Outlook: Regulators lost in the techno-maze

THERE'S EVEN a word for it - co-opetition - as well as a whole Harvard Business School book on the subject. Companies that are fierce competitors in one field are finding themselves powerful allies in another, sometimes connected, one.

It is very much a modern phenomenon and in the fast-growing, and fast- converging world of information technology, telecommunications and televisual media, few can talk about anything else. So rapid is the pace of development, so dynamic the technological change, so thick and fast are the deals being done and the alliances being formed, that it's hard to keep pace.

Certainly the regulators, both national and international, are finding it next to impossible - which some might reasonably argue to be a good thing. Then again, we all know that somehow or other consumer choice and competition is being harmed by it all. It's just that we're damned if we can figure out precisely how or why. Where do the alliances end and the competition begin?

That question is posed with added relevance after yesterday's gob-smacking $5bn investment by Microsoft in AT&T of the US. The immediate purpose of the tie-up seems to be so that Microsoft can guarantee use of its Windows CE-based operating system in the digital set-top boxes through which AT&T plans to manage its high-capacity cable links to customers. With a passing nod to the competition authorities, the two companies describe this arrangement as "non exclusive". Pull the other one.

Meanwhile, back in the UK, Microsoft will be acquiring a near 30 per cent stake in Telewest as a result of the AT&T link up. Together with its existing 5 per cent stake in NTL, this in turn might put Microsoft in a position to bring about the final, and long awaited, consolidation of Britain's three remaining cable operators into just one - let's call it United Micro-Cable. Again, the chief purpose of such a transaction for Microsoft would be the set-top box operating system, but there's more to it than that.

Bill Gates is a fully paid-up convert to the convergence theory. To safeguard Microsoft's future, he wants a stake not just in operating systems and interactivity, but in distribution and product too. His link-up with Telewest is as powerful a vote of confidence in Britain's cable industry as you could hope for. For shareholders in Telewest, a shambles of a company if ever there was one, it is like Christmas come early.

If the consolidation comes about, it will pitch Microsoft head-to-head with BSkyB and its partner in monopolistic strategy plays, British Telecom. Meanwhile, both companies have separate business alliances with Microsoft. BT is also in global partnership with AT&T for business telecommunications. Confusing, isn't it?

All these companies at present operate in reasonably distinct areas of the digital arena - Sky in digital TV, Microsoft in operating systems, AT&T and BT in telecommunications. But make no mistake; they all want as much of our digital future as they can get their hands on and these present distinctions will come to mean nothing in the scramble for market share.

If Microsoft really is about to put British cable fully on the map, then Sky had better watch out. Unless, of course, it can sign another of those anticompetitive alliances with Microsoft first.

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