I’ve always viewed Cisco’s (CSCO) acquisition of Scientific Atlanta negatively for this exact reason. Cisco bought a stupid, cheap, commodity box with no backing service infrastructure. Microsoft can deliver a hardware product 10x superior to the set top box you and I have today, and tie it into all of the other computing and service products they offer- from Xbox Live to your windows desktop to your Outlook email.
I anticipate that this announcement will continue to bring focus to the Nyquist concept of the Third PC, as consumers begin to expect more from the hardware they connect to their living room televisions.
Microsoft has a raft of other interesting announcements. I predict that 2007 is the year the media stops kicking Microsoft and starts respecting them again as a consumer force.
Aside: As a result of my ceaseless focus on this issue this blog is the #1 search result on Google for Xbox IPTV. Use the search box at the upper right to dig through the archives.
I’m off to CES!