Alcatel (NYSE: ALA; Paris: CGEP:PA) is abandoning the further development of its IPTV middleware product, the Open Media Platform (OMP), and has agreed to sell Microsoft Corp.'s (Nasdaq: MSFT) product exclusively, according to several industry sources.

Alcatel has delayed a scheduled “next-generation” upgrade to the OMP while it hammers out its IPTV middleware partnership with Microsoft Corp. (Nasdaq: MSFT), a source close to the situation says (see Alcatel, Microsoft Confirm IPTV Deal).

In an email response to questions, an Alcatel spokesman says the vendor was promoting a combination of “Alcatel’s network infrastructure and systems integration solutions and the Microsoft TV IPTV software platform.”

The Alcatel spokesman added that existing OMP users will be provided with "a migration path" to the new combined solution and that ongoing support of OMP will be provided.

Microsoft TV marketing director Ed Graczyk states in an email that “Alcatel... will only market and sell the Microsoft/Alcatel integrated solution moving forward.”

Questions were raised about OMP's future when Alcatel and Microsoft announced their relationship in February, as Alcatel already had 24 customers for its own middleware system. Alan Mottram, president of Alcatel’s fixed solutions division, stated at the time that Alcatel was continuing development of OMP and that the existing user base would be supported.

Mottram added that the new combined package would be offered to the OMP users, but he said it was unlikely that all would want to migrate.

Now it looks as if those customers won't be seeing any more OMP upgrades.

The move also affects video headend provider Tut Systems Inc. (Nasdaq: TUTS), which OEMs the Alcatel middleware and has deployed it in 20 carriers under its brandname “iViewTV.” Tut has a contract to sell the system in North America to carriers with fewer than 150,000 access lines.

"From our perspective we’re not really concerned, because our agreement with Alcatel gives us direct access to the product, and we’ll continue to support it directly,” says Tut Systems spokesperson Jeff Schline.

This latest development is further acknowledgement by Alcatel that Microsoft has made serious inroads into large telco accounts with its IPTV solution during the past year, most notably SBC Communications Inc. (NYSE: SBC) and Swisscom AG (NYSE: SCM), with more set to be announced, sources say. (See SBC Selects Microsoft for IPTV, Swisscom Picks Alcatel for IPTV, and Microsoft Pushes Deeper Into Carriers.)

Ironically, Alcatel's middleware is already commercially deployed, and the Microsoft solution is said to need more work for large-scale carrier deployments (see Swiss IPTV Trial Hits 'Glitches' and Is Microsoft Finally Carrier Grade?).

Alcatel entered the IPTV middleware market in 2003 by acquiring two firms, iMagic and Thirdspace (see Alcatel Denies iMagic Fadeout). But it now seems the French vendor is prepared to exit that space in exchange for a Microsoft alliance that promises to generate new hardware and system integration business from large carrier deployments.

Mauro Bonomi, CEO of Minerva Networks Inc., another IPTV middleware vendor, believes Alcatel’s Microsoft gambit makes sense when viewed in the context of the company’s software history.

“Traditionally, middleware is not Alcatel’s forte,” Bonomi says. “I think they did that to energize the [IPTV] market; I think it was a move they thought they had to make to enable the triple-play market, and in fact they succeeded.”

Bonomi believes IPTV is the “killer app” that will ultimately sell the telco triple play to consumers, and ultimately drive up access infrastructure revenues for Alcatel.

— Mark Sullivan, Reporter, Light Reading