SBC Communications, in an effort to compete head-on with the cable industry for television subscribers, has signed a 10-year, $400 million agreement with Microsoft for software that can be used to deliver TV programming over high-speed data lines.
It’s a move into unproven territory for SBC, which, like the other regional telephone giants wants to grow by expanding beyond phone and Internet services and into entertainment, a report in the New York Times said. To do that, SBC expects to spend more than $4 billion over the next three years on its fiber-optic network in order to offer faster Internet connections capable of carrying digital video programming.
The deal is also a milestone for Microsoft. The company has spent roughly $20 billion in the last decade trying to break into the television business, but it has little to show for that investment, industry analysts said. The agreement with SBC is Microsoft’s first commercial contract to help deliver programming to millions of homes.
Microsoft has been testing its IP-based television technology with several telecommunications companies outside the United States, including Bell Canada and Reliance Telecom, one of India’s largest phone providers. SBC said it has been testing an IP-based television service built on the Microsoft TV IPTV Edition platform since June 2004. The companies will begin field trials in mid-2005 and plan commercial availability of the IP-based television platform later in the year.
Though some analysts are skeptical of how quickly and cheaply the regional Bell companies can enter the television market, SBC plans to start selling programming through its fiber and copper network from the satellite provider, EchoStar, by the fourth quarter of 2005. SBC already has a separate agreement to market EchoStar’s satellite service, the Dish Network.
Like SBC, Verizon Communications and BellSouth, as well as many smaller phone companies, also plan to sell television in the coming years to increase revenue and challenge the cable industry.