Is Microsoft IPTV’s Weak Link?

IPTV, clearly is the buzzword of the year, right along with VoIP, Skype and Podcasting. Read the newspapers and you can walk away convinced that it is just the messiah that is going to save Bells from their past, and propel them into the future. That indeed might be the case, but one decision that leaves me scratching my head: why are they relying on Microsoft’s ability to deliver its promised IPTV software platform. Microsoft has a checkered past when its comes to television, and other related efforts. It is prone to delay its product launches (Longhorn?) and even when they ship, the crust is not fully baked.
One large company that has found out the hard way is Swiss incumbent phone operator, Swisscom. Just before the long weekend started, the Swiss operatorsaid in a statement (as per Light Reading) that it would not be able to launch its Bluewin TV IPTV service during the second half of 2005. (Blue Win… anyone else see the irony in the name?)
“The commercial launch will not be possible in the second half of 2005… as it has become apparent that the technology currently available is not yet suitable for serial delivery, in particular since the set-top box has no internal hard disk and only one television channel is available.” (Press Release)
Microsoft and Swisscom say that the service will be deployed in the homes of Swisscom and Microsoft employees by end of 2005. In other words, even then it will still be a test service. I have been hearing of these problems for a while now, and in fact would have resulted in some heads to roll at Swisscom.

“This is a first-of-its-kind service as well as being a complex project involving many different technologies from various partners,” says Ed Graczyk, director of marketing and communications for Microsoft TV. “As is common with pioneering services like Bluewin TV, sometimes the pieces of the puzzle take a bit longer to put together than initially planned but we’re confident that the puzzle is coming together very well now and that Bluewin TV will launch commercially to a broad set of Swisscom customers in 2006.”

The problems, as I understand stem from the fact that at present the servers cannot support more than 500 households and even then it can offer one television channel. This is not good when competing with cable operators. Looks like that actually might be true. In his DSL Prime newsletter, Dave Burstein reports that SBC LightSpeed has slipped between three to six months, mostly because of Microsoft’s Demovare, which is proving to be a buggy even in in-house trials.

“[Swisscom] believes that roughly half of Swiss households will have access to a VDSL enabled access line by 2007, similar to SBC’s current plan… We believe that SBC’s commercial launch of IPTV could also be pushed back into 2006 from its original target of fourth quarter 2005,” writes John C. Hodulik, analyst at UBS Investment Research, (Light Reading)

Microsoft is the big unknown in this space, and RBOCs are putting a lot of faith in their middle-ware, Rich Thompson, analyst with Heavy Reading told me a little while ago. He points out that Microsoft is trying to make it all happen with fewer than 500 people. He very succinctly pointed out that marketing muscle is one thing, and R&D muscle is one thing. If the Microsoft experiment doesn’t pan out, clearly their are others waiting in the wings to pick up slack. Siemens bought Myrio for $50 million, and Chinese equipment makers like UTStarcom have already readied their offerings. Failure could be bad news for Alcatel, which has chosen to forego its own internal products in favor of Microsoft.