Originally created 08/02/97

Justice Department approves Microsoft's purchase of WebTV



WASHINGTON (AP) - The Justice Department on Friday approved Microsoft Corp.'s $425 million acquisition of WebTV Networks because there's competition in the business of connecting home televisions to the Internet.

The department's antitrust division said a thorough investigation of the deal announced April 6 has been closed with a decision not to challenge it in court.

"The investigation confirmed that a number of other companies, several of whom are significant participants in the computer or consumer electronics industries, have or will soon enter the market with competitive products and alternative technologies," the division said in an unsigned, three-sentence statement. The government did not name these new competitors.

The computer software giant Microsoft acquired WebTV Networks, a Palo Alto, Calif., company that sell systems that allow people to surf the Internet over their TVs. Microsoft senior vice president Craig Mundie said, "We hope to dramatically accelerate the merger of the Internet and television."

The deal comes as the computer industry and existing TV-set makers race to shape the next generation of digital TV sets. The prize: $150 billion in spending needed to replace the existing 220 million analog TV sets in the United States that operate over radio waves.

The computer industry envisions a large-screen computer in living rooms that people use not only to get a crystal clear TV picture, but to surf the Internet and send e-mail.

TV makers have a different vision: A wide-screen TV with superior picture and sound quality, but little, if any computer capability.

For the computer industry's vision to work, TV broadcasters would have to transmit programs in a different format than they now use to display pictures on TV sets. Despite pressure from the computer industry, TV broadcasters haven't rushed to do that.

"It isn't really a war to decide whether everyone should watch television on their PCs exclusively or whether they should see television on TV to the exclusion of personal computers," Mundie has said. "It's really about a parallel set of evolutions to produce better PCs and better TVs."

Last spring, the Federal Communications Commission cleared the way for broadcasters to begin offering cinema-quality digital television. The existing analog system of broadcasting will end after the year 2006, and people will have to buy expensive new digital TV sets or converters for their existing analog sets.