SBC Signs Digital TV Deal With Microsoft

SBC Communications Inc. on Wednesday said it has agreed to pay $400 million for the use of Microsoft Corp.'s digital TV software platform, in a move seen as helping the telecommunications company defend against competing cable operators.

SBC, along with other carriers, is in an intense battle for customers with cable operators that are providing local and long-distance services, as well as Internet access and TV programming in one product bundle. To compete, carriers are racing to provide at least the same packages.

The latest SBC deal has the San Antonio, Texas, company paying Microsoft $400 million over 10 years for the use of the Microsoft TV Internet Protocol Television Edition. The software platform enables digital TV providers to include Internet-based services with TV programming.

For example, SBC said the technology would enable viewers to channel surf in a small window on their TV screens, while watching another program. Subscribers also could get alerts for their upcoming favorite shows, caller ID, instant messaging, video-on-demand, digital video recording and program guides.

Microsoft TV provides protection against illegal copying of movies and programming.

"Our service will change the way people experience TV," Edward E. Whitacre Jr., chairman and chief executive of SBC, said in a statement.

Whether the experience will prove popular with consumers remains to be seen, but it's certain that telephone companies need to offer subscribers more in the way of product bundles, or risk losing customers to cable companies.

"For the telephone companies, a me-to product isn't going to cut it," Gerry Kaufhold, analyst for In-Stat/MDR, said. "Telephone companies have to leapfrog cable and come out with services that cable doesn't have and will give them a strategic advantage."

SBC will deploy Microsoft software in its network. Subscribers will need a compatible set-top box to access the services.

SBC and Microsoft plan to begin field trials in mid-2005, with commercial availability scheduled for late in the year.

In the first quarter of next year, SBC plans to begin offering higher-speed connections to the home for delivering digital TV, Internet telephony and Internet access. Dubbed Project Lightspeed, SBC expects to reach 18 million households with the ultra-fast connections by the end of 2007.

For Microsoft, the SBC deal is another example of the progress the company is making with its digital TV platform. The Redmond, Wash., has deals with U.S. cable operator Comcast Corp. and Swiss telecom company Swisscom.

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