Clearer picture for IPTV tech?

Microsoft has tuned up its software for service providers, but consumers shouldn't expect much in the near future. Photos: Is IPTV software ready for prime time? IPTV chugs along

MOUNTAIN VIEW, Calif.-Microsoft thinks the TV is about ready for software.

Granted, Microsoft has been thinking that for more than a decade. But there's some reason to think that this time the folks from Redmond could be right.

Although the first stabs at interactive TV fizzled, WebTV topped out as a niche product and most of the cable industry decided it could live without Microsoft running its set-top boxes, a key technology shift may have cracked open the door that Microsoft has been knocking on all these years.

The change is TV's move beyond satellite and cable to so-called IPTV, that is, television that is distributed using Internet Protocol technology, usually by telephone companies. On Monday, Microsoft is introducing the latest version of its software, adding support for sharing digital photos and music throughout the home. And unlike its past TV efforts, Microsoft is finding some big name companies willing to bet on its technology.

AT&T for example, said in January, it was accelerating its IPTV plans, and Microsoft has a number of key overseas telecommunications companies signed on for its technology, including Deutsche Telekom, Telecom Italia, Swisscom and British Telecom.

IPTV has been on the cusp of reality for some time, gaining increasing importance as telecommunications companies feel the pinch in their telephony business from Internet-based calling and look to offer a "triple play" of voice, video and Internet services. But after years of talking about offering TV, the telephone companies are starting to invest serious dollars in their IPTV efforts.

Microsoft's entry into IPTV had humble origins. Back in 2002, most of the company's TV unit was focused on developing software for cable set-top boxes. But two people--Jim Baldwin and Peter Barrett--were thinking about sending video streams over the Internet.

The pair leased some business DSL lines and used Microsoft's Xbox development kit as a rudimentary set-top box. "We put Xbox development kits in about 10 people's houses in Mountain View and ran some video channels over it," Baldwin said.

By the next year, the two were ready to take their show on the road. They packed up the Xbox units, a head-end system and trekked to the ITU show in Geneva. At the show, Microsoft succeeded in piquing the interest of a number of companies including Swisscom and Bell Canada.

Even as Microsoft continued to develop the software, it invited telecommunications companies to start trials of their own, with Swisscom among those that signed on to try it out. Companies often used their own employees as guinea pigs. AT&T's was the first serious commercial trial, starting in the fall of 2005. The team has grown from just Baldwin and Barrett to a few hundred workers, and IPTV is frequently touted by Microsoft as one of its emerging businesses that is nearly ready to "pop."

Microsoft's top executives have acknowledged that the company was way early in the TV space. Its investments in the cable industry did not give the company the entree it hoped. Its Ultimate TV product a few years later won some fans among TV enthusiasts for its picture-in-picture and video-recording abilities. But the high cost led to little mainstream appeal, and Microsoft stopped pitching it not long after it launched. Even IPTV is moving slower than the company has hoped.

"We've been surprised and sometimes disappointed by how long it takes before things that seem so obvious are ultimately fully realized," Craig Mundie, Microsoft chief research and strategy officer, said in an interview last month. "The IPTV vision as we know it today started out as the interactive TV in 1993, and it's only getting broad deployment today, almost 14 years later."

It's hard to say just how much Microsoft has spent on its TV efforts. The company invested $1 billion in Comcast and $5 billion in AT&T back when Ma Bell was buying cable company Media One. In terms of its own products, Microsoft Chairman Bill Gates said in a speech back in 2004 that the company had spent upward of half a billion dollars.

"We got involved in TV-related software way too early, and we spent $500 (million) or $600 million before its time," Gates said in that speech.

Microsoft is trying to learn from its folly and not get too far ahead of where the business is. After initially touting all the amazing new features that IPTV would herald, Microsoft has actually gone to market with a product that looks and feels a lot like traditional cable or satellite.

Longer-term, though, the company knows it needs to make sure it has something that makes its technology stand out.

"When you compete on price and channels you are basically playing everyone else's game," said Paula Reinman, director of market intelligence for Microsoft TV.

Featured Video