Microsoft IPTV: At long last, progress

Peter Burrows
07 Nov 2007

For nearly a decade, Microsoft (MSFT) has tried to shake up the market for Internet TV, attempting to build a family of products that would give phone companies a big push forward in their battle with cable and satellite TV providers. But as is the case in other non-PC markets, such as smartphones and music players, Microsoft's progress in TV has been painfully slow.

Despite massive investments and headline-grabbing contracts with many of the world's largest phone companies, only about 500,000 homes now get TV from phone companies using Microsoft software and technology. In a market where dozens of small companies have developed an expertise in key niches, from video servers to set-top boxes, Microsoft has tried to cover all the bases of delivering TV programming via Internet technology"”an approach that for many carriers has proved harder and more expensive than expected to carry out on a large scale.

IPTV gathers momentum

But for the moment, the pace seems to be picking up on this slow march toward TV innovation, as plans to use Microsoft's Internet protocol TV products actually begin getting off the ground. AT&T (T), which by most accounts has been the poster child for Microsoft's disappointing progress, said in October that its U-Verse IPTV service had amassed 126,000 customers in the third quarter, from 51,000 in the second quarter. Ma Bell plans to make the service available to 8 million homes by the end of the year, up from 5 million now. Swisscom says it has lured 50,000 of Switzerland's 3 million homes away from cable and satellite rivals using Microsoft IPTV.

A year after launching its BT Vision IPTV service, British Telecom Group (BT) will release figures on subscriber gains on Nov. 8. BT Vision Chief Executive Dan Marks says his target is to sign up 2 million to 3 million customers within three to five years. 'It took longer than everyone wanted to get to this point, but we're pretty comfortable with the way things are going,' Marks says.

Microsoft continues to line up new business. On Nov. 5, Indian telecom powerhouse Reliance Communications announced a $500 million deal to begin delivering Microsoft's technology by April, 2008"”four years after first announcing a partnership with Microsoft. Yankee Group analyst Vince Vittore expects an increase in 2008, though he won't predict how steep. 'It's a complicated business,' Vittore says. 'But Microsoft is starting to get traction, and they've got the biggest carriers as key customers.'

The road to success

Why the holdup‾ While dumping Google's (GOOG) grainy YouTube videos onto the TV is relatively easy, getting glitch-free, HD-quality pictures and no-wait channel changing requires massive behind-the-scenes engineering"”a process made even more difficult by the cautious pace at which phone companies introduce new technologies onto their networks. Many of AT&T's customers suffered a 12-hour blackout of their TV service in late October. 'People will tolerate being without their phone for two minutes or without the Internet for 20 minutes, but they won't tolerate their TV going off at all,' Vittore says.

To keep up the progress, Microsoft will not only have to eliminate glitches but will need to find ways to make its basic TV service stand out vs. cable and satellite rivals. MediaRoom, the most recent makeover of its IPTV software, includes many slick features, such as the ability to see a thumbnail video of what's playing on each station in the program guide.

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