June 13, 2005 11:40 AM PDT

Siemens tackles Microsoft IPTV dominance

Recent speculation about problems with Microsoft's new Internet Protocol television software could give Siemens, the German telecommunications equipment giant, just the opportunity it's looking for to break into the emerging IPTV market.

Siemens, which makes equipment used by phone carriers to deliver broadband Internet access, claimed its stake in the IPTV market in April when it announced it was buying a small software company called Myrio, which specializes in IPTV software.

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What's new:
While Microsoft tries to remedy problems with its Internet Protocol TV tests in Europe, Germany's Siemens is using technology from newly acquired Myrio to prepare its own package of IPTV software.

Bottom line:
Because it offers a complete selection of IPTV applications, Microsoft is the current leader in that emerging market. But Microsoft's current IPTV troubles could give Siemens the opening it needs to become a serious competitor in Europe, Asia and the rural U.S.

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The next step is taking on Microsoft. The software giant is already considered by many to be the leader in this nascent market, with a software package that manages distribution of video content from the time it's picked up from a network until it reaches the set-top box in the home.

Though dozens of smaller companies offer pieces of the IPTV software solution, Microsoft is the only one that offers one-stop shopping for all the necessary applications. Microsoft offers software that lets operators acquire broadcast and on-demand programming from multiple sources, such as ESPN or HBO. It also sells software that manages the content and subscribers, and an operational- and billing-management system. On the consumer side, Microsoft also provides the software that sits in set-top boxes and provides viewers with a multimedia program guide.

Microsoft is also teaming with hardware makers to help the whole IPTV system work. Earlier this year, it announced a partnership with Alcatel, which, like Siemens, provides equipment that helps a carrier deliver broadband access. It has several partnerships with companies that make hardware products that encode and compress television signals, including Scientific Atlanta, Tandberg and Harmonic, and it has a deal with Motorola to include Microsoft software in Motorola 's set-top boxes.

"It's Microsoft's game to lose."
--Adi Kishore, analyst, The Yankee Group

"It's Microsoft's game to lose," said Adi Kishore, an analyst with The Yankee Group. "It would be difficult for Siemens to break into the North American market, but if Microsoft really screws up, it could allow someone else in the door."

There could be cracks in Microsoft's IPTV plans. Problems at Switzerland's Swisscom, the first carrier to test Microsoft's service with actual customers, have stirred speculation that other carriers may face similar technical problems getting Microsoft's IPTV solution to work.

Swisscom said recently it will delay the full deployment of its IPTV service until after it has worked out some "technical" issues, according to several news reports. If these problems result in significant delays, it could give Siemens, the new kid on the IPTV block, the opportunity it needs, say some analysts.

Microsoft denies that there is anything wrong with its software, but executives acknowledge that the process is complicated.

"The software is on track and will be fully baked this fall, as we have stated all along," said Ed Graczyck, director of marketing for Microsoft TV. "The operators set their own

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1 million customers for Belgacom IPTV?!?
I live in belgium and work in telco. Although it is correct that Belgacom are working on an IPTV project with Siemens and Myrio, they haven't launched the service yet. I don't know where they 1 million customers number comes from.

Maybe 100 as part of a proof of concept...
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