Phone Companies
Using Microsoft
Hit TV Service Snags
By PETER GRANT, ROBERT A. GUTH and DAVID PRINGLE
Staff Reporters of THE WALL STREET JOURNAL
June 24, 2005; Page B1 |
Over the past two years, Microsoft Corp. has convinced some of the largest telephone companies in the world to use its cutting-edge software in their plans to roll out television over Internet technology.
Now, as the carriers race to get TV services to millions of customers, they are experiencing growing pains trying to move the services from development labs to broad commercial rollouts within the next year. Most of the challenges focus on melding for the first time Microsoft software, complex hardware, existing telecommunications networks and other pieces of the infrastructure for a cohesive service.
So far, carriers say the challenges haven't derailed plans to launch the TV services widely by next year. Still, the wrinkles -- which include compatibility issues with some digital video recorders -- highlight the risks facing telecommunications operators as they try to offset their shrinking traditional land line revenue by breaking into the TV business.
Swisscom AG, a large European carrier using the Microsoft software, announced last month that it was delaying its TV rollout from this year until sometime in 2006. Telstra Corp., Australia's largest telephone company, announced this week that it scrapped plans to begin a trial phase with its Microsoft TV program, citing the "current state of [Telstra's] readiness."
Meantime, SBC Communications Inc., the largest phone company in the U.S., now says it will launch TV service in late 2005 or early 2006. The San Antonio company earlier promised to do so this year. "It's going to start off a lot slower than we had originally imagined," says John Hodulik, a telecommunications analyst with UBS Securities.
While delays are typical with new technology, telephone companies don't have the luxury of time. Competition from cable companies, wireless phone services and others is eating away at their land-line businesses. "Our speed to market is critical here," says Lea Ann Champion, an SBC executive senior vice president. Ms. Champion adds that Microsoft hasn't indicated that it expects delays.
Other phone companies that are working with Microsoft, including BellSouth Corp., Atlanta, are keeping their options open. "We're officially trialing that technology, but at the same time we're looking at all options," says Brent Fowler, a BellSouth spokesman.
Microsoft concedes that there have been snags, as with many roll-outs of complex new technologies. But it says the scale of the service being developed is unprecedented and it is on schedule.
"There are no issues that we've hit that would stand in the way of our customers launching at the end of 2005 or early 2006," says Ed Graczyk, director of marketing at Microsoft's TV unit. "In 24 months, we'll have gone from ground zero to a next-generation TV service."
Neither Microsoft nor phone companies have a good track record in TV. Some carriers tried to offer TV in the 1990s with dismal results. Microsoft has invested steadily in the business for more than a decade with little progress. TV is one of its biggest bets to gain a stronger position in consumer markets. The stakes are now higher as growth in its core PC software slows, adding pressure to find profit in its long-term investments such as television.
The Internet technology that phone companies are relying on transmits TV signals much differently than that used by satellite and cable operators, which send homes all TV channels all the time. The telecommunications TV services will turn television viewing into more like using the Internet. When a viewer wants a program, he will call it up the same way he accesses Web pages, with phone company computer servers individually delivering each show requested.
To give that flexibility to consumers requires complex hardware and software to work behind the scenes. The Microsoft software runs the set-top boxes in the home as well as the computer servers handling TV content at phone companies' premises.
Theoretically, this technology will enable phone companies to deliver TV signals over copper wires the last mile or so to homes, saving them billions of dollars in capital investment otherwise needed to string fiber-optic lines.
People involved in trials say Microsoft and the phone companies have encountered numerous issues in preparing to roll out the services to hundreds of thousands of subscribers. For example, the system needs a larger number of computer servers in local distribution points than is economically practical to provide certain features, such as instantaneous channel changing, the people involved in trials say. Mr. Graczyk says Microsoft has not gotten any complaints about this.
Also, making the Microsoft software work with hardware and software from other companies is proving difficult, these people say. Roughly 25 different pieces of software and hardware, including many from Microsoft, have to work together flawlessly, says Steven Hawley, an analyst with Advanced Media Strategies LLC, a consulting firm in Issaquah, Wash. "It makes the most complex corporate networks look like child's play," he says.
Swisscom last month said one of the problems with Microsoft's software was getting the technology to work with a digital video recorder that allows a viewer to watch a show and record a different program at the same time, a feature many consumers expect.
Microsoft's TV software rivals Siemens AG of Munich and Orca Interactive Ltd. of Tel Aviv. Both say their software already is being used to run commercial services. However, Siemens officials do say that theirs isn't yet able to deliver two television channels simultaneously to a consumer unless his household has two set-top boxes.
Also, most TV services using Internet technology already launched in Europe and Asia are less complex than what Microsoft is trying to do. That is partly because U.S. viewers expect more features, such as high-definition TV and advanced digital video recorders. Distances from phone company distribution facilities to homes also tend to be much greater in the U.S., complicating matters.
Some U.S. companies eager to get to market quickly have opted against using Internet technology altogether, for now at least. Verizon Communications Inc., New York, plans to launch a TV service this year using a broadcast technology similar to what cable companies use. Verizon expects to eventually use Internet technology when the company thinks it is ready. "We do believe [Internet technology] has the capability we want to offer," says Robert Ingalls Jr., president of retail markets for Verizon. "But we knew it wouldn't be here by the time we needed it in 2005."
|
