[opendtv] News: SBC in Deal With Microsoft to Provide TV on High-Speed Lines
- From: Craig Birkmaier <craig@xxxxxxxxx>
- To: OpenDTV Mail List <opendtv@xxxxxxxxxxxxx>
- Date: Wed, 17 Nov 2004 08:55:07 -0500
http://www.nytimes.com/2004/11/17/technology/17soft.html?th=&adxnnl=1&oref=login&adxnnlx=1100699362-s7onCpkEY9918lgn98VOSg
SBC in Deal With Microsoft to Provide TV on High-Speed Lines
By KEN BELSON and MATT RICHTEL
Published: November 17, 2004
SBC Communications, as part of its effort to compete head-on with the
cable industry for television subscribers, plans to announce today
that it will pay $400 million to Microsoft for software used to
deliver TV programming over high-speed data lines.
It would be a crucial move into unproven territory for SBC, which
like the other regional telephone giants wants to grow by expanding
beyond phone and Internet services and into entertainment. To do
that, SBC expects to spend more than $4 billion over the next three
years on its fiber optic network to offer faster Internet connections
able to carry digital video programming.
The deal is also a milestone for Microsoft. The company has spent
roughly $20 billion in the last decade trying to break into the
television business, but has little to show for that investment,
industry analysts said. The 10-year agreement with SBC is Microsoft's
first commercial contract to help deliver programming to millions of
homes.
SBC plans to deploy Microsoft's software to encode television
programming before it is sent to subscribers and then decode the same
programs on TV set-top boxes in customers' homes. Most important, the
software compresses digital signals so that video programs can be
sent over high-speed data lines.
Microsoft has been testing this technology, called IP-TV, with
several telecommunications companies outside the United States,
including Bell Canada and Reliance Telecom, one of India's largest
phone providers.
Though some analysts are skeptical of how quickly and cheaply the
regional Bell companies can enter the television market, SBC plans to
start selling programming through its fiber and copper network from
the satellite provider, EchoStar, by the fourth quarter of 2005. SBC
already has a separate agreement to market EchoStar's satellite
service known as the Dish Network.
Like SBC, the Bell giants Verizon Communications and BellSouth, as
well as many smaller phone companies also plan to sell television in
the coming years to increase revenue and challenge the cable
industry, which is fast moving into the phone business with
Internet-based phones.
Richard Doherty, research director of the Envisioneering Group, a
technology consultant on Long Island, said SBC's deal with Microsoft
underscored how fierce the competition between cable and telephone
companies was about to become.
"For the first time we hear the cable companies saying, 'the telcos
are coming,' " he said.
Microsoft's software, along with SBC's plans to extend fiber optic
cables to within a few thousand feet of customers' homes, will help
the company provide digital video to consumers quickly, according to
Lea Ann Champion, who runs Internet-based operations at SBC.
Speed is crucial, she said, because cable companies are urging their
customers to replace their older analog TV services with advanced
digital services.
"It's our window of opportunity to reach cable customers," she said.
The SBC-Microsoft alliance underscores the changing nature of how
telecommunication services are delivered. To compete with cable's
high-capacity pipe into the home, phone companies are rushing to
invest billions in fiber optic networks that make it possible for
them to send larger amounts of data to homes and businesses.
"This is a very big endorsement," said Moshe Lichtman, vice president
of Microsoft TV. "It's a signature of confidence in the direction
Microsoft has been taking in this space."
Consumers will potentially have hundreds of channels to choose from,
although the delivery of that programming will be different from
cable's. All IP-TV programs will be delivered as video-on-demand -
consumers request a program from a central server and it is delivered
immediately. In contrast, cable companies typically send hundreds of
channels to customers' homes all at once - although newer, digital
cable systems can also send programs one by one as in video-on-demand.
Initially, SBC hopes that the Microsoft technology will allow it to
simultaneously send two high-definition channels and two
standard-definition channels for consumers with two televisions on at
once, as well as a high-speed Internet connection to consumers.
Subscribers will need to add only a new set-top box to receive the
programming. SBC will also have to achieve vast increases in data
speeds on its network.
Microsoft's technology will also make it easier for SBC to offer TV
programming to its customers on a variety of devices that might
eventually include cellphones and personal digital assistants, when
wireless speeds become fast enough.
The deal with SBC comes after several high-profile failures by
Microsoft in its efforts to enter the lucrative television market.
Since 1993, Microsoft has invested $20 billion in cable companies and
other television-related endeavors, said Mr. Doherty, adding that
several of those ventures soured.
But Microsoft appears to have learned from earlier mistakes. Instead
of trying to win business by become an equity partner in cable
companies, Microsoft is instead focused on improving the server
computers and set-top boxes for IP-TV.
Other phone companies are looking at using Microsoft's technology.
Together, the Bells are expected to acquire 6.1 million television
subscribers, or 6.2 percent of the national market, by 2010,
according to Jeffrey Halpern, an analyst at Sanford C. Bernstein in
New York.
A major hurdle for SBC, however, is how to increase the speed of its
network to deliver the television and Internet services it promises.
SBC will have to increase its current connection speeds by sevenfold,
which may make the company's goal of providing television programming
within a year difficult to achieve.
SBC said yesterday that it would start offering Internet-based phone
service that operates over broadband lines in early 2005. The company
is testing the service in Chicago, Dallas, Los Angeles and San
Antonio. Verizon and Qwest plan to offer similar services.
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