The software, called Microsoft TV Foundation Edition, is a new technological platform designed to run on the digital cable boxes that sit atop many television sets.
The software, installed on both customers' set-top boxes and on computer servers at cable companies, includes applications for cable operators to create and deliver on-screen TV guides, movies-on-demand, and interactive advertisements for their customers.
"This is a big milestone for Microsoft TV," said Ed Graczyk, marketing director for the Microsoft TV division. "We're hoping this is an announcement that gets the industry excited."
It's also Microsoft's most promising foray yet into interactive TV and advanced digital TV services in a 10-year-long history of "ineffectual" efforts, said Josh Bernoff, principal analyst with Forrester Research.
In the past, Bernoff said, Microsoft TV was working on "the wrong product at the wrong time. Now it's a lot closer to being the right product at the right time," he said. "It doesn't mean they win, but at least they get to compete."
Microsoft rolled out the new software at The National Show, the annual convention of the National Cable & Telecommunications Association that starts Monday in Chicago.
The software is designed to help cable companies take advantage of the growing interest in "on-demand" services, which allow customers to order movies, special episodes or other programs at any time with the ability to pause, fast-forward and rewind, Graczyk said.
Using the Foundation suite of software, cable companies can also create screens that let users automatically click to see sports scores and headlines instead of waiting for a sports or news channel to broadcast them. The software also includes ways to create interactive advertisements, Graczyk said.
In addition, the software includes Microsoft's interactive program guide — an on-screen TV guide — which was introduced last year and is being used by three cable operators — two in Oregon and a third in Mexico. Although Gemstar TV Guide International has deals with far more operators than Microsoft, analysts said the Redmond software company's guide might make headway.
On Monday, Microsoft also was set to announce that Comcast, the nation's largest cable operator, will try out the new software. Microsoft has a stake in Comcast left over from a $5 billion investment in AT&T Broadband in 1999, before the company was acquired by Comcast.
The Foundation suite of software marks a shift in strategy for Microsoft, which had long been working on software to run on far more powerful, cable modem-enabled set-top boxes than those in use, and changed direction last year to focus on software to run on the more basic set-top boxes.
Cable operators never developed those high-powered boxes, Bernoff said. Meanwhile, the focus shifted from interactive TV, in which the Internet is a central feature, to on-demand TV services and personalized recording of shows.
Many companies have stumbled in figuring out this emerging field, said Sean Badding, president and senior analyst of The Carmel Group, a research firm in Carmel-by-the-Sea, Calif. Meanwhile, their interest in providing on-demand services is gaining momentum.
"What they're looking for here are viable technologies that will work and integrate seamlessly into their system and will ultimately allow them to offer better services to the consumer," he said.
Cable companies have spent billions of dollars in the last several years to upgrade their network to support services such as digital cable and Internet access over cable modems. But digital customers leave the service at a high rate, said Bernoff — as many as 4 percent or 5 percent each month.
The reasons range from switching to competitors, such as satellite TV operators, or switching back to cheaper analog service.
Offering new services can help cable companies attract and keep the higher-paying digital customers, Bernoff said.
The key will be for Microsoft to sign up customers such as Comcast, he said.