MEET THE NEW CABLE GUY

By JOSHUA COOPER RAMO

It may be the most interesting rhetorical question of the digital age: What does Bill Gates want? He already has $37 billion, worldwide fame and a company that is growing 20% annually. Once you get past the snappish answer of Silicon Valley wags--"Everything"--you have a diverting fin-de-siecle parlor game: guess Bill's agenda.

Gates is up for the contest. And in your parlor too. He believes that the next interactive revolution will arrive via your TV set and a very high-speed connection to the Internet--possibly over cable-television wires. That's not the way the geeks thought it would happen--they're desktop-computer riders. But the technology, quietly perfected by cable companies over the past three years, can deliver data 100 times as fast as most modems. Though only a few thousand such systems have been installed in the U.S., they offer the first glimpse of a Net that looks something like the one futurists have described for years: fast, simple and stuffed with content--everything from movies on demand to E-banking. Gates, a fiend for buzzy catch-phrases, likes to call this "the Web life-style." And by taking a slice of the transactions that will zip through these interactive TVs, Microsoft stands to make a(nother) fortune. Think of it as a new kind of pay-per-view. We'll let you figure out who pays.

Since January, Gates has put his money where his heart is. He's dropped $1 billion for 11.5% of cable giant Comcast and $425 million for WebTV, a start-up that builds boxes that connect TVs to the Web. Last week Microsoft was reportedly negotiating to put a billion dollars into TCI, another cable behemoth. (Both sides are mum on the deal.) More than that, cable insiders tell me Gates may be maneuvering for more than a chunk of TCI: He's asking for a kickoff order of 500,000 set-top boxes that will run Microsoft software.

In fact, though his aides insist otherwise, what Gates is hoping to buy is not just cable stock but also the ability to influence the cable firms' choice of software that will run these next-generation TVs. Craig Mundie, a Microsoft senior vice president, says the investments are also meant to signal the market that 1998 will be a big year for high-speed data. The signal has worked: cable stocks are up 15% since Gates' Comcast investment.

Buying off the cable companies may be harder than it looks. Most regard Gates--and his desire for a piece of their profits--with the warmth they usually reserve for satellite dishes. Cable execs have met with dozens of companies--Netscape, Oracle, Sony--about the software that will power the new set-top boxes but Gates' TV operating system, called Windows CE (for consumer electronics) is the only one with Cracker Jack charm: it comes, in effect, with billions of dollars inside. Says Comcast president Brian Roberts: "People in cable are working with Gates because of the wealth of technology, of people and the amazing financial resources."

Characteristically, Gates is hedging his bets. In addition to his cable play, he's investing in low-earth-orbit satellites and technology that speeds up data signals on plain old telephone lines. His hope is that all of these may one day run Windows CE, which is slated to appear in cell phones, automobile data systems and even smart kitchen appliances. Gates, who says he simply wants to "put Windows everywhere," may not want everything, but he clearly wants more.