updated 6/28/2005 7:55:30 PM ET 2005-06-28T23:55:30

Britain’s biggest phone company will use Microsoft Corp.’s technology to launch interactive TV services, joining a crowd of telephone companies around the globe who’ve allied with the software maker in a bid to compete with cable TV.

The announcement Tuesday by BT Group PLC is a boost for Microsoft’s so-called IPTV platform after some prominent setbacks and unconfirmed reports of possible glitches and delays. (MSNBC is a Microsoft - NBC joint venture.)

The Microsoft product will be used by BT to deliver video-on-demand and interactive features such as online chat, voting, gambling and video games. But unlike other phone companies such as SBC Communications Inc., BT is not planning to use the IPTV platform to deliver the regular lineup of cable TV channels.

Instead, it will be integrating the technology with a free digital broadcast platform introduced by the BBC in 2001, BT said.

The deal with BT marks the latest in a series of big customer wins for Microsoft’s TV technology among phone companies looking to compete with cable, including three of the four regional Bells in the United States.

But the announcement also comes at an opportune time for Microsoft, which has seen IPTV trials with customers in Switzerland and Australia stumble over the past month.

In May, Swisscom AG announced it won’t launch its IPTV service — IP stands for Internet Protocol — during the second half of 2005 as planned. And last week, Telstra Corp. of Australia revealed it will not be conducting market trials with the software.

Microsoft has said both developments are related to factors other than its software.

Meanwhile, in early June, numerous news reports emerging from a tech show in Chicago cited anonymous sources as saying the Microsoft technology is encountering serious problems that could force further delays in SBC’s planned rollout of a full-blown IPTV system by late 2005 or early 2006.

“Most of those reports were false,” Moshe Lichtman, corporate vice president for Microsoft TV, said in an interview Tuesday.

He acknowledged that there have been difficulties tying together a new software platform with a wide array of hardware from a variety of vendors, but said nothing insurmountable has emerged.

“When you reinvent TV, there are a lot of moving parts, and some pieces of puzzle are taking longer to come together,” Lichtman said. But, he added, “Our partners are making dramatic progress, and the customers we have talked about are focused and their plans haven’t changed.”

While it’s unclear why, both SBC and Verizon have been nudging back their timetables for testing and launching their cable TV services.

SBC, based in San Antonio, initially planned to start selling IPTV-based cable service in at least one market by the end of 2005. But in recent months, the timetable has drifted to late 2005 or early 2006, and SBC’s wording has shifted to an “initial controlled market launch” rather than a market-wide rollout.

So far, SBC has only tested the Microsoft technology in the field at a handful of employees’ homes. A larger trial with employees is slated for this summer.

Verizon, which like BT is initially using IPTV to deliver video-on-demand and other interactive services on top of a traditional cable delivery platform, has also backed away some from its ambitious timetable for introducing TV over the all-fiber network it is building.

The New York-based company, which has been conducting trials with employees in Texas, originally indicated it would launch the service in at least one market around mid-year. More recently it has pointed to the end of September or, more vaguely, “during” the second half of this year.

Copyright 2005 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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