Swisscom IPTV Stall Sends Shivers

Light Reading
Supercomm News Analysis
Light Reading
5/27/2005



The telecom carrier IPTV world was hit with a setback this week as Swisscom AG (NYSE: SCM) confirmed that it won't be able to commercially launch its "Bluewin TV" IPTV service during the second half of 2005, as originally planned (see Swisscom Postpones IPTV).

"The commercial launch will not be possible in the second half of 2005… as it has become apparent that the technology currently available is not yet suitable for serial delivery, in particular since the set-top box has no internal hard disk and only one television channel is available," the company explained in a statement released on Thursday.

The deployment has been widely anticipated, particularly because of the involvement of its software partner, Microsoft Corp. (Nasdaq: MSFT), and its hardware and integration partner Alcatel (NYSE: ALA; Paris: CGEP:PA).

Light Reading couldn't reach Swisscom officials on Friday for additional comment.

Swisscom's statement reminds us that its IPTV test in 2004 went well, as more than 600 households in German-speaking Switzerland tested television. But Light Reading reported that there had been some "glitches" in the field trial. Nothing serious, mind you, just last-minute integration issues (see Swiss IPTV Trial Hits 'Glitches').

The carrier's statement says its initial IPTV release will be installed for employees of the Swisscom Group and Microsoft by the end of 2005: "The aim is to launch a full TV service offering with a broad range of television programmes, a set-top box with integrated hard disk and the possibility of recording and viewing simultaneously via a single connection."

In the U.S., analysts are watching the development closely -- perhaps too closely -- as some think it might even point to additional setbacks at other networks where Microsoft and Alcatel are working together.

"[Swisscom] believes that roughly half of Swiss households will have access to a VDSL enabled access line by 2007, similar to SBC's current plan… We believe that SBC's commercial launch of IPTV could also be pushed back into 2006 from its original target of fourth quarter 2005," writes John C. Hodulik, analyst at UBS Investment Research, in a note to clients this morning.

SBC Communications Inc. (NYSE: SBC) couldn't be reached for comment.

From Alcatel's point of view, its work with Microsoft is going well and the company has downplayed any scaleability issues (see Alcatel & Microsoft Going Steady).

Microsoft is saying the whole thing is a constant learning experience. "This is a first-of-its-kind service as well as being a complex project involving many different technologies from various partners," says Ed Graczyk, director of marketing and communications for Microsoft TV. "As is common with pioneering services like Bluewin TV, sometimes the pieces of the puzzle take a bit longer to put together than initially planned but we're confident that the puzzle is coming together very well now and that Bluewin TV will launch commercially to a broad set of Swisscom customers in 2006."

On Microsoft's dealings with other carriers Graczyk says, "Our relationship with SBC and our other customers continues to move forward as we prepare for the deployment of IPTV services in late 2005 and beyond."

So far, however, there's been no talk of setbacks from the other widely watched European IPTV trials at Telecom Italia SpA (NYSE: TI). That carrier has been trialing Microsoft software and Marconi Corp. plc (Nasdaq: MRCIY; London: MONI) and Siemens AG (NYSE: SI; Frankfurt: SIE) equipment and is set to launch an IPTV service this summer.

— Phil Harvey, News Editor, Light Reading

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