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Microsoft Snuggles With AT&T For Windows Phones

Despite AT&T's unofficial status as the punching bag of choice for iPhone users, Microsoft has seen fit to name the carrier one of the two "premier partners" it plans to work with on Window Phone 7.

While it's not entirely clear what privileges will be conveyed by premier partner status, Microsoft will be "deeply engaged" with both AT&T and Orange to bring Windows Phone 7 devices to market on a wide range of devices, according to Andy Lees, senior vice president of Microsoft's Mobile Communications Business.

"We're working with them side by side so that they can provide their differentiation through unique software and services on their networks," Lees said Tuesday at a press conference at the Mobile World Congress in Barcelona.

Olaf Swantee, senior executive vice president for Orange's global mobile business, offered more insight, explaining that the European carrier will work with Microsoft to handle not only distribution of Windows Phone 7 devices, but also services and support.

AT&T has been at the epicenter of the bandwidth crunch wrought by booming smartphone adoption. While the iPhone has revitalized AT&T's business, the carrier claims that 3 percent of its smartphone customers account for 40 percent of wireless data traffic. In December, Ralph de la Vega, chief executive of AT&T Mobility, stirred up a hornet's nest of subscriber anger by suggesting the carrier may switch to usage-based pricing to compensate for so-called "data hogs."

For months, rumors have swirled about AT&T losing its exclusive iPhone distribution deal in the U.S., but the fact that Apple is staying with AT&T for the iPad has put these to rest, albeit temporarily. The Windows Phone deal with Microsoft would amount to a huge vote of confidence in AT&T, especially since Microsoft, given its current precarious mobile market position, cannot afford the kind of negative publicity the iPhone has generated.

Although the usage-based pricing argument isn't going away, AT&T does plan to spend between $18 and $19 billion on network upgrades this year, a figure that includes a doubling of its wireless network investment from last year, The Wall Street Journal reported last month.

For Microsoft, naming AT&T a premier partner fits into its vision of "three screens and the cloud," Microsoft's strategy of developing software for PCs, televisions, and mobile devices, and having all three platforms augmented by cloud services.

At the MWC press conference, Microsoft CEO Steve Ballmer said his firm's partnership with AT&T's U-verse IPTV offering fills the television piece, which suggests the software giant sees the Windows Phone deal filling the mobile piece.

"I think this just kind of rounds out this notion of all three screens playing together, with the seamless infrastructure to support them," Ballmer said at the press conference.

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