You've Got Cable?

Bill Gates is taking the gloves off again and this time the target is his main rival in the consumer Internet sector, AOL Time Warner.

Just days after word leaked that AOL was eyeing AT&T's cable system, published reports Monday say that Microsoft will go to great lengths to make sure that deal doesn't happen.

Here's why: for years now, Gates and company have bet big on cable, assuming that it is the strongest link into the digital home.

If AOL snatches AT&T's broadband division it will have cable dominance: a total of 29 million U.S. homes or nearly 40% of the cable universe.

Microsoft does not want that to happen and it has a lot of firepower in its arsenal.  Not only has Microsoft invested $1 billion in Comcast stock — the main suitor for AT&T broadband — it has a $5 billion investment in AT&T. No doubt that means AT&T’s board will take Mr. Gates’ phone calls about the deal.

Microsoft is also said to be marshalling AOL’s rivals in its campaign to keep AOL’s cable presence from growing, courting a list of competitors including Disney and Yahoo!

Microsoft will have to tread lightly, the company is still under the Justice Department microscope. But the fact that it is taking the offensive against AOL shows just how strong the rivalry between the two tech giants has become.