IPTV: Microsoft's Window to Carriers
So far, the big phone companies are lining up for Microsoft's solution and, some say, sacrificing the vendor diversity that’s been a hallmark of telecom purchasing since... well, forever (see SBC Selects Microsoft for IPTV and BellSouth Trials Microsoft's IPTV). But are they really sacrificing an open system and vendor flexibility by choosing Microsoft?
"Microsoft is trying to replicate in the TV world what it did in the PC world and what they've done in enterprise computing and consumer computing," says Steven Hawley, principal analyst at Advanced Media Strategies LLC, a Seattle-based IPTV consultancy. "They would be pleased to own the end-to-end TV value chain, and if they succeed, their technology could be pervasive in the carrier space."
There's no doubt Microsoft has energized the IPTV space. Its presence and marketing power have raised awareness and interest among operators and suppliers alike (see IPTV Scramble Is On). But with that awareness is the growing fear that the company will eventually have too much control over the space.
There are many steps in the video distribution chain -- video on demand (VOD) and digital rights management (DRM), for example -- and many ways to execute each. Numerous small, “point-solution” companies have sprung up to address one or two of those steps, each with its own ingenious way of doing so and, in many cases, the patents to prove it (see Europe Tunes In to IPTV).
Microsoft’s end-to-end solution provides the software platform that manages the distribution of video content from the time it enters the distribution chain by encoders to the time it is decoded by the set-top box in the home, according to Ed Graczyk, director of marketing for Microsoft’s IPTV division.
Ultimately, Microsoft believes it can save carriers money because its end-to-end solution requires far fewer integration steps once it is deployed. And, if something goes wrong, there is but a single point of contact for fixing it and no blame-shifting among vendors.
That particular "let us handle it all" point of view is being embraced more and more by a variety of IPTV solutions providers. UTStarcom Inc., (Nasdaq: UTSIE) for instance, sells its mVision IPTV solution as a whole end-to-end kit with hardware and software included (see UTStarcom, Myrio Have Their IPTV ).
Many point-solution providers believe that in networks where Microsoft controls the middleware part of the solution, all other vendors, save a few Microsoft-selected partners, are effectively shut out (see Microsoft TV Names Partners). This, they say, is because many aspects of Microsoft TV are proprietary, and will not play nice with point solutions the operator/customer believes to be “best of breed.”
Some detractors even go so far as to say that carriers buying into Microsoft's solution are making a mistake by being locked into one dominant supplier. They say just as cable MSOs were locked into their proprietary equipment vendors a decade ago, so will the RBOCs be stuck with their IPTV technology choices (see Cable Analysts Long to Be Ignored).
Microsoft, however, challenges the notion that its technology limits carrier choices.
"In general, the platform is built on open standards, from the IP network it sits on all the way up," Microsoft's Graczyk says. "It's not like SBC has to rely on us if they want to go out and have games on the platform -- we're not the only provider of games." Indeed, in Microsoft's view, an "open" system doesn't have to give competitors a foot in the door so they can steal back business. "There are some unique technologies in some of this patented software we've created that would make no sense for us to open up or make available to other people, because it's a big competitive advantage, like the instant channel changing," Graczyk says.
An example: Microsoft uses its own DRM solution for content protection. But many content creators and some telecom carriers believe competing solutions, such as those sold by Widevine Technologies Inc. are more secure; and Widevine’s solution currently does not interoperate with Microsoft middleware (see IPTV Security: Content Is King).
“The frustration for me is that, on one hand, they’ve kicked things into high gear; they’ve awakened all the giants for IPTV,” says one industry source who spoke on condition of anonymity. “But in the end they’re going to slow things down, and freeze the market as they often do, and that’s going to be frustrating for all the vendors in the marketplace.”
Microsoft officials are familiar with such grousing and dismiss it as sour grapes.
“It’s a very typical competitive response,” say Microsoft's Ed Graczyk. “It’s always that argument of do you sacrifice the overall quality -- do you have the absolute best VOD server, if that’s your specialty, versus the VOD capability that we have in our platform? And frankly I’d put pretty much any piece of our platform up against any of the other providers."
Behind this back-and-forth, though, Microsoft is stacking up wins with the biggest of the big telecom carriers (see Microsoft IPTV: Now That's Italian!). Many are now in trials with the Microsoft TV solution, while SBC Communications Inc. (NYSE: SBC) and Verizon Communications Inc. (NYSE: VZ) have entered commercial agreements. “So like everything there’s pros and cons, but I think the marketplace is kind of speaking in terms of where they feel the value is and the benefit,” Graczyk says.
— Mark Sullivan, Reporter, Light Reading