 By ELLEN LEE San Francisco Chronicle February 09, 2006
The SBC executives were getting their first glimpse of IPTV, or Internet Protocol Television, which uses your phone line to deliver programming to your television. Much like cable or satellite television, IPTV uses a set-top box that allows customers to cruise hundreds of channels such as HBO, MTV and ESPN, and order movies and other shows anytime through video-on-demand.
"It looked really good," said Peter Barrett, chief technology officer of Microsoft TV. "The hair on the back of everybody's neck stood up, and they said, 'Wow, we really have something here.' " Now SBC, which has since changed its name to AT&T, plans to roll out IPTV in the San Francisco area and other cities, possibly as early as this year. Once it does, IPTV will offer another alternative for television service and an entirely new way of delivering it to homes. Other communications companies, including Verizon, also have IPTV plans in the works. IPTV uses the same kind of technology that delivers high-speed Internet service to the computer. That opens the door to a host of new, untapped features, such as more interactivity and the potential for thousands, as opposed to hundreds, of channels. "There are a lot of future applications," said Michelle Abraham, principal analyst at In-Stat, a technology research firm. "Videoconferencing through your television is one of the things they're talking about, or being able to chat with friends as the television program is going on." Note: IPTV isn't the same as getting television programs through the Internet. Google, Yahoo, Apple and others are doing that - offering television shows through their Web sites, from episodes of "Survivor" to amateur video produced by everyday Internet users. With television through the Internet, the shows aren't live, and consumers have to stream or download them from the Internet to their personal computers. IPTV, on the other hand, is managed by a telecommunications company like AT&T and is transmitted through a private, closed network to your living room. AT&T, like cable and satellite television providers, also controls the television programming it offers. IPTV "is what we're used to today, but better," said Christine Heckart, general manager of marketing for Microsoft TV. "We're not in the same market (as Google, Yahoo and Apple)." Big expenditures AT&T is spending between $4.2 billion and $4.8 billion to upgrade and ready its network for IPTV. In November 2004, it struck a $400 million partnership with Microsoft to develop IPTV software. It also made a $1.7 billion deal with Alcatel, the French telecommunications equipment-maker, to put together the necessary equipment. That's quite an investment. But telecommunications companies, facing competition from cell phone, cable and other companies, are trying to move into new areas to compensate for their declining landline telephone business. If all goes as scheduled, AT&T plans to have IPTV in as many as 3 million homes this year, with the goal of reaching 18 million homes by 2008. Despite speculation about delays, including problems with Microsoft's software, AT&T said it is on track, beginning with a test run in San Antonio in December. "We've been pretty true to the schedule," said Jeff Weber, AT&T vice president of product and strategy. "There are things we work through every day, but no delays and no slips in the path we're on." What threatens to slow it down is the regulatory battle that AT&T is wrestling with on both on a national and local level as it seeks to deploy "Project Lightspeed" to improve its network. Walnut Creek, Calif., for one, is requiring AT&T, like its main competitor, cable provider Comcast Corp., to pay the city a fee to offer IPTV in the area. AT&T, which has sued the city, contending that the network upgrade isn't all about television, but other services as well. AT&T needs to update its network because for IPTV to work, high-speed Internet has to reach about 20 to 25 Mbps. Currently, AT&T offers 1.5 to 6 Mbps high-speed Internet service. How it works IPTV works by breaking the latest "Lost" episode into packets and sending them to your television, in much the way e-mail is sent to your computer. That technology gives IPTV a degree of flexibility that cable and satellite providers don't have, said Tim Krause, Alcatel's North America chief marketing officer. Unlike traditional television, the IPTV set-top box does not store the hundred or so channels; instead, there is a constant two-way communication between the customer and AT&T. Select a channel, and the set-top box will retrieve the television show from AT&T's servers. That means IPTV could theoretically offer an infinite number of channels, limited just by cost, including more high-definition and niche programming, from foreign-language soap operas to games of cricket to old episodes of "Howdy Doody." "On the Hollywood studio side, they can dust off all this content that's been sitting on the shelves because no one was willing to offer it," Krause said. IPTV could even potentially allow subscribers to have their own television channel where they could share their photos and video with their friends and neighbors or even the rest of the world. Simultaneous viewing With IPTV, couch potatoes will also be able to watch a lot more television at the same time: Microsoft's software allows users to keep an eye on six sports games at the same time, on the same screen, or study one game from multiple camera angles, or even channel surf at the bottom of the screen while the regular television show is still playing. In the future, because the same kind of technology will join telephone, Internet and television services, it could allow consumers to program their recorders through the Internet or their cell phones, instant message during a television show, video conference through their television sets and see the image of the person who is calling during a show. And it creates new opportunities to make television more interactive, such as ordering a product online that's been featured on a television show. "IPTV takes it to a new level," said Sam Pemberton, CEO of Softel-USA, which develops interactive television technology. "The technology enables greater imagination." Not all of these features are novel. Comcast said it is already deploying many of the same features, such as caller ID on your television screen. "AT&T is spending years and billions of dollars to imitate a network that Comcast has already built," Comcast spokesman Andrew Johnson said in a statement. "We've seen nothing ... that we can't exceed." The threat of AT&T could lead to more competition and lower prices. AT&T declined to detail how much it plans to charge subscribers for IPTV, though it said it would be competitive with cable and satellite prices. In parts of Europe and Asia, as well as California, IPTV has already been installed. By 2009, the IPTV industry is projected to hit $3.4 billion in revenue with 8.8 million subscribers, according to the Multimedia Research Group. That's still a small dent in the cable television industry, which draws about 70 million to 75 million subscribers today. "Cable and satellite services are already very good," said Bob Larribeau, a program director at Multimedia Research Group. "It's going to be tough to pull subscribers away."
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