Steve Balmer who launched the Portuguese deal

It also allows some shopping, banking and betting and offers guides to news, sports, entertainment and other shows.

Microsoft's first deal was with Portugal's TV Cabo cable system, which will offer Microsoft TV to its one million subscribers.

Microsoft Chief Executive Steve Ballmer attended the launch of the service in Lisbon, hailing it as a "landmark day" for interactive television.

'Masses'

The price of the service and the equipment has not yet been announced, but the aim according to the chairman of TV Cabo is to reach the "masses".

Later this year Mexico's Grupo Televisa's cable outfit - Cablevision - will begin testing the Microsoft TV server and software using advanced set-top boxes made by Motorola.

And Israel's Matav Cable Systems will begin field trials of the Microsoft system later this summer.

Matav serves about one quarter of the Israeli population.

Microsoft's XBox console set for release in November

In the UK, interactive television has been offered by BSkyB, owned by News Corporation which has nearly five million interactive users.

Microsoft has been expanding from core computer software into consumer products like television and video games for some time.

A series of setbacks, including snags with adapting the software to set-top boxes, delayed the roll-out of commercial interactive TV.

Microsoft suffered a set-back in rolling out interactive TV services in the US when AT&T dropped its commitment to developing a set-top cable box.

AT&T had developed a box called the DCT-5000, but Microsoft had failed to complete the software necessary.

Now AT&T has decided to focus on offering a variety of services rather than concentrating on interactive TV.

The X-Box, Microsoft's first major entry into the games hardware market, is due to be in American shops on 8 November, just in time for Christmas.