IPTV: Microsoft jockeys for position

There’s little question that most people using a desktop computer, a laptop or some other mobile information device will encounter a Microsoft product very early in the day. Even us Apple users have Microsoft Office. But one area that Microsoft has doggedly pursued, little known until recently, and with comparatively little to show to date, is in the area of TV. Over the past six or seven years, Microsoft invested billions of dollars in cable operators that included TCI (which became AT&T’s cable arm and was in turn acquired by Comcast) in the U.S., UPC in Europe, and others. In return, the hope was that these operators would deploy the Microsoft TV platform. Today, Microsoft “TV2”--its second major release--is under consideration by many cable operators and is soon to be in commercial deployment by Comcast.

Recognizing the IPTV opportunity, Microsoft adapted TV2 to IPTV. It is an all-Microsoft solution, using Windows Media (expected soon to become a SMPTE standard called VC1), the Windows 2003 server, SQL Server, Windows CE and Microsoft TV2 middleware. And whether you read about it in the pages of Telephony or in the business section of your newspaper, it’s little secret that some major carriers have been attracted to this platform. There are two categories of Microsoft IPTV customers: commercial sales and early adopters. The two commercial IPTV sales are to Verizon and SBC; trials have been announced with BellSouth, Bell Canada, Telecom Italia, Reliance InfoComm of India and others.

Another Microsoft early adopter is Bluewin, a subsidiary of Swisscom of Zurich, Switzerland. Swisscom is one of the first large European telephone carriers to introduce IPTV services. In September 2004, the company began an IPTV market trial to the TV over ADSL, with about 100 friendly users and plans to roll out a market trial to as many as 600 subscribers during the fourth quarter of 2004 and first quarter of 2005. Bluewin also has had an IPTV-to-the-PC service offering in commercial deployment since August 2003, with about 10,000 subscribers as of the fourth quarter of 2004.

The carrier’s goal is to offer its service commercially beginning in the second half of 2005 across the Swisscom footprint. Over time, Bluewin plans to reach 80% of its total base of subscriber households with at least 4.3 Mb/s of bandwidth, so it can offer two streams of 1.5 Mb/s TV plus broadband data and voice-over-IP telephone service.

Bluewin’s initial IPTV service package will include about 100 channels of multi-channel digital television with an interactive program guide, movies-on-demand, third-party video-on-demand, PVR with the ability to pause live TV, personalized TV channel packages, radio, broadband Internet access and home networking and, of course, telephony.

Enhancements that will be introduced after the initial commercial launch in 2005 will include caller-ID on TV, email on TV, photo management on TV, music, video phone and cross-product bundles (with mobile, fixed line and access). With this breadth of services, Bluewin believes it will have a strong competitive advantage over potential triple-play competitors (read: cable operators) in their territory.

Although thirteen technology suppliers originally submitted responses to Bluewin’s request for information, the 2004-2005 trial is being conducted using IPTV software from Microsoft. However, the carrier continues to monitor middleware-applications platform alternatives. At the conclusion of the trial, the carrier plans to finalize its interactive TV infrastructure decisions.

Bluewin’s IPTV platform evaluation criteria included breadth of features, maturity of the product (although Bluewin has made concessions in recognition that the technology category is not mature), the strength of the supplier, scalability and readiness of the technology for a large-scale commercial deployment. Equally important are how well the middleware-applications platform can be integrated in an end-to-end solution and its ability to handle future device and service plans beyond TV, such as media center and wired/wireless in-home networking and whether or not it accommodate game consoles.

As well, Bluewin presented rigorous technical requirements to its technology supplier candidates and is monitoring their progress as the required technologies become demonstrable by the suppliers in their labs. When choosing technology suppliers, Bluewin has favored companies that understand telcos. In fact, the company deliberately eliminated several traditional broadcast cable/satellite suppliers from consideration. Another major consideration has been Bluewin’s ongoing interest in optimizing the mix of advanced codecs, available bandwidth and a minimum cost for infrastructure and customer premises equipment.

In summary, Bluewin is committed to launch its IPTV-based services commercially during the second quarter of 2005. This is very significant because the carrier is counting upon new technologies that have not yet been fully proven in a commercial deployment. For example, products using the MPEG-4 or VC1 (Windows Media) advanced codecs are just becoming available now and there have as yet been no major carrier deployments.

And even though Microsoft can already boast early adopters and commercial sales for its IPTV platform, it is competing with established IPTV suppliers that have partners with formidable credentials (like Myrio, partnered with Siemens, and Orca Interactive, which are partnered with HP and IBM)--and with IPTV suppliers that are will challenge them on their own, like Alcatel. Interestingly, because Alcatel is an incumbent network supplier at Swisscom, it is likely to work with Microsoft on the systems integration side.

Will Microsoft win or even win a spot in the top tier of IPTV technology suppliers? It’s far too early to say. Not only does the company have competition from other suppliers; it is competing against the clock. Part of the Microsoft IPTV early adopter program places the carrier in close working contact with Microsoft product development, to ensure that Microsoft delivers a carrier-class product that will help major carriers compete against today’s threats from cable and satellite.

Steve Hawley is principal consulting analyst of Advanced Media Strategies. He may be reached via his Web site, http://www.tvstrategies.com.