SureWest Communications (Nasdaq: SURW) might not be huge, but the blessing it's given Microsoft Corp. (Nasdaq: MSFT) could be a big sign that the vendor is ready to expand its IPTV software to smaller operators.

Last week, SureWest announced it will be using Mediaroom as its IPTV platform, apparently the first Tier 2 operator to do so. SureWest will keep its current IPTV network running, but an expansion with capacity for 25,000 more users will be based on Mediaroom. (See SureWest Deploying Microsoft Mediaroom.)

Future IPTV build-outs will be based on Mediaroom as well, rather than on platforms from SureWest's previous vendors -- notably, Minerva Networks Inc. , which had provided SureWest's IPTV middleware until now.

It's a good testimonial for Mediaroom. SureWest's IPTV network reaches just 20,000 subscribers in the Sacramento region, but it's an IPTV pioneer. (See Microsoft's Virtual IPTV Math and Microsoft Virtualizes IPTV.)

"Microsoft is making hay now and moving these systems down the value chain to the smaller operators," says Colin Dixon, an analyst with The Diffusion Group (TDG) .

Microsoft's win reflects not only the maturity of its own platform, but of IPTV in general. SureWest has been an IPTV pioneer since 2004, building its network from the pieces available from various vendors. (Back then, the list didn't include Microsoft.)

Since then, Microsoft has taken its dings for Mediaroom. The platform won the hearts of big carriers like AT&T Inc. (NYSE: T), which uses it for U-verse, but smaller carriers were less enthused. For one thing, Mediaroom -- formerly called Microsoft TV Edition -- required a lot of servers, making for a hefty and expensive installation. That's changed, says Bill DeMuth, chief technology officer for SureWest.

"Even when Microsoft first came out with Mediaroom, they were only focused on the big carriers at the time," DeMuth says. "And when they first launched, they had fewer features and less functionality than we already had."

Now, for example, Microsoft has cut down the number of servers Mediaroom needs. The platform can now deliver six HD channels per server, compared with one channel (of any type) previously, DeMuth says. Microsoft is also taking advantage of virtualization features in Windows to let small operators use servers more efficiently. (DeMuth characterized virtualization as a feature for very small operators and said SureWest isn't using it.)

SureWest wasn't just bargain hunting, though. With IPTV products improving, the carrier sees a chance to stop being such a pioneer in terms of building the network. By going with Mediaroom, SureWest can do less integration work and focus more on creating new applications, according to DeMuth. He's particularly interested in Microsoft's plans for adding social media to IPTV.

So, who gets hurt if Mediaroom gains more Tier 2 business? One likely answer is Minerva, given its strong standing in that market.

"Minerva has really had the Tier 2 and Tier 3 to themselves for the last two years, since Myrio got bought by Nokia Networks ," Dixon says. "They really lost focus on this market, and Minerva just rolled in. Minerva is not cheap. I hear the Tier 2s and 3s talking about that all the time." (See Siemens Touts Dutch IPTV and IPTV Roundup: What's With NSN? )

Minerva CEO Mauro Bonomi disagrees with that last part, of course. "We pride ourselves with enabling a far superior return on investment (ROI) than competing solutions," he writes in an email to Light Reading.

As for any competition from Mediaroom, Bonomi says Minerva's open architecture provides a way for Internet companies to contribute to the platform, which will, it is hoped, help create new services that go beyond putting Internet widgets on a screen. That could be helpful, considering so many operators are done with the nuts and bolts of IPTV and are looking for ways to set their services apart.

Bonomi also notes that Minerva is still adding to the 175 deployments it's got. The company has landed two new contracts with "large international operators" to be announced soon, he writes.

And in SureWest's specific case, Bonomi offers this explanation: SureWest is expanding into areas where it's going head-to-head against U-verse. "In those areas, they have decided to compete using the same exact technology as AT&T," he writes.

SureWest won't be migrating IPTV customers to the Mediaroom platform right away, partly because doing so would require old customers to change their set-top boxes. There's also the fact that most of those subscribers are on SureWest's fiber network; the Mediaroom buildout, adding capacity for 25,000 subscribers, will run on SureWest's copper network, which feeds only 2,200 video subscribers so far. So the carrier will have some duplication in its network core for a few years, DeMuth says.

— Craig Matsumoto, West Coast Editor, Light Reading