Reliance Steps Up IPTV Plans

A revamped Reliance Communications Ventures (RCoVL) is kickstarting its long-standing plans to roll out IPTV services in India by the end of the year.

To provide content for the service, Reliance has adopted an unusual strategy of bringing production in-house in addition to negotiating distribution partnerships as other IPTV providers have. The carrier has been quietly buying up TV and video production facilities over the last few months, including taking a 51 percent stake in Adlabs, a film production and distribution company.

That will give it more control over the supply of video for the service -- from making sure it has enough programming to simplifying the distribution process.

The carrier is running a trial in 20,000 homes on the Microsoft Corp. (Nasdaq: MSFT) TV platform and is in talks with Motorola Inc. (NYSE: MOT) for set-top boxes. With more than 60,000 km of fiber laid, Reliance provides the country's biggest testing ground for IPTV, and Microsoft is even talking about ponying up some investment cash.

At an event coinciding with Reliance's recent listing on the national stock exchanges, Microsoft CEO Steve Ballmer spoke via video conferencing (showing off Microsoft TV) and said the company is looking at picking up a strategic equity stake in Reliance "due to the immense potential of the IPTV business in India." Microsoft and Cisco Systems Inc. (Nasdaq: CSCO) have also committed to helping Reliance roll out the access infrastructure to support the service.

That a vendor would provide financing to a carrier using its equipment is not new to Indian carriers: ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) signed a deal with Atlas Interactive last year that would provide a $1 billion line of credit to the operator as it rolled out a triple-play network, although that effort has quietly petered out. (See ZTE Gives Indian Carrier Some Credit.)

Reliance Infocomm has been working with Microsoft since back in 2003. (See Reliance, Microsoft Team on IP TV.) The carrier planned to launch its Netway service over high-speed Ethernet connections early last year, but it has been struggling to build up its broadband subscriptions and in the meantime got sidetracked by internal strife.

Reliance Communications was formed last year when feuding brothers Mukesh and Anil Ambani carved up the Reliance empire, which included telecom, energy, and financial services. Anil Ambani took the telecom business and the demerger process was completed in February. According to a filing with the Securities and Exchange Board of India, the Reliance Netway subsidiary -- a Mukesh Ambani project -- has been dissolved.

It seems Anil Ambani wants his own project, because the new Reliance is taking a different approach. Up until now, Reliance hasn't had the last-mile infrastructure in place to carry video services, so the carrier is focusing first on building out its network. Reliance says it has ambitions to reach 5 million IPTV customers, and so far its fiber network will allow it to connect 1 million buildings.

Broadband subscriptions account for just 4 percent of revenues of the carrier's revenues, and it intends to spend 15 billion rupees (US$335 million) annually to expand the network, initially targeting 200 cities -- up from the 40 it currently reaches. (See Reliance Buoyed by Q4 Profits.)

— Nicole Willing, Reporter, Light Reading