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Bell Canada, Microsoft TV team up

The Canadian phone company plans to begin testing a new service that uses Microsoft technology to deliver video over telephone lines.

Bell Canada plans to begin testing a new service that uses Microsoft technology to deliver video over telephone lines, according to a company executive.

Michael Coulson, associate director for Internet service provider development at Bell Canada, said that Microsoft TV and Bell Canada have signed a memorandum of understanding to begin testing Microsoft TV in Toronto. Customers of Bell Canada's "early adopter" program, who reside in six apartment buildings throughout Toronto, will have use of a set-top box that includes Microsoft TV's Interactive Program Guide (IPG) and other digital services such as video on demand (VOD).

Microsoft TV, a division of the Redmond, Wash.-based software company, already licenses similar software to cable companies called Microsoft TV Foundation Edition, a platform that combines an IPG and branded on-demand video services. The experiment with Bell Canada marks a new direction for Microsoft TV in supplying software to telecom companies--and it could signal that more deals are in the works.

Microsoft declined to comment.

The move plays into Bell Canada's latest strategy to bundle services, including phone, high-speed Internet access and satellite TV, into one suite for consumers. The package, called "The Bundle from Bell," comprises wireless, high-speed DSL (digital subscriber line), satellite TV and phone service and is designed to allow customers to pay for multiple services on one bill.

What Bell Canada is testing with Microsoft is a set-top box that combines on-demand video services, an interactive programming guide, and potentially, personal video recorder features that allow people to record TV shows and play them back like a DVD.

The service is in development, and Coulson would not say when the tests would begin. But he said the effort is aimed at countering cable companies that are encroaching on the telecom industry's territory as they begin offering phone service.

"We've got to have TV to counter the cable threat," Coulson said during an event at the Digital Hollywood conference in Los Angeles this week.

For Microsoft TV, the test is a minor win in Microsoft's long race to push adoption of its software onto the television, analysts said. The company has spent roughly seven years in the TV software market after it bought WebTV, but it has yet to gain any major traction in the arena, said Matt Rosoff, an analyst at Directions at Microsoft.

Still, the software giant has made some inroads with Microsoft TV products, which include its IPG software and its Microsoft TV Foundation Edition suite of software. The technology is designed for cable operators to build in digital services such as interactive games, VOD and subscription VOD. This summer, AOL Time Warner said it would start testing Microsoft TV's IPG in homes in Beaumont, Texas. Comcast Cable agreed to test the IPG and Microsoft's technology on a limited basis in Seattle.

Microsoft also has made some headway in Mexico, signing two major cable operators, Megacable and Cablevision Mexico, to launch its software widely.

In early September, Bell Canada, said it will convert its telephone network into one based on the Internet Protocol, giving it the ability to sell new commercial services such as video calling or sharing documents over a telephone line.