U.S. telecommunications giant SBC Communications plans to test Internet Protocol TV (IPTV), a forthcoming Microsoft solution for delivering TV broadcasts over IP networks, by the end of 2004. The deal will give Microsoft a chance to prove the efficacy of a technology which could open up new markets to digital audio and video, but which will require major new investments from telecom companies.

SBC is one of four large regional telecommunications companies in the United States, and currently operates voice and data service to more than 50 million endpoints (consumers and businesses) in 13 states. Traditional phone carriers such as SBC are facing increased competition from cable companies, which are beginning to offer homes voice service in addition to broadband Internet access and television.

Announced in late 2003, Microsoft's IPTV could help traditional phone providers match cable's "triple threat" by letting them add TV to their arsenal. (While Microsoft also promotes IPTV to cable providers as a way to lower their costs by delivering video over the same IP networks that they use for data and voice, so far no cable providers have signed up to participate.) However, IPTV is still in its early development stages and has not been publicly tested or demonstrated on a large scale. In addition, it will require significant investments, including the deployment of new set-top boxes and higher-bandwidth connections to support streaming video (particularly high-definition TV).

This makes the planned SBC trial important: the company announced the IPTV trial along with plans to spend up to US$6 billion improving its network, including deploying fiber optic cable more deeply into neighborhoods. SBC is the first U.S. company to agree to test IPTV, joining Bell Canada (which is upgrading its analog network) and India's Reliance Infocomm (which plans to wire Indian homes with fiber optic cable).

Separately, Lucent Technologies, a major telecom equipment vendor, has agreed to integrate support for IPTV into some of its products. Specifically, it will integrate IPTV into its ADSL2+ DSL modem and Stinger Digital Subscriber Line Access Multiplexor (DSLAM—a mechanism used by telephone companies to transfer data between customers' DSL lines and the Internet backbone). In addition, Lucent Worldwide Services, the company's consulting arm, has signed a nonexclusive agreement with Microsoft to help telephone companies design, integrate, and deploy IPTV.

The original announcement of IPTV was covered in "TV-over-IP Technology Planned" on page 21 of the Dec. 2003 Update.

Microsoft's IPTV page is at www.microsoft.com/tv/content/Solutions/IPTV/mstv_IPTV_Overview.mspx.