Q&A: Microsoft, Alcatel Collaboration Propels Internet Protocol TV into Primetime

REDMOND, Wash., Feb. 22, 2005 — Today, Microsoft announced a major agreement with Alcatel, designed to rapidly accelerate the availability of Internet Protocol Television (IPTV) on a global scale. The two companies will jointly market an integrated IPTV delivery solution using Alcatel network access equipment and systems integration services, and the Microsoft TV IPTV Edition software platform, to broadband providers worldwide. Together, Microsoft and Alcatel, a leader in broadband, IP networking, and systems integration, expect to bring down IPTV costs, speed up the time-to-market and enable the introduction of innovative new services to consumers.

The relationship builds on Alcatel’s strength in broadband, IP networking, development, and integration of end-to-end multimedia and video solutions, and Microsoft’s strength in TV software solutions and connected entertainment experiences across consumer devices.

The announcement follows closely on the heels of IPTV deals reached recently between Microsoft and BellSouth, SBC, Verizon and other network operators abroad, all of which have plans to trial or deploy the Microsoft TV Platform.

Moshe Lichtman , corporate vice president of the Microsoft TV Division, sat down with PressPass to discuss the significance of the Alcatel agreement to the IPTV industry, Microsoft, broadband service providers and ultimately to consumers.

PressPass: Can you give us an overview of the agreement and talk about its importance?

Lichtman : Well, if IPTV was in first gear before, we have just shifted into at least third. Alcatel has made many early investments in advancing broadband and triple-play services, as well as IPTV solutions. Microsoft has focused on cable TV and IPTV platform software and driven a broad initiative targeting the “connected-home.” We have both made significant progress in the marketplace. So we have complementary skills and this agreement is a classic win-win — Alcatel will be Microsoft’s preferred network access and systems integration partner and Microsoft TV will be Alcatel’s preferred software partner for IPTV sales efforts on a global scale. This is a precedent-setting alliance for the industry that will create a whole new dynamic that we expect will propel the industry forward.

As part of the agreement, Alcatel and Microsoft also will work together on a series of joint IPTV initiatives — from developing and customizing applications based on broadband providers’ specific needs, to integrating software deeper into the network, to bringing together service security, digital rights management, and asset management for secure delivery of high-quality content to, and throughout, the home.

PressPass: Tell us more about what this deal means to Microsoft TV from a global perspective.

Lichtman: This agreement will positively impact the IPTV industry and broadband providers worldwide on a significant scale. Both Microsoft TV and Alcatel already have large global footprints. Alcatel is one of the leading providers of the underlying network access systems that power DSL networks around the world and has pioneered triple play and video solutions in a number of these networks. In the last 18 months or so, Microsoft has signed trial and deployment agreements with many of the world’s leading telecommunications operators. Collectively, Microsoft TV’s telco customers have more than 179 million access-line subscribers today. Our two companies also share a broad commitment to digital TV innovation and growth on a global scale, and will work together to build customized solutions that meet the needs of different cultures and markets around the world. By pooling our respective efforts together we are able to address the needs of more customers quicker, and to accelerate ecosystem initiatives on a global scale.

PressPass: What are the tangible benefits of the deal, both for service providers and consumers?

Lichtman: Broadly speaking, our alliance means that the entire IPTV ecosystem benefits — from broadband service providers to chipset, encoder and set-top vendors, to content owners to consumers — because we have just jump-started economies of scale that simply didn’t exist before. For broadband service providers, it allows them to reduce integration costs, complexity and improves time-to-market for their IPTV services. For chipset, encoder and set-top vendors, this collaboration accelerates the demand for their new IPTV equipment. For content owners, IPTV opens up a significant new distribution channel and one that offers them more flexibility and new business models they can take advantage of to deliver their programming in interesting new ways. And it means consumers will benefit from earlier availability of the next-generation TV services and connected-entertainment experiences that IPTV enables.

PressPass: And how exactly does IPTV improve the consumer video experience? What will consumers get out of the technology?Lichtman: IPTV gives consumers the latest TV features — hundreds of digital channels, interactive programming guides, video-on-demand, digital video recording and high-definition TV for example — but these services are delivered over two-way, broadband connections, which enable a much higher level of functionality than the one-way broadcast networks used by the cable and satellite systems that most consumers have today. IPTV also makes it possible for consumers to enjoy a multimedia entertainment experience that extends beyond TVs and set-top boxes to other devices in the home — for example, PCs and mobile phones to share photos, music and home videos or play games online.

PressPass: Why did Microsoft and Alcatel align? And when will the solution be ready to roll out?

Lichtman : Microsoft and Alcatel have a number of customers in common and we have been working closely with them for some time on IPTV services. In addition, Alcatel already uses core Microsoft technology like Microsoft’s Windows Media Video 9 in its solutions, and a partnership in call-center technology with Alcatel’s Genesys was recently announced. In the end though, this agreement was ultimately driven by our shared IPTV vision and our commitment to seeing that vision realized.

It is clear from our recent customer commitments that Microsoft has emerged as a leader in the innovation of IPTV software. At the same time Alcatel has become a leading provider of IP broadband equipment, system integration and solution delivery. We feel that, strategically, this agreement will enable both companies to bring “Triple Play” (integrated voice, video and data) services to consumers more quickly. Some of our joint customers are planning consumer deployments of the Microsoft TV software running on Alcatel-based networks as soon as later this year.

PressPass: It’s still early, but what is the reaction you expect of broadband providers and other IPTV players?

Lichtman : The fact that SBC, BellSouth and Telecom Italia, three leading telcos with extensive IPTV plans, saw value in working with both companies demonstrates the complementary nature of what Microsoft and Alcatel have to offer. We feel confident that other major telcos will see the clear value that the results of this agreement will bring to the entire IPTV ecosystem.

IPTV is moving pretty fast already, but this alliance between Microsoft and Alcatel will speed things up even further and accelerate deployments with the operators around the world that we’re working with. In the end, that benefits everyone involved in the IPTV industry.

PressPass: Where will you go from here?

Lichtman: With 500 million broadband subscribers expected by 2010, 27 million IPTV subscribers expected worldwide by 2008, according to some analysts, and the fact that the handful of operators we’re already working with have existing relationships with more than 100 million consumers, the sky’s the limit. Together with Alcatel, we’re thrilled to be at the forefront of digital TV history and are excited to help our customers bring next-generation TV services more quickly to millions of consumers around the globe.