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Microsoft TV dealt blow Down Under

Australian phone giant Telstra cancels test of Microsoft IPTV, another setback for the software giant's TV technology efforts.

Australian telephone giant Telstra has canceled its field test of Microsoft Internet Protocol TV, another setback for the software giant's TV technology efforts.

Telstra had been in discussions with Microsoft to conduct a trial using the Microsoft TV IPTV set-top-box software but decided it was premature to move forward.

"We have decided not to do so at this time entirely for our own internal and local market reasons and not because of anything to do with Microsoft's product," Warwick Ponder, a Telstra spokesman, said in an e-mail statement.

Telstra, along with roughly a dozen other companies, was part of Microsoft's early adopter program to field test the product and bring it to market. Interest in IPTV is gaining traction with Microsoft, Siemens and others, as more homes become equipped with broadband connections to pipe TV-related content into homes.

Though Telstra noted it was attracted to Microsoft's IPTV customer interface, the company is also leaving its options open should it move forward in offering the IPTV service at a later date.

"If and when we make a decision to offer an IPTV service, from a commercial and technical perspective, Microsoft's platform would be one of a number of serious options," Ponder said.

Microsoft said it is not discouraged that Telstra is keeping its options open.

"We don't have a commercial agreement with them today, so of course they are going to say they're evaluating all their options," said Ed Graczyk, marketing director for the Microsoft TV division. "We believe we are in the best position at Telstra, and with all the companies in the adopter program."

Swisscom is another telephone company that's delaying its use of Microsoft's IPTV technology.

Last month, Swisscom said it would postpone the commercial launch of its Bluewin TV service, in part because the technology for the set-top box is not ready. The service, initially scheduled for a full-scale commercial launch during the second half of this year, will now be pushed back to 2006, the European telephone company said.

"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," Swisscom said in a statement about the delay.

Swisscom conducted a successful trial using set-top boxes with external hard drives, but the company wanted internal hard drives before going into commercial production, Graczyk said.

These recent events may ratchet up IPTV competition between Microsoft and hardware vendor Siemens, which announced plans last April to purchase IP video software company Myrio. Both companies are looking to grab market share in the fledgling IPTV industry, but they're taking different approaches to grab their slice of the action.

Siemens is tying its hardware technology to IPTV technology from various software vendors, while Microsoft is coupling its software with hardware provided by Alcatel.

Graczyk pointed to other telephone companies in the IPTV early adopter program that are on track.

Telephone titan SBC Communications is conducting technical trials in employees' homes and plans to undertake a controlled market launch later this year or early next year, said Denise Koenig, an SBC spokeswoman.

And last January, BellSouth began testing Microsoft's IPTV software in its lab.