. We're all aware of Bill Gates' influence on almost all the computing platforms in our offices. Now let's give him a warm greeting as he enters our homes as well.

Rich Tehrani welcomes comments at rtehrani@tmcnet.com.