Rival Attacks Microsoft Strategy Software Giant Is Trying To Control Market For Internet-Linked TVs, Rival Says

Microsoft is positioning itself to control every aspect of the coming market for Internet-linked television sets, according to a competitor who has taken his complaints to the U.S. Justice Department.

Largely through acquisitions and investments, Microsoft and its chairman, Bill Gates, are moving to control everything from Internet programming for TV sets to ownership of cable networks and Internet-TV devices, says Philip Monego, chief executive of South San Francisco-based NetChannel.

Monego’s 2-year-old company is developing an Internet-access service for TV sets that will compete with that of WebTV Networks, a Palo Alto, Calif., start-up Microsoft wants to buy for $425 million. WebTV and NetChannel are developing Internet services designed for display over TV sets; WebTV also makes technology for television set-top boxes that let people use their TVs to browse the Internet’s World Wide Web and send or receive e-mail.

“If successful,” Monego wrote in a “white paper” addressed to his industry peers, “Microsoft and its chairman will have built the foundation for a choke hold over the entertainment, electronic commerce and communication industries similar to its current position in the personal-computer industry.

“This time, however, the stakes are even higher,” wrote Monego, stressing that more people are using computers to do banking, get their news and buy retail goods.

Microsoft spokesman Mark Murray dismissed the charges, saying that Microsoft is playing a lead role in many areas simply to spur innovation in markets that are so new or vast they can’t be dominated.

Monego’s company is developing its service for set-top boxes planned by Silicon Valley-based Oracle, whose chairman, Larry Ellison, is Gates’ archrival.

Monego’s conclusions aren’t far different from those of his fellow Microsoft competitors, but unlike many others, he has laid out a detailed argument based on his view of Microsoft’s strategy.

His paper is circulating as the U.S. Justice Department reviews the proposed WebTV deal and provides some insight into the issues investigators are likely considering.

The Justice inquiry began as a cursory review but was extended in May when investigators asked Microsoft and WebTV for more detailed information about the deal, then began interviewing competitors.

Federal officials would not say why they extended the review or when it will conclude. Monego said federal investigators had interviewed him and others at his company twice, as recently as a few weeks ago.

Initially, Monego said, he and NetChannel’s co-founder, David Atkinson, thought the WebTV deal would help NetChannel by lending credence to the idea of TV-based Internet services. But they became leery of Microsoft’s motives after seeing subsequent deals, including a $1 billion investment in the Comcast cable company and an investment in Seattle’s Progressive Networks, which is developing Internet video technology.

“What we’re now realizing is it’s a much grander strategy,” Monego said of Microsoft’s series of deals.

But Microsoft’s Murray said his company’s initiatives won’t stifle competition.

“Consumers are going to have lots of choices and rapid innovation and intense competition,” he said.