Alcatel SA (NYSE: ALA; Paris: CGEP:PA) today basked in the glory of its contract award from SBC Communications Inc. (NYSE: SBC), a deal that has sent the vendor's share price up by $1.03, more than 8 percent, in morning trading to $13.83 (see Mais Alors! Alcatel Bags $1.7B SBC Deal ).

There's no doubt the deal is a huge win for Alcatel. But it's also going to take time to sort out how much of the gear will come from Alcatel -- and which areas of the broadband infrastructure are still up for grabs.

Case in point: IPTV, or video over broadband. While SBC will be buying a myriad of Alcatel systems for its Project Lightspeed, and it has named the vendor as its video systems integrator, the carrier has not made a final selection for its TV-over-DSL middleware system, which manages the delivery of video and broadcast TV streams across access networks (see Alcatel Unveils Open Media Suite).

Alcatel has pumped a lot of human and financial resources into its own IPTV system, and it is anxious to position itself as the lead IPTV middleware supplier as carriers consider their triple-play strategies. Winning a major RBOC account would provide Alcatel, or any IPTV middleware player, with a valuable customer reference (see Alcatel Denies iMagic Fadeout and Heavy Reading: Telco Triple Play).

It seems more likely, though, that Alcatel will find itself installing middleware from a rival supplier such as Microsoft Corp. (Nasdaq: MSFT), which has already been named as a partner by SBC, and which is as determined as Alcatel to dominate this market (see SBC's $6 Billion Banquet, Microsoft IPTV: Now That's Italian!, and Is Microsoft Finally Carrier Grade?).

For now, it appears that SBC wants an open system. Alcatel says that, as part of the bid process to win the SBC business, it had to demonstrate that its network systems could deliver TV and video services across a variety of IPTV middleware systems. "That's one of the things SBC liked about our overall architecture. It can support the middleware from other suppliers as well as our own," says a spokesman.

SBC declined to comment on whether Alcatel was being considered as an IPTV system supplier, saying only that Microsoft's system was still being trialed in its labs.

The final decision about which IPTV middleware to use will be a tough one, says an industry insider, as each has its own issues. The specialist, who preferred not to be named, says that, while the Microsoft system looks great in demos and at the software firm's solutions center, its complexity makes it hard to transfer from the lab into a live network. News of some glitches at trial customer Swisscom AG (NYSE: SCM) have not helped its cause, he adds (see Swiss IPTV Trial Hits 'Glitches').

Alcatel, meanwhile, has credibility at the network level, but suffers from being a piecemeal system that has been sourced from different acquisitions and glued together, says our source.

And although Alcatel has some deployments and customer wins under its belt, including Softbank in Japan and SaskTel in Canada, the insider says it has yet to prove that its middleware can function in an effective, large-scale operational environment (see Russians Pick Alcatel for Entertainment and Alcatel, Acer to Deploy IP TV in Taiwan).

He believes that other middleware providers, such as Myrio Corp., Minerva Networks Inc., and Orca Interactive Ltd. have greater technical credibility, and have systems that probably fit better into carriers' networks. However, their big problem is scale, he says, and they'll have a hard time getting a large carrier to commit to their systems.

— Ray Le Maistre, International News Editor, Light Reading