Remarks by Bill Gates, Chairman and Chief Software Architect, Microsoft Corporation
ITU Telecom World 2003
Geneva, Switzerland
October 13, 2003

ANNOUNCER: Ladies and gentlemen, please welcome the chairman and CEO of the Omega Partners and the chairman of ITU Telecom World 2003 Reza Jafari. (Applause.)

REZA JAFARI: Good morning. Special guests, ladies and gentlemen, on behalf of the ITU Telecom World 2003, it is my great pleasure to welcome each and every one of you to the special presentation of Microsoft.

Four years ago to date, we had the honor of having Bill Gates in Geneva for the ITU Telecom World 1999. As you all know, much has changed and much has happened since then. However, Microsoft's commitment to information and communication technology remains as strong, and is profound as ever. Indeed, the ICT industry will forever remain indebted to Bill Gates and Microsoft for their unparalleled support and their unmatched leadership, the best friends of our industry.

Bill Gates and Microsoft need no introduction. Ladies and gentlemen, it is with distinct pleasure and utmost delight to have them again in this arena. Please join me to give a warm welcome to our friend Bill Gates. (Applause.)

BILL GATES: Well, good morning. It is amazing how much has changed over these last four years. I remember the night before I gave my speech four years ago one of the Internet startup people was telling me how his company couldn't possibly be overvalued because he had compared his value to some of the computer companies and communications companies. Well, it turns out he was right about that analogy. Things were in a sense hyped, but some of the excitement was about things that are still very important today: the advance of broadband that four years ago had really just gotten started, the advance of the mobile space, and the role of data in that mobile space driving new solutions and new capabilities.

It was four years ago that Microsoft made its commitment to do R&D to bring telephony and PC scenarios together. We made a commitment to do backend software to let operators handle their accounting and new services in a rich and simple way.

And so, what we've been doing these last four years is building software to allow these scenarios to move forward.

Four years ago, our R&D budget was US$3 billion a year. This year, our R&D budget will be more than $6 billion, and so obviously we have a lot of optimism that this commitment to build software platforms is an opportunity not only for us, but for everyone in the communications business.

Our role is very straightforward: We are building very powerful platforms, making the Windows server, the Windows client, Windows in PDA and phone devices richer and richer, and allowing those to work together in a more effective fashion. It's an approach that's about high volume. When we design products, we think not just in terms of millions of users, but hundreds of millions of users, and we can spread our large R&D costs across those hundreds of millions of users to build very, very low-cost platforms.

Our focus is on breakthroughs, breakthroughs like the Tablet personal computer that brings inking and note-taking for the first time to the portable environment, future breakthroughs like speech recognition that will play a very important role in all of these communication devices.

The advances in the hardware and software have been very rapid. Another comparison to four years ago is that our database product offered about 40,000 transactions a minute, in 1999. Today, using a standard off-the-shelf Intel server, that same database server product handles over 800,000 transactions in the same time period, so it's a factor of 20 increase, and it's things like this that are making possible these new applications.

Well, the message I'm providing today is one of excitement and optimism about the ways that the software advances and the telecommunications companies can work together to provide growth. We see ourselves as one of the key players there, providing the software. Software is a magic element here. Software can allow provisioning of new services. Software can allow the device to be far easier to use. It's software that's going to bridge the voice world and the data world and bring those together in ways that people eventually will just take for granted.

It's through software that the data world will provide new revenue and new business models. And business models here don't require a complete change to the backend infrastructure, they don't require a whole new set of devices; these are business model approaches that can be executed on the platforms that the investments have been made in.

For example, bridging enterprise data so that out on mobile devices you can be notified and get the enterprise data that you're interested in, that's a kind of thing software can make very, very simple.

Providing new user interfaces, making things provisioned in a simple way, these are software challenges that our telecommunication customers have made clear to us.

Now, software can help in the backend systems as well; driving software for new standards, being able to reach out to partners in new ways, that's critical.

As the Internet arrived in the 1990s, there clearly was a need to think about software connecting up and working in a different way, letting software essentially be a platform for the entire Internet. Now, that's taking time. Some people expected in the late '90s that e-commerce would explode over night, but that didn't happen because the software platform wasn't there. Some of the complex issues of finding buyers and sellers and making sure that the descriptions of the contract and the goods could be agreed on even though the IT people in those companies hadn't built common software, those were tough problems, and it's required these last four years of investments for the industry to drive up and have this new approach to software running on the Internet that we talk about as Web services. Web services is really a central element of how telecom will take software and use it to drive growth and profitability.

What are the user scenarios here? Well, very simply, there's a move toward digital in everything. We often refer to this decade, 2000 to 2009, as the digital decade. At the start of the decade, very few people were doing their activities digitally. Paying their bills, their photos, their music, organizing their schedules, sharing and collaborating on documents: That was the exception rather than the rule. By the end of the decade, it will be the rule. People will think back to having to develop photos or only getting their music in a particular order that they can't control or take with them as sort of an antiquated thing that was a long time ago. So in this new digital world, you'll create, you'll distribute and consume all your information in this rich digital way.

Now, this is something that spans work and home. We're talking about the digital information that counts in your business, being notified of things that are of importance and all the activities around even pure entertainment: what games look like, or even how you'll find the shows that you're interested in watching, will be driven to this digital base.

It's through the magic of Moore's Law that this advances at full speed, even things like editing movies and sharing movies becoming commonplace, and something that everyone expects.

Now, this vision requires a way of connecting things together that goes beyond what we've had in the past. Broadband, of course, is key to that. And, in addition to the mobile space, a lot of the growth and opportunity comes from providing broadband not only to business customers where it's exploded, but increasingly to consumers as well.

The difference in usage between a dial-up capability -- where you have to wait quite some time before the connection is established and then have a fairly slow speed of connection -- to broadband -- where that connection is always there and you just take it for granted that even things like a video clip can come down -- it's quite a difference. We were able to bootstrap a lot of Internet authoring and Web sites out of that dial-up narrowband world.

But that's a world that we're actually leaving behind. The prices for broadband are becoming very attractive in country after country, and some countries have shown that when you get the balance right, you can drive to extremely high penetration.

By the end of the decade, most developed countries will have the majority of households connected up through broadband, and the number of services that will come along on top of broadband I think will surprise all of us. Some of them the things we expect today, and some of them that will be new and different. Exciting things like taking entertainment networks, and letting people compete with each other and play together and talk to each that we've pioneered through Xbox is just one example of something that will be very, very explosive.

Making these broadband networks something that create not just the broadband opportunity, but other service opportunities for network providers, is something we're very committed to, so this is an area of very large investment.

Now, one of the things that I think has surprised everyone in these last four years is the rise of Wi-Fi wireless. It is fantastic. It's proliferating in many different places, first of all in the workplace. More and more as you move between conference rooms and take your portable computer, you are connected. You're getting your e-mail, you can browse the Web, you can go through sales figures, get the up to date information, you can get video training connected to all those devices. So Wi-Fi in the enterprise is on its way to becoming a common-sense tool to drive worker productivity.

Wi-Fi in the home environment really opens up this dream of the digital home, getting music anywhere in the home, having your laptop anywhere you want to go, having the photos show up on screens throughout the house, and not having to move information around because the information is always available. The sales of these access points in the home have been phenomenal and, in fact, that's even being bundled in more and more with the broadband modem and the Wi-Fi capability.

Now, people are using these so extensively that we need more bandwidth. We need to move up to be able to have high-quality, multi-channel video inside the home, and that's why evolving Wi-Fi into the 5GHz and flavors like the A variety will be very important.

We want to thank the IQ for their pioneering work here at designating spectrum in the 5GHz range and really encourage every country to follow along to what will be largely a worldwide regime that will allow Wi-Fi to tackle these new capabilities at full speed.

The third area we're seeing Wi-Fi is, of course, in hotspots -- hotels, convention centers -- and that's exploding as well, particularly with some of the software initiatives we're taking to make it simple to sign up and be connected, and in a completely secure way.

Now, what we do as a software provider is come up with platforms, tools and technologies for the common applications. We are in a constant dialogue with our communications customers about what kind of things would they like to see. It's all being done around the open Web services approach. This allows people to add new services without throwing away the backend they have today. They can make incremental improvements to bring in these new capabilities. Whether it's an improved billing system, whether it's a location service, whether it's running TV applications across their broadband, it can hook in without rip-and-replace type approaches.

The number of applications that are coming along here for e-mail backend, instant messaging, rich devices -- it's really exciting to see how each one of those is developing and proliferating as broadband expands.

And what we're doing is making sure that there's room here for any amount of customization: third parties coming in with services, operators controlling the user interface and how they present services, connecting in with their other backends. This idea of customization and customization that literally takes a few months of work instead of what would've been years in the past is very important.

And so, it's because of these opportunities that we've made that doubling of our R&D budget.

We've got lots of cases where people are moving away from expensive, very high-end UNIX platforms or mainframe platforms onto industry standard Windows platforms to do mission-critical, high-scale activities. Korea.com, with 8 million Exchange hosted users -- three admins are able to control that server farm, so it's really quite phenomenal, something that we've pioneered with the way we run our own Hotmail infrastructure; Qwest now providing Windows clusters with backup for XML Web services, and many other examples, including here in Switzerland with Swisscom letting people get at directory information in a rich, scalable way from any type of device.

What we'll see is that as operators see new business opportunities, they will be moving more industry standard servers with Windows into the platform and it will need to connect up to those traditional systems. But as they see how effective these things are, the ease of development, the low cost of the hardware, that will actually accelerate their opportunity to have more flexible backends without having to go back to the investment levels that were so high four years ago.

I've talked about Web services a bit, and one thing I want to make very clear is that this is an industry-wide effort. We started this work back in 1997 around so-called XML. XML is the format that information is sent in for these Web services connections, and so XML had to be developed, there had to be rich tools around it and a broad acceptance of it. I can say that that's happened in a really phenomenal way. Everyone accepts today that this flexibility of XML is what will allow people to do e-commerce and other rich applications.

Well, we needed more than just XML; we needed protocols to stick the XML in, and we needed security and transactions and high reliability around those protocols. And that's why in 2000 we labeled our initiative to build that platform and make Web services very easy, so-called .NET, and that's really had a huge effect on all our software. Office: you'll see in the version that gets released later this month that XML is at the center of what we're doing. Our new database work is really built around XML; making our systems very easy to manage is exposing within the software itself these XML Web service capabilities.

A key partner in driving these Web service standards forward has been IBM, and so we work together with IBM on standards and then we compete to provide great implementations of the Web services platform. We recently demonstrated together how these advanced protocols make it easy to have all the richness that would have required lots of expensive software in the past now built in -- in the Microsoft case, our .NET Windows platform, and in the IBM case, into their WebSphere offering.

These standards are open to all the different companies. This is the level of interoperability. Whenever somebody builds a new application, they simply should insist that it use Web services and then pick which platform they feel is the best implementation and let them get that service up and running as quickly as possible.

Because of the wide acceptance of Web services, it means that as carriers are connecting with each other, as they're connecting with third party applications, they don't have to worry about whether they're using the same software base as that partner is; it all works as long as you get the Web service definitions right. And so that's become a big focus in the industry is taking particular verticals or particular services and defining the Web services calls for those things: healthcare, financial, things like data quote feeds, all of those are being standardized within Web services.

Our .NET effort is the tools that make this very, very simple: software to connect information, people, systems and devices. So, the difficulty of the past of moving your information from one system to the next or connecting up your backend structured systems with your knowledge workers who are working on a less structured basis with e-mail and phone calls and faxes, this approach allows those things to be connected together.

It's not just a PC initiative or a server initiative; this extends out into the mobile devices themselves, and so every new Pocket PC, Smartphone, even some of the simpler devices like the watch devices that we're working on will have this .NET capability built in, and so applications software can move around in a secure way between the different devices.

Now, let's map that very particularly to how Web services affect the mobile environment. This technology is perfect for the mobile environment as there are thousands of different people thinking, 'Gosh, I could connect up to that phone and use the billing infrastructure or the location infrastructure to provide something very nice, or I could connect up to PCs and provide that.' Whether they're on the wireless network or not, there needs to be a clear message at the next level down for these particular services.

And this is something over the last year we've been talking about with our customers, thinking about how could we drive this forward. We've had a lot of different prototype systems, and we've been saying we need to get this to critical mass and just make decisions so this get standardized, and standardized in a way that's open across the industry.

One of the most aggressive companies in terms of using this in their own backend and thinking how this can drive the industry forward is Vodafone, and so I'm very excited to have Ian Maxwell here from Vodafone and I want to invite Ian to come out and talk to us about how Microsoft and Vodafone want to drive these standards forward and make that a platform for the industry. So let's welcome Ian Maxwell. (Applause.)

IAN MAXWELL: Good morning. Thank you, Bill. Good morning, ladies and gentlemen. I must say I'm very excited to be here this morning working with Bill announcing this initiative that we've been leading together. And when I say leading together, I'd also like to emphasize our intention to make this an open standard approach that will be available to all networks and all software providers.

What we really want to do, of course, is to get all those developers out there excited. I want to get their imaginations running. I want to get more, better services for our customers sooner. That's our real objective in doing this.

So what do we do every day? As a GSM [Global Mobile System] operator, we have the largest GSM network in the world, and day in, day out we do a lot of these things that are on the slide that you showed a minute ago, the authentication, billing, messenger services and so on.

We have the capability now to deconstruct that stack and to disassociate those services from the underlying network, and therefore to provide those facilities for the first time without the need for there to be a mobile network, a wireless network, involved. We can do that over the fixed network.

So how do we do this? Well, here we have what we call a Vodafone GSM SIMM dongle. It's got a GSM subscriber identity module buried in this plastic, and on the other end of that it has a standard USB port.

So if I go over to the PC here, and I think I've got to press a button on here to change it over to the different machine, and if I then just plug this module in, what's happening now is Windows is recognizing my GSM SIMM that's embedded in that dongle and it's challenging me. It's saying, please enter a PIN to confirm that I have the right to use this dongle. So if I enter my PIN and if I click on 'OK,' we can see that it now says it's authenticating. Now, the authentication is complete, and I would be able to access those services over a fixed wire with no use of wireless for the first time.

Now, this is very exciting for the mobile industry because it lets us extend our existing business model out to reach users who have got fixed PCs.

BILL GATES: That is pretty exciting. I think probably the easiest way to show people why we're so excited about this is actually to demonstrate what we've got here and so let me ask Mark Gilbert and Rimes Mortimer to come out and give us an example of how this new open approach will create opportunities for Vodafone and other providers and great new capabilities for users.

RIMES MORTIMER: Is this the UK 24-hour roadside assistance number?

MARK GILBERT: Good morning. Yes, it is. This is Mark speaking. How could I help you?

RIMES MORTIMER: Hey, Mark, it's Rimes Mortimer calling. Listen, I just had a breakdown. I got a flat tire on my car. I really have to get to a meeting. Can you please send out a technician?

MARK GILBERT: Yes, sir, Rimes. What we're going to do is retrieve your customer information. It looks like you're driving a Ford Explorer. Is that the car you have with you now?

RIMES MORTIMER: Yes, that's the car.

MARK GILBERT: If you can let me know where you are, we'll send a service personnel to help you as quickly as possible.

RIMES MORTIMER: Actually, Mark, I really don't have a clue where I am. I know I'm in Central London. There's a park. I can barely make out the road street sign. You know what, this is really embarrassing, I'm going to have to ask somebody.

MARK GILBERT: That's okay, Rimes. We can use your Vodafone mobile to locate you, but we need your permission to do that. Will you give us permission to find your location?

RIMES MORTIMER: Absolutely, Mark. I really have an important presentation to get to and I need you to get someone to me right away, so you absolutely have my permission.

MARK GILBERT: Great. As soon as we find that and get the closest service personnel we'll send you a message to let you know they're on their way.

RIMES MORTIMER: That's great. Thanks so much; just hurry.

MARK GILBERT: So as you can see, Bill and Ian, Rimes right now is stuck in downtown London with a flat tire. He doesn't know where he is. And what we're going to do is use a variety of Web services from different providers to find out where he is and get him a service personnel as quickly as possible.

So the first thing I want to do is find his location. What I'm going to do is, I've switched over to use my dongle for this, so it's now challenging me for my PIN, which I'll type in and I'll authenticate with the Vodafone Web services.

In this case, we're using two Web services, the Vodafone location service and the Microsoft MapPoint Web service to not only find his location but put him on a map. And he's right now in downtown London, right next to Hurlingham Park.

So, the next step for us is going to be to find the service personnel that are closest to him. Since they're using Vodafone mobiles as well, we can click on Locate Service Personnel and find all of the people in the area.

I can see that there's four people in his area in London, and so what I'm going to do is take Employee 34, who's the closest, I'm going to select him and I'm going to create a service request that gets sent to his mobile. The service request will have all the information about our customer as well as his current location and a description of the problem, which I'll type in now, which is a flat tire.

When I submit this request I'm also going to create a map with directions for the driver to show them where he is and where the customer is right now.

So what I'm going to do is switch over and show you what our driver would see on the mobile phone when they're in the truck.

So here you can see on our mobile device that we have the same information that's available on the PC: the customer information and the problem. We also have a map with the location of where we are and where the customer is with the quickest directions to get there.

But since this is a Mobile Connect phone, we can also call other Web services dynamically. We can get the history for our customer and we can even dig in and look at details from our customer management system to see what's happened in the past with him. And, of course, since this device has a SIMM card in it as well, while we're driving, if we get lost we can pull over and get an updated map with new directions, given our current location. And you can see that we're making that call now and we get an updated map with directions.

So overall, you can see that the same data is available on the mobile device as we have on the PC, with a very, very similar experience. In this case we're using a Pocket PC phone, which has a very good screen and form factor for viewing maps, but this can be any mobile platform used to access these Web services.

Another thing is that on the mobile case we're using the SIMM card embedded in the phone to authenticate with this network and what we're going to do in the PC case is use the Vodafone dongle that Ian showed earlier, and that's really the key that we use on the PC to authenticate with these Web services that are available.

So now that I have the driver on the way, I'm going to go back and send Rimes a message from the PC. So I'm going to quickly send him an SMS message letting him know that help is on the way and that they'll get there in five minutes.

RIMES MORTIMER: Oh, that's great. It looks like I'm going to be able to make my meeting; help is on the way.

MARK GILBERT: Great. So you can see, Ian and Bill, that the application we've shown today integrates a number of Vodafone services as well as some Microsoft ones: Location, authentication, SMS and there's a variety of others that they'll be providing. But the work we're talking about today enables much more than that. It enables any mobile operator to take the services they have today and expose them as Web services on the network. That means that they will now have a whole new set of potential customers coming from the PC world just as we've accessed those from the PC today.

For developers, this means that you can now create rich new applications that use a variety of network services that weren't possible before. You can integrate these into your application, given you amazingly new applications and a whole new potential revenue stream from the services.

And for you and I the consumer this enables us to have a common experience between the device that you've seen and the PC, really enabling us to share information between the two and helping convergence come today.

Thank you. (Applause.)

BILL GATES: Let me be clear about how Vodafone and Microsoft are rolling this out. Actually, this month, we'll be giving the technical roadmap out to developers who are interested in it, including at our Professional Developers Conference. We have a mobile Web services workshop to get feedback from all industry participants. That will be early next year. And we've got the preliminary information up on the Web site that we've got on the slide here [http://www.microsoft.com/mobilewebservices]. So anybody's who's interested in that, wants to be involved in making sure these things get defined the right way with the right open flexibility, we invite your participation because we think this is an important step.

It's very exciting. We're pleased that Vodafone and Microsoft are helping to drive this forward and thanks for coming, Ian.

IAN MAXWELL: Thank you very much, Bill. (Applause.)

BILL GATES: Well, one big topic for all these new capabilities is security. People are hoping to use digital infrastructures for very crucial operations: billing, transactions, monitoring. And so we'll be depending on the digital infrastructure the same way that we depend on electricity or water infrastructures today.

And this is a very demanding requirement. It means the reliability of the hardware and software has to be extremely high. It means these systems have to be designed to avoid people being able to attack them and cause problems.

And we've seen over the last few years that that level of richness and maturity is not yet built into these systems. Even the basic protocols, the Internet protocols, don't allow you to know for sure who's sending the message. Mail messages, the standard SMTP protocol, allows somebody to pretend to be somebody else as they're sending in a message. And those are just among the many things we need to fix to get reliability that's important. Even things like passwords will give way to smart cards and SIMM cards and biometrics in the future, so that we really know who's connecting up to the network.

There's a lot of advances in the software level that have to take place here. Being able to isolate systems, we've seen that people aren't setting up the firewalls to give themselves perfect isolation. If that had been done, none of these security problems over the last few years would have affected people. And so making sure that we give people those tools, let them test whether they're doing it the right way, that's very important.

Likewise, no problems would have taken place if people had had their software up to date, and so we need to make it very easy to be up to date, working with broadband providers on firewalls, working with them on the automatic update capabilities, and being able to use that to make sure that we really get the infrastructure we want.

This is a substantial investment for us. It's the biggest part of that $6 billion in the R&D -- the new tools, the new approaches here -- and working with partners to drive these things forward.

One of the particular topics that will be addressed as part of this is spam. Spam on the PC is particularly bad, but we're even seeing it somewhat in the mobile infrastructure. But by being able to identify who the sender of the message is and making sure that they are really who they say they are, we'll be able to make this spam problem essentially go away, make it not be something that holds back the scenarios here.

So this is a journey that we're on with a lot of very important milestones just in the months ahead.

What is digital empowerment? What is it that will be different about the way people analyze business information and how they stay in touch with partners?

Well, we think there is a lot to be done here, things like people working together on a meeting or a customer presentation. The tools today are much better than they were in the past, but they're nowhere near what they can achieve.

We can make this collaboration across devices, across company boundaries, something that works very well. We can make it something that means that you don't have to travel quite as much to work with people at a distance.

We have a number of initiatives that are very work focused, you know, how can you schedule things, how can you share business intelligence information and be able to drive in and understand customer satisfaction or profitability. These rich services around our customer relation management, our application software, do create opportunities for telecom providers to host these things, to come up with offerings together with their other products where these things come together.

We've see Web site hosting be quite successful, including using the Windows platform. We're seeing mail hosting as a growth opportunity, and there will be growth in terms of rich applications hosting, we believe, as well. And so, this is an area that the leading telecom providers are already starting to show it can drive growth and profitability.

Another belief we have is that, in the future, when you think about phone calls, you won't just think about voice. After all, a lot of times when you're connecting up with somebody there's a PC in their office and a PC in your office and so when you call them you'd like to have those screens automatically connected. In fact, this can drive more telecommunications traffic and in some ways substitute for travel expense.

We took a big step forward in this by integrating these capabilities into the next version of Office. We really believe that everyone as part of their normal work activities ought to be doing this screen sharing, talking to people, editing documents together. We think that will be a standard approach.

We call this Live Meeting; it allows the meeting to be recorded, both the screen presentation and the audio, and that's accessible to people who weren't there. We've accelerated our activity here by buying a company called PlaceWare. We're doing a lot of promotion of this Live Meeting thing, including a lot of free trials so people can connect up. And whether it's training or product demos, there's a lot of different approaches here that will drive things forward. It connects up to the Instant Messaging backbone, will be very explosive, and another thing where partnerships with telecom providers is very important to us.

Well, I've talked about a lot of these different pieces. Now I'd like you to see an example of users using this. We call this the big demonstration that shows it all coming together and we call that Better Together. So let's take a look at seeing what this is going to be like for a user.

DEREK: Thank you, Bill.

Today, we're going to tell you a story about a chocolate company and how Microsoft software enables a variety of new innovative solutions for voice and for data.

First, we're going to see wireless provisioning services for Windows, a platform for operators to offer their customers secure and easy to use Wi-Fi access.

Shy is at an Internet café and he needs to send an e-mail with an urgent order for some chocolate. Like many busy people, he's looking for a Wi-Fi hotspot.

Hi, Shy.

SHY: Hi. I'm using wireless provisioning services on Windows XP using this Tablet PC. Now let's find a wireless network to get connected.

I can see that there are a number of networks available, but I haven't connected to any of them before. Let's try connecting to this one.

Windows is now connecting securely as a guest.

DEREK: As you know, a network ID can't be localized or branded with operator branding. Let's see how wireless provisioning services for Windows enables this.

SHY: There's more information I'm downloading. This information is an XML schema hosted and provided by the operator. It contains information such as branded content, service plans and hotspot locations. Once the information has completed the download, a wizard will be launched to help guide me through the rest of the sign-on process.

DEREK: So does this work with a variety of different business models?

SHY: Yes, it does. In this example, I'm going to show a prepaid scratch card that I purchased earlier yesterday. I'm going to enter in a promotional code. I can agree to the terms and I'm connected.

Now, if this were a monthly subscription, what I would do is select this option and I connect automatically whenever I was in range of this network. I also have the option of selecting this option, which allows the service to keep the data up-to-date so when new hotspot locations are available, I'll know about them.

DEREK: That's fantastic. So what we've seen here are two key things: first, the ability of the operator to be able to offer branded Wi-Fi access to their customers, and more importantly, secure and easy to use access by those customers.

Now let's go to the sales desk of the chocolate company where Robert has just received the e-mail from Shy.

ROBERT: That's correct, Derek. So, here I have typical information worker scenario where I've received an e-mail from my customer, they would like additional Belgian chocolates and I would like to make that happen quickly.

DEREK: It sounds good.

ROBERT: So in this case, I'm going to do that by opening Windows Messenger, where I see that my warehouse guy is online, perhaps away from his desk right now, but I'd like to set up a communication with him. In this case, I'm going to do that over Windows Messenger.

DEREK: Robert is making a Voice-Over-IP [VOIP] call using a subscription service from his operator. The phone call is routed via Microsoft Live Communication Server. VOIP enables operators to offer new value added services. Let's walk over to the warehouse where Balz has his VOIP enabled Web CE Webpad. How are you doing?

BALZ: Hey, Derek, how are you?

Here's a call coming in. Using Caller ID I see it's Rob from my sales department. I answer the call. Hey, Rob, how are you?

ROBERT: Good, Balz. I wonder if you can do me a favor. I just had a great order come in from one of our key customers at Northwind for Belgian chocolate. He needs it by 2:00. Can you tell me what we have in stock?

BALZ: Well, let me check our inventory. I'll put you really quickly on hold.

DEREK: While Robert is on hold, Balz is launching a .NET application using XML services to access his company's inventory information.

BALZ: And the results are already back from our database query. It shows that we are out of Belgian chocolate. Hmm, however, it looks like there is some Swiss chocolate here. Let me pick one of these items, and I see there is really tasty Swiss chocolate. Let me reserve this. Let me confirm it and go back to the call to dial application and resume the call with Rob.

Hey, Rob, I checked our inventory. It looks like we are out of Belgian chocolate. However, we have some really tasty Swiss chocolate. Do you think that's okay for our customer?

ROBERT: You know, I don't know right now, so let me check back with Northwind and I'll get back to you as soon as possible.

BALZ: All right, bye-bye.

DEREK: What we've seen here is how operators can integrate their subscription service with enterprise infrastructures.

Back at the sales desk, Robert is using Office Conferencing. He uses Live Meeting service and his mobile operator provides this as a conferencing solution.

ROBERT: Right. In this case, again a typical information worker scenario, I'm in the immersive productivity environment of Office. I receive an e-mail. I follow it up on that. We've used VOIP to initiate that first part of the conversation. Now, I'd like to get back to my customer. Previously, I would have had to have searched for their information and made the call. In this case, via Office Phone Conference, we have seamlessly integrated Office with the Internet and the PSTN.

DEREK: That's fantastic.

ROBERT: So through this e-mail I'll simply click on the Office Phone Conference dialogue and set up a call with Shy. In this case my phone will ring, as will his, to initiate the call. It takes a few moments and the audio bridge is not moving as quickly as it should.

DEREK: But right now, you're able to dial from Office, just look up his name, dial out and find his phone number. That's fantastic.

ROBERT: Exactly. So the phone rings, and in a few moments Shy will join us.

SHY: Shy here.

ROBERT: Hey, Shy. This is Robert from Northwind. I got your e-mail and I am very interested in fulfilling that order. However, we're out of Belgian chocolate right now, but I have some great Swiss chocolate and I'm wondering if we'd be able to provide that instead.

SHY: I don't know. I'd really like to see the product before I purchase it.

ROBERT: Okay. Well, that shouldn't be a problem. I can see that you're online, so I suggest that we just initiate a Live Meeting session and I'll bring you into that. You should receive an Instant Message in a moment, and we can go from there into a quick look at the catalog and I can show you what I have and you can see if you're going to be happy with that.

SHY: Great. I got the invite and I'm joining now.

DEREK: Using Live Meeting, Robert and Shy are able to share and collaborate using applications and resolve this issue in real time. Live Meeting conferencing is an additional service an operator could offer.

What we're seeing here is interesting. First, it's an integration between the PSTN and the Internet, and secondly we're seeing phone and data conferencing being integrated into one experience.

So, Robert, your operator provides this experience, right?

ROBERT: Absolutely. I have this seamless experience of Web conferencing, which is very much the conferencing environment of the future, with phone conferencing, which will remain key to any kind of collaborative process. But I'm approaching all of this, interfacing all of this through Office, integrating both the PSTN and the Internet back, through into Office as well.

DEREK: That's fantastic. So, you and Shy would have the ability to see the same view of this Swiss chocolate here?

ROBERT: Absolutely. So we've seen the chocolate there and, Shy, at this point are you happy with the chocolate that we have up there?

SHY: Yeah, absolutely, this looks great. Let's go for it.

ROBERT: Okay, good news. So, I think what we'll do now is we'll extend this impulse call that we've had in process here between two people into a multi-party call. I happen to know a very good delivery guy who usually works pretty quickly for me. His name is Bill. So why don't we search for Bill, bring up his information, and go from there into a multiparty call and see if he can help us out here. So let's place that call.

BILL: Hello. This is Bill.

ROBERT: Hey, Bill, this is Robert here. I have an urgent order that's come in from Northwind. I was hoping you could help me out and get something to them, get the chocolate they just ordered to them by 2:00 this afternoon. Think you can help me there?

BILL: Sure. I don't think that should be a problem. Let me just check my calendar really quickly first.

SHY: Guys, I've got to run. Please get back to me and let me know when I can have the chocolate.

ROBERT: No problem.

DEREK: So you're able to just check your calendar right from the phone call?

BILL: That's correct. You can see I had a quick link in my actual call dialer user interface and I can go into my calendar. It looks like I'm quite open. So, Robert, my morning looks quite open. I should be able to help you out.

ROBERT: Great. Well, I know that you have your Windows Mobile Smartphone, so I would just simply send you an e-mail with the directions to Shy.

BILL: Great, thank you.

ROBERT: Thanks a lot.

DEREK: Bill has a new Orange SPV E200 Windows Mobile Base Smartphone and an Exchange e-mail account. With this combination Bill is always up to date. Bill opens his e-mail from Robert. He can see a link for directions. Using his mobile operator's MapPoint service he has directions and a map to find Shy.

Now back to the e-mail. Because of the Smart Link technology, Bill can just click on the phone number and automatically dial Shy.

SHY: Shy here.

BILL: Hey, Shy, this is Bill. I just want to let you know that I'm on my way with your product.

SHY: That's great. Thanks.

BILL: Sure. See you soon.

SHY: Bye.

DEREK: So what have we seen here? A range of services: mobile, wireline, Wi-Fi, voice over IP that demonstrate how Microsoft software enables new innovative value-add services, voice and data on any network infrastructure. We've also seen how the Windows platform plus the .NET technologies for Web service integrated with existing systems. Thanks to Microsoft software, we've got a happy customer. Thanks.

(Applause.)

BILL GATES: So you saw there how the PC at work is getting more connected to the voice network, to mobile scenarios and really taking this rich Web services idea and applying it across every type of device.

Another place where these advanced technologies will really drive new activities is in the home. Here, we have young people who have grown up with Instant Messaging and are used to having many sessions going at a time to stay in touch with their friends, demanding rich new capabilities. We're rolling out new things like the ability for them to listen to music together, to share their photos together, all as an extension of Instant Messaging. So, sharing digital memories is something that the young generation will be driving forward.

This also applies to their entertainment activity. We've been very lucky to partner with network providers to take our videogame Xbox and use Xbox Live to let people play together. We decided to require broadband, so we built the Ethernet into each box and we have the rich experience that provides voice discussion while playing across all of the different games.

And so this is really explosive. This is what's going to drive broadband. And it's not just the penetration; it's also an opportunity for the operators to be involved in the different services. It's an opportunity to drive customer demand up to the higher tiers of the broadband offering.

Now, we're going to take this even further. Our belief is that over the rest of this decade, all of the broadband providers will be providing video TV solutions on their network. It's an opportunity to take the infrastructure that you've built and get a video revenue stream. We call this IPTV, obviously providing the richness of the TV across the Internet protocol. But it's better than today's TV. It's something that's got video-on-demand. It's something that's got a rich interactive guide. It's something where the richness of the user interface is way beyond the channel switching in the past.

And so, we think telecommunications providers will move into this capability. We just last week announced this initiative and we announced it with two pioneering customers who are doing pilots with us, Bell Canada and Reliance Infocom in India. It really relies on the fact that the performance of these networks continues to go up. The magic of the hardware means that even a simple data network that you put in will have the right capabilities for this.

I'd encourage you to go take a look at what this TV experience is like in our booth, because it's way beyond the TV that people thought about historically.

Another interesting thing is getting the information onto all these different devices, making it so somebody sitting at their PC or any device can say what stocks or sports or news they're interested in, and have that show up on their phone, alerting them if it's very important information they need to know about.

The idea that this can work seamlessly is something that we and others are putting forward, and there will be subscriptions that offer this service, in our case our MSN type subscriptions.

We're making the customization model very straightforward. We're making the provisioning very straightforward and we've got some partnerships that are showing how this can be done. So, it's an easy thing for operators to set up and it can help drive things forward.

A good example of how we're working with mobile operators is what we've been doing in the devices. It was just a year ago that our very first phone device shipped, and that was called the SPV Phone and it was Orange was our initial partner there. In the first year, that phone found a lot of success. We learned a lot about how people would work with it. And as you saw in the recent demo we have a new generation of that phone that's shipping in the next month, which is called the E200 Variant -- a lot of improvements in the software, a lot of improvements in the provisioning, based on this last year's experience.

What we've seen from these users has actually been better than we or Orange would have expected, heavy use of the Internet, many times a day, heavy use of the synchronization and rich e-mail capabilities and a desire to keep the software up to date, and that's really built into the phone to be able to update over the network.

And so if we boil it down to simple business terms and look at the comparative RPUs on different kinds of devices, on this SPV phone we're seeing that the browsing revenue, the SMS revenue and all the voice revenue add up to this being a customer that's far more valuable than a customer using any other device.

Now, this is just the beginning of what we're doing with these devices. We have a lot of new partnerships with the device makers in these areas, a lot of advances in the software, and so we're one of the many people that will take the magic advances of hardware and software and make the mobile experience even better than it is today.

So the theme here is pretty simple: It's that software is an ingredient that helps this continue to be a growth industry. We will continue to increase our R&D. We'll continue to sit down and talk about what types of solutions you want to see us put together and taking your network, your customers, you'll be able to do a lot more with those investments, and so I'm excited to see what we can do working together.

Thank you.

(Applause.)