Xlog

Om Malik, from Gigaom (see links on right), has written a piece on AT&T Uverse deployment of the Microsoft IPTV platform.

It is hard to get a grip on AT&T’s IPTV efforts. Dubbed Uverse, some say AT&T’s television service it is still stuck in neutral, plagued by technical problems. AT&T, however feels otherwise, and has started making a strong marketing push for the service, according to a report in San Antonio-Express News. The company claims that it has ironed out all the technical glitches and is now ready to take on the cable operators.

We’re ready to take our foot off the brake and step on the accelerator, John Stankey, AT&T’s group president for operations, said Tuesday. By the end of the year, we will be up and running in every significantly sized market where we operate.

Fascinating, since it was only a couple of months ago that the company’s tech troubles were highlighted in the Wall Street Journal, pointing to the problems with Microsoft IPTV software.

From everything I know from publicly available sources and people close to the Microsoft product, the Uverse deployment is stabilizing (apparently, enought that AT&T feels compelled to begin limited rollouts), however the actual deployed service will have far fewer features than AT&T had hoped for and an order of magnitude fewer features than the Microsoft marketing machine has been pitching for the past 2 years.

The actual Uverse product looks very little like what Microsoft has been showing to the market, at trade shows and other public events. Many features of dubious customer value, like “instant channel change” are conspicuously absent from the Uverse deployment. However, their absence is not by choice, but due to poor architectural choices and a poor understanding of service provider economics. It looks like Microsoft is learning the hard lessons about building a scalable IPTV solution–lessons the rest of us learned years ago. It would also appear AT&T is learning a tough lesson about listening to the Redmond marketing machine.

Unfortunately for AT&T, the next lessons will be even more painful as their “partner” begins competing with them for their own customers. Just look at what’s happening with Xbox Cinema on Xbox Live. Microsoft has gone to great lengths to ensure their brand remains prominent in their IPTV offering. There will be no question in the mind of Uverse users that they are using a Microsoft product (insert joke here).

The Uverse service gives Microsoft a prime opportunity to upsell subscribers to other Microsoft products like Media Center PCs, powered by Vista and mobile devices powered by Windows Mobile. These devices do not have to be connected to the AT&T Uverse service but connected directly to Microsoft “over the top” of AT&T.

Thus far, Microsoft has played nice (relatively speaking) with its service provider customers in the mobile arena. This is not surprising when you recognize that they have the financial resources and investor backing to be very very patient when entering new markets. However, just as the success of the iPod precipiated Microsoft dumping its “Plays for sure” partners and building their own “iPod killer”, the Zune, I believe the iPhone will inspire the monopolists in Redmond to take a harder stance with wireless operators and begin to push for concessions that give them more control over the mobile devices running Windows–just as they do on PCs today. The emphasis for Microsoft will shift from providing capabilities that give wireless operators the platform and toolsets to build compelling wireless features, to the virtues Windows Mobile for the wireless consumer. The service providers differentiation and value add will diminish to the point that the average mobile consumer won’t care from whom they get the service, but only that they have the latest version of Windows Mobile and Microsoft mobile applications (has anyone seen this movie before?).

This same fate awaits AT&T in their wireline business as their Uverse subscribers increasingly look for Windows and Windows applications, caring less and less about the network (and service provider) that delivers them. The next few years should be interesting.