Alcatel-Lucent (NYSE: ALU) is joining the hunt for the smaller telco IPTV market, announcing a compact IPTV solution built around Microsoft Corp. (Nasdaq: MSFT) Mediaroom middleware that can scale to serve markets as small as 1,000 subscribers and as large as 100,000 -- and can roll out service in as little as 90 days.

The move puts Alcatel-Lucent into competition with such companies as Calix Inc. (NYSE: CALX), Occam Networks Inc. (Nasdaq: OCNW), Zhone Technologies Inc. (Nasdaq: ZHNE), and others that have focused on the Tier 2 and Tier 3 telco markets. (See Calix Scores Island Deal, Calix at TelcoTV, and Occam Lands Access Deals.)

Alcatel-Lucent is hoping to differentiate itself by offering a less costly, single-rack solution that also requires less power, heating, and cooling. While the solution is based on Microsoft's Hyper-V architecture, AlcaLu says its unique design integration enables its Integrated Solution for Microsoft Mediaroom to serve three times as many set-top boxes in a single deployment, while using a smaller number of servers, than previous Microsoft deployments.

AlcaLu worked with HP Inc. (NYSE: HPQ) on the development, using the HP BladeSystem with HP Virtual Connect technology to reduce the cabling required and enable the flexibility needed to handle changes in workload demands.

Cinergy MetroNet, a service provider in Indiana, is the first announced customer of the new system and will begin offering IPTV services in six cities later this month.

By creating an IPTV solution that is pre-integrated and lab tested, Alcatel-Lucent is reducing complexity for operators, helping to minimize their technical and commercial risks in launching IPTV, and enabling faster deployments, says Geeta Chaudhary, vice president of AlcaLu’s Multimedia Integration Services group.

Other vendors that have built ecosystems around their product expertise to target the Tier 2 and Tier 3 operators may feel the heat from AlcaLu's integrated solution, says Yankee Group Research Inc. principal analyst Vince Vittore.

"Alcatel hasn't made a huge leap forward in terms of technology -- it's the total package that's appealing," Vittore says. "Just from a cost standpoint, to be able to scale down to 1,000 units, that's a tough business case to make. If they want to dip down into that area it becomes a lot more compelling."

Smaller telcos that initially shied away from Microsoft's Mediaroom platform because of its complexity and the number of servers required have been attracted to the more recent version, launched in early 2009, that requires fewer servers. Alcatel-Lucent is taking that one step farther, says Vittore, who notes that the vendor's interest in this market is a sign of where AlcaLu believes IPTV growth is coming from. (See Microsoft Virtualizes IPTV.)

— Carol Wilson, Chief Editor, Events, Light Reading