Microsoft IPTV is still fuzzy but promising

Software companies and telcos both face challenges

Several big telecommunications operators and, in particular, the world's largest software maker, Microsoft, hope to sway many couch potatoes to zap their old-fashioned notions about television and tune into the convergence of TV and the Internet.

Internet TV, or IPTV, is arguably one of the hottest new technologies in the communications sector. A handful of operators are already offering service with their own, largely home-grown systems, but many eyes are glued to the screen to see what Microsoft is concocting together with some big-name carriers.

Using the same DSL (digital subscriber line) high-speed connection that offers customers broadband Internet access over copper telephone lines, Microsoft-aligned operators such as BT Group PLC, Telecom Italia SpA, SBC Communications Inc. and India's Reliance Infocomm Ltd. aim to add television to their product offerings to achieve the much-cited "triple play" of bundled voice, data and video services. Their motto: if -- in our age of the digital packet -- documents, images, music and even phone calls can be broken up into bits, thrust through networks and reassembled at the other end by the Internet protocol, why not TV?

It's a legitimate question, and one that telephone companies -- painfully aware that the days of their cash-cow circuit-switched telephone business are numbered as cheap VOIP (voice over IP) services go mass market -- aim to answer, despite their failed TV attempts in the past.

More than a decade ago, several big carriers, such as Deutsche Telekom AG, tried unsuccessfully to deliver TV service over analog lines. Now, with digital technology, operators are more likely to succeed, according to Laura Behrens, principle research media analyst at Gartner Inc. "Delivery of anything digital into the consumer home is so much more reliable and less costly at the operating level than anything operators ever dreamt of in the analog era," she said.

The quality of the digital stream into the home, however, is a big factor and one that operators say will distinguish IPTV from video streamed to a PC over the Internet. On the public Internet, packets can be delayed or lost entirely, explaining why Web video can be so jerky and low resolution. IPTV, by comparison, is engineered for end-to-end delivery of high-quality video as good as any digital cable or satellite feed.

One of the components necessary to provide this quality of delivery is a dedicated transmission path. Another is a high-performance set-top box. And still another, software that unites all the pieces.

For instance, under the IPTV service that French network operator France Télécom SA has been offering over its DSL lines since March 2004, live TV programs and video-on-demand are transmitted as MPEG2 streams over an IP connection, but the video streams and normal Internet traffic are kept from interfering with one another by separating them at the ATM (Asynchronous Transfer Mode) layer. They are transmitted in separate virtual channels over the same piece of copper between the DSLAM (DSL access multiplexer) and the DSL modem in the subscriber's home. France Télécom uses the SmartVision Internet TV system from Thales SA.

IPTV set-top boxes offer new encoding technology designed to highly compress video. Such compression can reduce not only network congestion but also the jumpiness of video simply because the signal will take up less network capacity, and allow the delivery of TV over narrower channels than would otherwise be possible.

And lastly software plays a crucial role in making the many different systems communicate with each other. That's where Microsoft hopes to make its mark. Around a dozen well-known operators are currently testing Microsoft TV IPTV Edition software. German electronics giant Siemens AG is competing for market share with a rival TV system but so far has struck deals with a handful of operators, including Advanced Datanetwork Communications Co. Ltd. (ADC) in Thailand and Belgacom SA in Belgium.

"Microsoft has designed a client-server system to run on the infrastructure of numerous vendors," said William Cooper, principle consultant at the privately held consultancy in London and author of the report: IPTV: Broadband meets broadcast -- The network television revolution. "This is something that the company has mastered in the PC world."

Carriers are interested in working with Microsoft, according to Cooper, to extend its expertise in home computing to the emerging home entertainment market and other home networking opportunities. It helps that Microsoft has been able to persuade French telecommunication giant Alcatel SA, a trusted name to many carriers and one of the world's largest suppliers of DSL equipment, to abandon its own IPTV plans and work together with the U.S. software company.

But all things said and done, the picture Microsoft has produced so far is a bit fuzzy.

In May Swisscom Ltd., one of the first telcos in Europe to agree to test Microsoft's software platform, was forced to delay the launch of commercial service from the second half of 2005 to an undetermined date next year largely because of technical difficulties with the software. "They aren't as far along as they thought they would be," said Swisscom communications director Pia Colombo. "Now we are going to have to wait until all the kinks are worked out."

In June, Australian telco Telstra Corp. dropped out of Microsoft's early adopter program. "We are investigating IPTV because it makes sense for a telco in our position to do so," said Telstra spokesman Warwick Ponder. "But if and when we make a decision to offer an IPTV service, from a commercial and technical perspective, we will look at a number of serious options, including Microsoft."

Similarly, the three big carriers that Microsoft has lined up in the U.S. -- BellSouth Corp., SBC and Verizon Communications Inc. -- have signalled delays in their rollout plans.

No one said the move to IPTV would be a piece of cake. "There are lots of pieces to the big IPTV puzzle," said Ed Gracyzk, director of marketing for the Microsoft TV division, speaking of his own group's challenges to work out the kinks in their deployments. "We're one of those pieces, and we aim to finish our software later this year. But every telco has its own requirements, too, and will need to work closely with its suppliers for set-top boxes, encoders, content and more to make everything work."

Some analysts warn of scalability issues as well, questioning whether the technology is ripe enough to provide service to thousands of customers simultaneously. "Microsoft's IPTV software platform works; I've seen it and I'm impressed," said Cooper. "But it's one thing to show the service using a single client and a single server at a trade show and quite another to deploy the service in a large, live network where lots can go wrong."

Microsoft remains convinced that its IPTV technology will succeed and change the way people access broadcast TV, movies and other video content, and, in particular, the way they interact with the service.

"Our IPTV solution offers a bunch of better TV features, like an elegant user interface, easy navigating, instant channeling and an interactive program guide," said Gracyzk.

Although some critics say rival systems provide many of the same features, Cooper claims the Microsoft interface, which looks similar to the one used in the company's Media Center Edition, "is really sexy" and the instant channeling "truly unique in the industry."

Microsoft's technology cuts the 1-to-2 second delay typically required to switch channels in satellite and cable transmissions to under 150 milliseconds "or faster than the blink of an eye," said Gracyzk.

The picture-in-picture (PIP) program guide functionality allows users to open up one or more smaller screens and simultaneously view programs on other channels --- all live and immediately available at the click of a button.

Down the road, Microsoft envisions its software platform also supporting what Gracyzk calls "connected entertainment," a feature that will link all digital devices, such as PCs, game consoles, video recorders and phones in the home.

All this is possible, of course, if telcos choose Microsoft's platform, which the company boasts as being the only "end-to-end" system in the market. Microsoft's platform, according to Gracyzk, connects every component in the IPTV value chain, from the point content enters the network to the point it is displayed on the TV screen.

While that's a tempting proposition for telcos, it's also a scary one because, from a software perspective, it forces them to put all their eggs in one basket, according to analyst Cooper.

Telcos face another challenge, albeit one less technical: content. They'll need to convince TV stations, movie studios and other content producers to work with them. And they'll need to line up offerings that are not only as compelling but also as numerous as those already beamed free by satellite operators.

If operators can't do this, users may not bite for the service. "The interactive features of IPTV sound really cool, but I already have free access to more than 3,000 programs via satellite, so I'm not going to be easily persuaded to use this new technology, especially if I have to pay for fewer programs," said Pedro Mpaltatzis, an avid PC and TV user in Düsseldorf, Germany.

Operators planning to offer IPTV should listen closely to concerns by potential customers like Mpaltatzis. All the bells and whistles that Microsoft promises to deliver with its software platform are arguably nice to have and perhaps even necessary to generate ample interest. But if the core offering -- content -- is insufficient or overly priced, this new form of television may not win enough eyeballs to make it a lucrative business, like the failed systems before it.


Copyright © 2005 IDG Communications, Inc.

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