Microsoft plans to release software for encoding and distributing web-based audio and video files, which it claims will improve their quality and make them more economical to transmit.

The software giant also released a beta version of Windows Media 8 that allows users to encode audio and video files in a new compression format that Microsoft says is capable of delivering DVD-quality video at 500Kbps.

Speaking at Streaming Media West 2000 in California this week, Microsoft president Steve Ballmer said the latest software can store high-quality audio recordings in about a third of the file space that is typically used by the MP3 format, and can be downloaded 30 per cent faster.

Ballmer demonstrated streaming media with wireless partner NTT DoCoMo. The so-called Eggy device, available only in Japan, uses Windows Media to deliver streamed audio and video to mobile phones.

Ballmer also previewed the new-generation Windows operating system, codenamed Whistler, which includes integrated support for DVD playback, easy video transfer to portable devices and new ways of viewing the My Music folder.

Microsoft unveiled Windows Media Player 7 for the Pocket PC, which offersCasio, Compaq and Hewlett Packard Pocket PC users the ability to download and play Windows Media video as well as music content.

Rival RealNetworks dismissed Microsoft's latest streaming media announcements as a "futile effort" to catch up with RealAudio 8 and RealVideo 8. "This is a classic example of Microsoft trying to match the quality of service that RealNetworks has been delivering for months," claimed a RealNetworks spokesman.