SBC Ups Ante Against Cable

UPDATE: Regional Bell SBC Communications escalated its onslaught against cable operators this week, investing in both television and Internet access services.

SBC announced a 10-year, $400 million deal to use Microsoft’s Internet Protocol Television (IPTV) software platform to power its foray into IP-based television services. On the access side, the company inked a multi-year extension of their 3-year-old alliance with Yahoo to provide co-branded DSL and dial-up services.

The company also plans to extend the co-branding to its Cingular wireless phones, home audio and video, and Wi-Fi services. The first new products developed as part of the expanded alliance are expected next year.

“Customers want communications that revolve around them, not the other way around. By integrating the SBC Yahoo experience across multiple devices and networks, we’ll deliver services that our competitors cannot match,” said Edward E. Whitacre Jr., SBC chairman and CEO.

Beginning early next year, SBC will begin building out its fiber network to deploy advanced services to residential customers in its 13-state service area, including IPTV, voice over IP (VoIP), and ultra-fast Internet access. SBC expects “Project Lightspeed” to reach 18 million households by year-end 2007. Three-year deployment costs for the project are expected to reach $4 billion.

SBC Labs began testing the service in June 2004. SBC companies and Microsoft will begin field trials in mid 2005, and plan commercial availability of the IP-based TV platform late next year. Development was accelerated in October following an FCC ruling that cleared the way for telecommunications providers to build additional fiber networks.

“Our service will change the way people experience TV. Finally, customers will watch what they want, when they want — from a virtually unlimited and interactive content selection,” Whitacre said. “We will deliver integrated communications and entertainment services to enhance the digital lifestyle of our customers.”

SBC plans to include features in the service like picture-in-picture, customizable channel lineups, video on demand, digital video recording, multimedia interactive program guides, event notifications, and content protection features, Whitacre said.

SBC has hired former Home Box Office (HBO) executive Dan York to lead the company’s video content strategy and acquisition for SBC’s entertainment services.

Microsoft unveiled the IPTV platform in September. Microsoft’s TV strategy fits in with its broader plan to dominate the future digital home. Earlier this year, the company formed its Media/Entertainment & Technology Convergence Group.

“Project Lightspeed and the Microsoft and SBC relationship underscore what the future holds for consumers: a virtually unlimited opportunity for innovative, cross-device services and entertainment experiences enabled by the marriage of powerful broadband networks with the magic of software,” said Steve Ballmer, Microsoft’s CEO.

Deploying content over a two-way broadband network opens up possibilities to interactive features such as alerting a customer of an upcoming favorite show, or displaying Caller ID and instant messaging on the TV screen.

“Microsoft isn’t just thinking about working with the cable operators and the content itself, but how it fits into its larger living room strategy,” said Joe Wilcox, JupiterResearch analyst. “Services running Microsoft’s servers on the back end could deliver things other than content to the TV. It could be specialized content to Media Center PC, or Xbox games. They could wrap some DRM around the content and make it portable, so customers could buy music or videos from their TV content provider.”

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