SBC to Deploy IPTV Edition

SBC has signed a 10-year, $400 million-plus agreement, under which it will use IPTV Edition to launch interactive and on-demand television services. The carrier has been testing an IPTV offering based on the platform since June, and says it will begin field trials of the offering in mid-2005. (Note: a number of other companies are conducting trials of the platform, including Telecom Italia, Bell Canada, Reliance Infocomm, and Swisscom/Bluewin.)

Commercial launch of the service is currently scheduled for late 2005, and SBC says that it hopes to become the number-2 pay-TV service provider in the markets it serves by 2007. The service will be delivered over "Project Lightspeed," a $4 billion "fiber-to-the-node" (FTTN) network which SBC will begin constructing in the first quarter of next year, and which the company says should reach 18 million households by the end of 2007 (note: SBC recently announced that it had chosen Alcatel as its network access equipment provider for Project Lightspeed, in a deal worth $1.7 billion): in addition to interactive television, the new network will be used to support voice-over-IP and ultra-high-speed Internet access services. (Note: when announcing the new service, SBC stressed that the use of IP technology to deliver a variety of services over a single network connection means that it will be possible to access and share those services via multiple devices, such as TV's, PC's, PDA's and phones. Shortly after revealing its plans to use IPTV Edition, SBC announced a multi-year expansion of its existing partnership with Yahoo!, under which the latter will supply it with a variety of branded, cross-platform services, allowing its subscribers to, for example, check email on their televisions or set up digital video recordings over the Internet.)

SBC has provided some information on the IPTV service it plans to use the Microsoft platform to offer: it says that it will feature video-on-demand with "a substantial content library" (note: the company has not yet announced any VOD content - licensing deals; however, earlier this month it revealed that it had hired Dan York --who was previously SVP of programming and development at content-aggregator, iN DEMAND, where he was responsible for the company's programming relationships with Hollywood studios, cable networks and premium content providers, such as HBO and Showtime--to head up its video content strategy and its content-acquisition operations), a multimedia EPG with customizable channel line-ups, instant channel changing (note: the ability to support this is one of the competitive advantages IPTV offers over digital cable), optional HDTV, digital video recording, the ability to play back on TV photos stored on a networked computer, picture-in-picture functionality, end-to-end digital rights management technology capable of protecting content across multiple devices, and alert/notification services, including the ability to alert a customer of upcoming favorite shows, and caller ID and instant messaging on the TV screen. At a later stage, it may feature more sophisticated interactive TV services, such as multi-screen/multi-camera apps. To optimize bandwidth use, SBC plans to use a switched video distribution system that streams only the content that each customer requests, instead of broadcasting all channels to all customers at once. It also plans to use either Microsoft's own VC1 technology or MPEG-4 to compress video content transported over its network (note: SBC says that the network will support throughput of up to 25Mbps), allowing it to deliver one high-definition and up to 4 standard-definition TV feeds to each household, in addition to high-speed data and voice-over-IP services.

According to Microsoft TV's director of marketing, Ed Graczyk, who spoke to [itvt] last week, the deal with SBC is important not only to Microsoft but to the IPTV industry in general: "Obviously this is a strategic milestone for us, because it's the first commercial deployment of our IPTV product line," he said. "It's also a huge deal in terms of dollar value and units, and, in fact, is by several orders of magnitude the biggest IPTV software deal ever -- it's likely also one of the largest TV software deals ever. Because it's so large, we think it has a lot of ramifications for the broader IPTV ecosystem, when you take into account all the 3rd-party technologies and products that connect to and integrate with or sit on top of or under our solution." However, while the new deal will "raise the importance of Microsoft's IPTV strategy a few notches up from where it was," Graczyk said, it is unlikely to result in a major expansion of the Microsoft TV division: "We may hire a few more people in our marketing and development groups as a result, but not huge numbers, because we've planned for this all along," he explained. "However, there will be some growth in our services side: we'll be hiring the kind of people who are onsite with the customers, doing integration."

[itvt] asked Graczyk why he believes so many telcos are starting to enter the IPTV space (note: Microsoft's development of its IPTV platform was not originally undertaken with telcos in mind: "When we first developed this, we were really thinking of it as a technology that cable could use to take advantage of the DOCSIS network, in order to move to an all-digital, all-IP infrastructure," Graczyk explained): "As you know, it allows them to compete with the cable companies which are increasingly offering triple-play services," he said. "But what gets them so excited about it is that, it doesn't just allow them to get into the TV business with a very competitive offering, it allows them to change the ground rules, by offering not only pay-TV services, but services that cross the various devices in the home, such as the TV, the phone and the gaming station. This, of course, is because with IPTV, your TV infrastructure uses the same technology as all these other devices that are connected to the broadband pipe into the home. When people talk about triple play today, it's just a marketing bundle of 3 discreet services. But IP technology allows a variety of secondary triple-play services that haven't been possible until now, because it fully integrates video, voice and data. IPTV also has other advantages," he continued. "Practically speaking, you have instant channel changing, because channels can be tuned in 150 milliseconds as opposed to the 1-2 seconds it takes in other digital television environments. Also, it's much more bandwidth-efficient than traditional broadcast TV delivery systems, because everything is on demand, so to speak: individual channels are streamed to the set-top box, based on the choices made by the consumer, rather than everything being broadcast to everybody. Because of this, you can offer literally thousands of channels in the program guide without affecting how much bandwidth you need into the home."

According to Graczyk, Microsoft TV is working behind the scenes to ensure that its IPTV customers are able to secure content and applications for their new services: "We had a content summit last week in Los Angeles," he said, "where we sought to educate and evangelize the content community about IPTV, Windows Media and digital rights management. It also served as an opportunity to introduce our customers to the content community, and was very successful. In general we're seeing a lot of enthusiasm for IPTV from the content community. It not only offers them another distribution channel for their programming, but also enables some interesting new business models that are possible with modern DRM. We're also in the process of putting together a developer group for our IPTV solution," he continued, "as well as creating tools to help developers and content owners create their own IPTV applications. At the end of the day, though, it's the network operators who decide which content and application developers we should work with, so the developer program isn't an 'open' program in the sense that anyone can join."