Shares in OpenTV fell by nearly a quarter following the news that Comcast and Cox will buy rival company Liberate to bring control of interactive television middleware for their cable networks in-house.

OpenTV shares slumped by around a dollar after Liberate announced the sale of its North American business for $82 million.

In the face of increasing competition from satellite operators DirectTV and Echostar, the deal gives leading cable companies Comcast and Cox an opportunity to develop services based on Liberate’s interactive software.

“Purchasing Liberate’s North American assets will give us greater control over the software platform,” said Steve Silva, who is responsible for new business development at Comcast.

Microsoft has also teamed up with Comcast, but Ed Gracyzk of Microsoft TV, says Microsoft and Liberate can co-exist on the same set-top boxes, saying “Now the number 1 and number 3 operators are aligned on a standard platform. Any company that builds a co-application can deploy it more cost-effectively.”

The lack of software standards has hitherto hindered the development of interactive services on cable television in the United States. The cable industry has lined up behind OCAP, the Open Cable Applications Platform which is in turn based on the European MHP standard.

Along with other vendors in the space, Liberate has an OCAP compatible offering, together with software that runs on low-end set-top boxes supporting Java and HTML.

Liberate also provides the interactive platform for UK cable television operators ntl and Telewest, and UPC in Europe, although to date this has lagged significantly behind that of satellite operator Sky in sophistication. An ongoing commitment to the existing cable platform was signalled by Telewest when it announced that its new PVR from Scientific-Atlanta would include Liberate support.

Liberate chairman and chief executive David Lockwood told analysts “We are entering into discussions with our partners, ntl, Telewest and UPC and discussing with them the best way to move forward.” Some form of further acquisition by these cable companies would appear to be an option under consideration.

The acquisition of Liberate’s North American business by two of the leading cable operators in the country could be bad news for OpenTV, which also missed out as a middleware provider for DIRECTV.

OpenTV is headed-up by Jim Chiddix, a former Time Warner man, who has appointed other former cable colleagues to help address this market.

OpenTV now trades at a mere fraction of its high of nearly $200 a share at the crest of the dot com boom in 2000, consequently any movement in price is significant.