June 29, 2005
Microsoft Corp. (Nasdaq: MSFT) landed another big carrier deal this week as British incumbent BT Group plc (NYSE: BT; London: BTA) said it will throw in with the software company for its upcoming video-on-demand deployments (see BT Chooses Microsoft TV).
BT says it was working as a participant in Microsoft’s “Early Adopter” beta site program for the past eight months. In fact, the carrier has long been kicking the tires on IPTV systems (see BT Puts IPTV to the Test).
But why Microsoft? And why now?
Andrew Burke, CEO of BT Retail's BT Entertainment division, says Microsoft had the most complete solution and it offered a real differentiation from the U.K.'s current cable and satellite TV offerings.
“We had several integrators in who were trying to piece together an IPTV solution, but only Microsoft had a true end-to-end product,” Burke says (see IPTV: Microsoft's Window to Carriers).“When we looked at it, what was exciting to us, and what resonated both with us and with Microsoft, was that we don’t believe TVs will stay as TVs, PCs stay as PCs, handhelds or whatever. Convergence and new product development will push us to deliver a converged solution, and I think Microsoft is so far ahead of the competition in terms of thinking that way."
BT plans to begin trials in early 2006, with commercial service delivery planned for the summer of 2006.
Microsoft’s IPTV platform is still a work in progress and is completely untested in large commercial rollouts, yet the software giant has been particularly adept at winning large deals with operators facing competitive pressure from cable and satellite operators (see SBC Awards Microsoft $400M IPTV Deal ).
Also, BT's confidence in Microsoft comes at a time when the industry skepticism about IPTV and Microsoft has been intensified by slowdowns at Swisscom AG (NYSE: SCM) and Australian operator Telstra Corp. removing itself from Microsoft’s Early Adopter program for reasons unspecified.
In the U.K., BT will be facing Rupert Murdoch’s dominant BSkyB satellite service and cable operators NTL Group Ltd. (Nasdaq: NTLI) and Telewest Communications Networks plc (Nasdaq: TWSTY), but Burke denies BT's motivation is competition. “We are targeting people that are not taking Sky and have not taken cable; now there are 14 million homes today that have no form of pay TV, no form of on-demand content, so there is a significant market out there for -- for want of a better word -- cable and Sky ‘refuseniks.' "
Microsoft's competitors, however, have different ideas about BT's needs. “I think that deal was really about one large company wanting to do business with another large company in spite of the fact that the technology is not quite there yet,” says Mauro Bonomi, CEO at middleware player Minerva Networks Inc.
“I think BT just said ‘I don’t care about the challenges I’m hearing about the Microsoft platform, because I’m making my move right now and we will launch the service in twelve to eighteen months, but by that time Microsoft will have the challenges worked out.' But even when they do get it worked out, will the technology be scaleable or will it require a lot of expensive hardware? That is yet to be seen. Will it be a flexible and open system? It’s unlikely.” (See SBC, Microsoft Defend Lightspeed and Swisscom IPTV Stall Sends Shivers.)
BT's Burke says Microsoft's Early Adopter program put to rest any concerns the operator had. “We’ve done extensive evaluation of the product itself, and we are absolutely convinced it is the right technical solution; and by launch time, which means in the middle of next year, we have no doubt whatsoever that this product will deliver for us.”
— Mark Sullivan, Reporter, Light Reading
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