Alcatel & Microsoft Going Steady

PALO ALTO, Calif. -- Alcatel's (NYSE: ALA; Paris: CGEP:PA) North America CTO Kenny Frank says his company is perfectly happy in a supporting role to Microsoft Corp. (Nasdaq: MSFT) in telecom IPTV rollouts, such as the one under way at SBC Communications Inc. (NYSE: SBC).

“The partnership with SBC and with Microsoft is really where Alcatel really wants to go as a company, you know, providing this integration role,” Frank told Light Reading shortly after his presentation (see Alcatel, Microsoft Confirm IPTV Deal). “I think this is far more on the assisting side -- in getting this product out and making it happen -- than anything else.”

“I think this is the model that is going to be used by other telcos to really improve their time to market,” Frank added (see IPTV Scramble Is On).

Frank spoke at 13th annual Symposium, “Next Generation Media Networks," presented here by the Stanford Networking Research Center and Accel Partners.

Alcatel, Microsoft, and SBC are getting along swimmingly, Frank says (see Inside SBC's IPTV Factory). “That activity is doing very well, and we’re showing them what we can do for them, by bringing Microsoft and partnering with them to make this happen.

“The challenges are there, but then the challenges are there if [SBC] were to do the integration themselves.".

Several industry sources, however, have told Light Reading that Alcatel and Microsoft are now dealing with some serious scaleability problems in their combined solution, a notion Frank firmly dismisses (see Swiss IPTV Trial Hits 'Glitches').

“That’s not true,” he says. “We are doing a significant amount of integration right now, so we’re going to be ready, trust me. I’m very bullish and excited about the way it’s going so far.”

While Alcatel may play a “supporting” role in SBC’s ambitious rollout, the Paris-based company’s behind-the-scenes work may be the most crucial, Frank argues.

During his presentation, he showed a slide illustrating the chief concerns of Jeff Weber, an SBC VP in charge of planning the carrier's IPTV offering. “Jeff, what keeps you up at night?” the slide read (see SBC: IPTV's Day Has Come).

“It’s not new compression schemes, not content deals, not content security; it’s not the new Microsoft platform, nor building access to 18 million homes,” Frank says. “The thing he’s worried about is the integration of the solution -- there’s a lot of components that must fit together to make this thing work.”

Most observers agree SBC is betting its future on its massive fiber build and subsequent triple-play offering. It sounds dramatic, but Frank believes that SBC, and all big carriers, may not have a choice.

“You have the competitive threat of the cable companies entering the voice space, and with the flattening of the voice revenues, the North American telcos are having to more aggressively fight back to retain their share of the opportunity."

Frank says some remain very skeptical of the business case for telecom carrier IPTV, but “for carriers the business case of not doing anything is far worse.”

The groundwork for a partnership arrangement between Alcatel and Microsoft was set when the two found themselves working on IPTV projects at common customers such as Swisscom AG (NYSE: SCM) and SBC.

Under the now-formalized agreement, Alcatel acts as the “sole global distributor and integrator,” while Microsoft is the “preferred partner” for the IPTV software platform, according to Frank.

Alcatel has also agreed to halt development of its own IPTV middleware platform in favor of an end-to-end Microsoft TV solution (see Alcatel's IPTV U-Turn).

— Mark Sullivan, Reporter, Light Reading