Verizon Communications Inc. plans to use Microsoft Corp. technology for its rollout of television service over a new fiber-optic network, becoming the third major telephone company to help fulfill Microsoft’s long-stymied bid to barge into the TV business.
The software maker’s platform initially will be used to provide an interactive program guide, high-definition television, digital video recording and video-on-demand for Verizon’s FiOS TV service, which is due to launch in undisclosed markets around mid-year.
Verizon, which is spending billions to replace its copper phone lines with speedy fiberglass cables, also expects to exploit the technology’s Internet-based capabilities to roll out more advanced interactive services down the road, the companies planned to announce Monday.
The deal with Verizon comes on the heels of a contract from SBC Communications Inc. to use Microsoft’s platform to launch that telephone company’s planned TV service and an agreement with BellSouth Corp. to conduct trials with the technology.
(MSNBC is a Microsoft - NBC joint venture.)
By signing up the nation’s three biggest local phone companies, Microsoft has taken a sharp detour to achieve in just three months what it failed to accomplish in a decade, bypassing the traditional cable establishment to establish a serious beachhead in the video entertainment industry.
Prior to the deals with the three Bells, Microsoft’s only notable TV success in the United States is a new set-top box and video recorder with its software being offered in Washington state by Comcast Corp., the nation’s biggest cable company.
And in other countries, Microsoft’s technology is being used by some cable providers in Mexico and in trials and tests with the telephone companies Bell Canada, SwissCom AG of Switzerland and Telecom Italia of Italy. An earlier foray into Portugal was withdrawn.
Getting ready for Internet TV
While the latest deals aren’t obviously lucrative — SBC agreed to pay just $400 million over 10 years and no terms were disclosed for the Verizon or BellSouth agreements — the contracts may position Microsoft at the focal point of the expected convergence of TV and the Internet, helping replicate and reinforce its dominant position in the computer industry.
That convergence calls for a television signal to be transmitted in the language of the Internet, known as Internet Protocol, or IP.
“IPTV” works much the same as the Internet-based phone service known as VoIP, or voice over Internet, which breaks calls into data packets, sends them over the Internet and reassembles them on the other end.
The advantage can be twofold, but there are questions about whether IPTV can replicate the immediacy and quality of a traditional cable feed.
One benefit is that IPTV can require less bandwidth than existing cable systems, which shoot every channel available to a customer in a continuous stream all the way to that viewer’s set-top box. The viewer then selects a channel to watch, typically using a remote control and a set-top box.
With IPTV, only the desired channels are transmitted to the home. In theory, that allows the company selling programming through an IPTV system to offer a limitless choice of channels.
That's a major appeal for SBC.
Unlike Verizon, SBC is only replacing major copper arteries with fiber across its local phone network, which dominates the Midwest, Southwest and California. Because copper provides less bandwidth than fiber, SBC is looking to IPTV to enable it to serve homes which may have several TVs turned on at a single time.
By SBC’s calculation, Microsoft’s platform will allow a home to receive three standard definition TV signals, one high-definition channel, and high-speed Internet access at the same time.
With Verizon’s pricier all-fiber strategy, capacity is not an issue.
That company, which provides local phone service across most of the Northeast and Mid-Atlantic, plans to deliver television using the traditional cable transmission of every channel at once, thereby minimizing the chance of quality issues such a potential lag when changing channels.
In that case, IPTV’s main benefit is its ability to deliver interactive services such as viewing an event from multiple angles, doing a Web search related to the program, having caller ID pop up on the TV, and programming a video recorder from a cell phone.