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IPTV: Microsoft's Window to Carriers

The IPTV equipment and software market may seem crowded with vendors, but there are really only two choices for large telecom carriers: an end-to-end solution from Microsoft Corp. (Nasdaq: MSFT) or a “best-of-breed” solution from its competitors.

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

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rjmcmahon 12/5/2012 | 3:13:24 AM
re: IPTV: Microsoft's Window to Carriers Can someone explain to me what is the special hardware required for IPTV? Apart from a set top box, that is?

Today, you need a PC, some free software, and a broadband link. You can sample some traditional TV affilliates news programming at the following sites

http://www.feedroom.com
http://www.ibsys.com

Eventually you'll be able to get every sports event and music video you want without having to wait. All at the highest resolutions that modern technology provides.
canadian 12/5/2012 | 3:13:24 AM
re: IPTV: Microsoft's Window to Carriers I just posted a similar message on the Me-too TV article - I can understand that there are large software challenges with IPTV and Microsoft probably has a good handle on that.

Can someone explain to me what is the special hardware required for IPTV? Apart from a set top box, that is?
canadian 12/5/2012 | 3:13:23 AM
re: IPTV: Microsoft's Window to Carriers Thanks McMahon.

However, I am curious - Microsoft seems to be doing just the software, there must be video being served from servers that can see my requests on demand and serve it out (in the final scenario you mention - that means 300 million simultaneous TVs watching different content at the same time in the US alone).

Who makes the hardware component required for IPTV? I can't believe today's equipment will handle that load?

Thanks!
digits 12/5/2012 | 3:13:22 AM
re: IPTV: Microsoft's Window to Carriers There's quite a number of different elements involved -- for an overview of the main elements and what they do, check out the 'Who Makes What: Telco Video' report at

http://www.lightreading.com/do...

Ray, Light Reading
static 12/5/2012 | 3:13:21 AM
re: IPTV: Microsoft's Window to Carriers Hi,
While there may be 300 million TVs turned on I don't expect they'll all be watching different channels. I suspect that the demographics are such that most people in the same area will be watching pretty much the same stuff.
Also I'm not sure that real time channel surfing is something that is in Microsoft's area of expertise.

rjmcmahon 12/5/2012 | 3:13:20 AM
re: IPTV: Microsoft's Window to Carriers Sports Events will not be available until they actually occur. They also have dramatically decreasing value over time. Also, new content is likely to be staggered in its release. Even in a "channelless" world, there will be a pace to the availability of new content.

I believe I agree with your analysis. (It's worth noting that the local news has no shelf life either. That's why the feedroom can afford the content they aggregate. It cost them nothing.)

The difference in our perspectives is that I'm saying that IPTV will be last in line when it comes to getting content. The best the phone companies can hope for is content which has no shelf life and no value. They'll be boxed out of everything of quality. They'll have to turn to supporting piracy to satisfy consumers.

(It's worth noting that Yahoo has no relevant video streams even with an old Hollywood exec at the helm. Remember Mark Cuban's broadcast.com for soemthing like a billion dollars? Nothing left there from what I can tell except a guy with holding the loot proudly making an idiot out of himself.)

The phone companies are going to fail in consumer video too. They aren't even really trying because they are at such a disadvantage to the cable cos. Their real goal is to monopolize fiber access to fortune 1000 businesses. If they were serious about IP video to residences they would only build the network and let the content be provided by those who truly have the broadcasting rights. They're not doig that. They're playing to Wall Street hype and using the hypothesis of competition to obtain a position of private monopoly over data access.
paolo.franzoi 12/5/2012 | 3:13:20 AM
re: IPTV: Microsoft's Window to Carriers
rj,

Couple of comments.

I think you might want to read your statement and modify it a bit. Sports Events will not be available until they actually occur. They also have dramatically decreasing value over time. Also, new content is likely to be staggered in its release. Even in a "channelless" world, there will be a pace to the availability of new content.

Also, the idea of lots of content generators with a large following is pretty slim. I have only seen 1 music video that would really qualify as something really well done. It was done by a film student and friends as a way of getting attention.

www.ryanmcfaul.com/mirror/gb_m...

seven
canadian 12/5/2012 | 3:13:14 AM
re: IPTV: Microsoft's Window to Carriers There's quite a number of different elements involved -- for an overview of the main elements and what they do, check out the 'Who Makes What: Telco Video' report at

http://www.lightreading.com/do...

Ray, Light Reading <\b>

Ray,

IPTV is not Telco TV. Or at least, Microsoft's version of IPTV (Microsoft TV) is not Telco TV.

It says so on the Microsoft TV website. And Microsoft seems to be monopolizing the IPTV space.

Therefore, I am not convinced Lightreading's Telco TV report (while somewhat relevant) is an accurate explanation of IPTV.

And if we assume the two are the same, the things that Microsoft TV talks about are not possible with the networks shown in the Telco TV report, without *significant* upgrades - haven't seen any signs of Wall Street letting the Telcos do that just yet.
paolo.franzoi 12/5/2012 | 2:55:10 AM
re: IPTV: Microsoft's Window to Carriers
Hakan,

You mistake the concern. Most of us question spending billions to make an IPTV network if there is not some content hook to get viewers to switch their current video provider.

In the US, both Sattelite and Cable are basically available everywhere and have VoD, HDTV and 100s of channels available today.

Currently the IPTV proponents are claiming that a new Programming Guide will cause viewers to switch. Most of us find that highly unlikely.

seven
[email protected] 12/5/2012 | 2:55:10 AM
re: IPTV: Microsoft's Window to Carriers Dear All,
I just like to add that in Europe there are no problem to get content to the IPTV network, predicting that content will differ between Satellite-TV/cable-TV and IPTV is a strange prediction.


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