What you get
Xbox Live's most visable telemarketer-style headset with a microphone. Like the headset for the Playstation 2 (that comes with the game SOCOM, there is a single earbud, presumably engineered so you can still hear your friends talking if they're in the same room. Unlike the Playstation 2 design (which connects the headset to the front panel of the console), Microsoft's headset plugs directly into an plastic extension that fits into one of the controller slots. The controller interface looks a lot like the various force feedback accessories that appeared for the ill-fated Sega Dreamcast.
The sound quality is adequate, but understandably not phenominal. There is a fair amount of compression that goes on in voice transmissions, and there can be a delay of 1-3 seconds between speaking and your opponent hearing what you say. Trash-talking and one-liners work fine -- active conversations aren't really possible. This was probably a [good] design decision on the part of Microsoft's Xbox network engineers -- if there's a logjam of packets, gameplay seems to get first priority. I'd much rather have my game be responsive (and kill someone), then hear first from somebody else (who just killed me).
You also get a full version of Re-Volt (which came out several years ago), an ok racing game that improves somewhat online. (The beta kit comes with a prerelease version of NFL Fever 2003. This will probably not be included in the final package). For your $50, you also get one year access to the Microsoft Xbox Live network. More on that in a minute.
I set the system up in a fairly simple matter: cable goes to my TV already. I split cable (you can get your local cable company to do this) so one goes to the TV, and one goes to the cable modem. I connected the cable modem to a wireless router (I recommend SMC's Barricade). Lastly, I plugged the Xbox into to one of the router's ports, and set the rest of my network up for wireless. Voila. Internet in the living room.
Much has been made of Microsoft's decision to include an Ethernet port on the Xbox. Until now the port has remained dormant, outside of a few determined programmers who have tricked the Xbox into playing "system link" games over the Internet. The Xbox is not the first console to go online (the original Genesis holds that distinction, with an add-on), nor is it the first console to support an Ethernet adapter (the Dreamcast has an optional, now hard to find, add-on that slides into the modem port). Microsoft's decision to include an Ethernet adapter as standard, however, will undoubtedly affect future console designs.
The headset features voice masking, which allows players to change their voice to a number of presets (low pitched male, squeaky girl, robot, etc). This is to allow additional privacy (a girl can go on the network and sound like every other guy, instead of being accosted constantly). This feature works very well, with no noticable decrease in sound quality or transmission speed. It can also be used for intimidation purposes (the robot voice, for example, fits aggressive games quite well).
There is no keyboard for the Xbox (and none are supported) so the only communication possible is through voice. That said, there is really no way to perform any adequate censorship of speech (outside of censoring your onscreen name, which Microsoft calls a GamerTag. If someone is talking dirty to you, you have one option: you can mute them. You do this within the game itself. If you want, you can also mute everyone by pushing the button on top of the interface that connects with the controllers. Microsoft has made no effort to bleep out words (and I frankly can't blame them).
Like the Playstation 2, most games only have vocal communications coming over the headset, not your main speakers. Thus, in a situation where you're the only one with a headset in the room, it appears (quite eerily) like you're talking to yourself.
The Xbox Live network and gaming
Signing up for Xbox Live is simple, if not a little intrusive. You choose a GamerTag (screenname) which identifies you on the network. You only get one chance to choose your GamerTag, presumably so users carry their reputation around with them instead of making up new ones on the spot. Make sure to spellcheck. You also are required to provide demographic information, such as your age and sex.
Along with doing this, you need to provide a credit card number and billing address. As previously mentioned, your $50 Xbox Live purchase only guarantees you one year of access. After this, Microsoft plans to charge a fee (the fee is unknown at this time). The cost of the service is to support Microsoft's network structure, which requires all game providers to go through Microsoft's servers directly. Game providers may also ask for an additional fee (for example, for massively multiplayer online games such as EverQuest).
The cornerstone of the experience, gaming on Xbox Live, is a real treat. Because everyone has broadband, nearly all games are completely lag free. "Turn-based" sports titles, such as NFL Fever 2003 and NFL 2K3 work extremely well (since there are noticable breaks between plays, the network has time to resync). Even fast-paced games, like Re-Volt and Whacked (Mario Kart-style racing/combat) are crisp with no noticable slowdown. As previously mentioned, voice is a bit delayed, but not unmanagable.
Defined skillsets are still in their nascient stages on Xbox Live. Unlike WarCraft III, that has an established (and effective) means of matching similarly skilled players online, Live's "QuickMatch" and "OptiMatch" levels still have to be fleshed out with different players/skills across the ladder. Once this ladder has been completed, matching similarly-skilled players, by pushing one button, will be a lot easier (right now, it's too easy to find players who are much greater than your current skillset).
The Xbox Live community (or, more accurately, the Xbox Live beta community) has been surprisingly friendly, responsive, and fun. Unlike communications on services like Blizzard's Battle.net, people are remarkably civil. Part of that may be the extra mask of text-only communications being removed (it's a lot harder to say "You're an asshole" to a stranger than typing it). I've also found players to be more talkative and friendly than in SOCOM (part of the reason might be you can never resort to keyboard communications, like you can in SOCOM's chatrooms). The service offers a simple buddy list with a neat feature -- you can find out when friends are playing other Xbox Live games online (a small icon appears on your screen). You can then invite them to your game, have them swap discs, and join you.
Xbox Live vs. competitors
Microsoft has two major competitors with Xbox Live: Sony and the PC (I'm going to leave Nintendo's GameCube out of this discussion, because very few online games have been announced for the system). The PC is an estabished competitor, with years of online experience. Sony is new to the field but powerful, with a 30 million+ Playstation 2 pool.
Let's start with the PC. For the foreseeable future, PC gaming will continue to thrive. There are millions of machines out there, and most (if not all) new games, feature some form of online component. Game series like Quake, Unreal Tournament, EverQuest and WarCraft have finely honed the PC's networked community edge with years of practice.
One of the major benefits of the PC platform, its relative hardware and software openness, is also a major detriment to gaming. With so many available configurations for game makers to deal with, they always have to accomodate the lowest common denominator. Carmack can create a new engine that requires the latest GeForce monster chipset to run, but he still has to target gamers with Pentium II 300's and 4 MB video cards for compatibility. With an established hardware configuration on a console, the designer can tweak and prod his code, knowing every player will have exactly the same strength of processor, memory, etc. Additionally, the support of only broadband ensures there will be no lag due to a player having a 56K modem.
Sony might be a stronger competitor, even though they initially have an uphill battle. The Playstation 2 shipped without any network connectivity, so players must buy a network adapter (a 56K modem will be shipping later). The headset (currently) only comes with SOCOM. Thus, there is no guarantee that an online Playstation 2 player will be on broadband -- or can even talk to others. It is difficult to compare performance at this time (very few online games are available for the Playstation 2) but the early consensus is that the speed is comparable, as long as the other player has a decent connection.
A huge point of contention has been the service plans between Microsoft and Sony. Microsoft has a much more concentrated plan: their servers handle all game traffic at three datacenters (North America, Europe and Asia). If a datacenter goes down, millions of players can be without access (granted, their datacenters are fairly impressive, so the chances of this happening is slim).
There are benefits and drawbacks to the "one point of contention" design. With a single point of contact, all developers can hand server administration off to Microsoft. Authentication, bandwidth, and (if they like) payment, can also be handed off to Microsoft. This frees up developers so they don't have to worry about administration after the game is released. It also sets Microsoft up as the gatekeeper to a large amount of demographic information, something companies like EA are very wary of (none of EA's sports titles for the fall season are Xbox Live-compatible).
The Sony system is a bit more anarchic, but may prove just as successful. In the Sony model, each developer is responsible for their own administration (similar to PCs). Individual Playstation 2's can act as servers, but whether or not this will be truely viable technologically remains to be seen. If a game does not connect, the developer is responsible -- not Sony. The player can always insert another game, and it should work. The lack of a consistent hardware configuration (as mentioned previously) may be a big problem, as players are forced to deal with possible lag and communication problems (some machines will be without broadband and headsets).
There are other, ancillary parts to both systems. Microsoft's system will be subscription-based after one year. In exchange, developers will be able to offer download add-ons and updates (think mods and new levels) that should breathe new life into old console games. The downloads will be saved to the hard drive (something Sony does not have out of the box). Prices for the Xbox Live subscription, and additional costs for extra content, have not yet been revealed.
On the Playstation 2, there are much greater expansion possibilities online, given the built-in "regular" (as opposed to proprietary Xbox controller) USB ports, and a 1394 iLink/Firewire port. To date, very few peripherals have used these ports. There is also greater discussion of consistent multiplayer online games that mesh with the PC world, such as EverQuest and Tribes (most Xbox Live discussions talk about games solely on the console). These Playstation/PC efforts will probably need a hard drive, however -- another optional accessory that does not come out of the box with Playstation 2.
My reaction, and my friends' reactions, to Xbox Live has been quite positive. Clearly, this is the future of gaming, even if Microsoft isn't the sole "winner". More importantly, it finally gets Ethernet into the living room, enabling a more networked home (early rumors of the PS3 talk about connecting the system to various home appliances).
My advice: check out both Playstation 2's offerings and Xbox Live, even if you're not into video games. See what you like, and get at least one of them. From my experience with Xbox Live, you won't be disappointed by this next, logical step in gaming.