Phone giant SBC Communications will pay Microsoft $400 million in a deal that will supply TV programming over high-speed fiber-optic data lines to consumers in the United States. Like other large US telephone companies, SBC is rapidly moving into markets that cable companies once exclusively dominated; the 10-year Microsoft deal will help SBC offer cable-like packages to customers. SBC says that it expects to spend more than $4 billion over the next 3 years on its fiber-optic networks.
  
The technology for delivering TV programming over the Internet, Internet Protocol Television (IPTV), differs from cable TV in that all IPTV programming is delivered on-demand to customers. For Microsoft, fresh from a recent TV-related victory with cable giant Comcast, the deal is monumental. Microsoft has been trying for years to get its TV-based technology into the hands of entertainment carriers in the cable and telephone industries but until recently has been unsuccessful, despite a $20 billion investment over the past 10 years.
  
"This is a very big endorsement," Microsoft TV Vice President Moshe Lichtman said. "It's a signature of confidence in the direction Microsoft has been taking in this space."
  
Under the terms of the SBC agreement, Microsoft will supply software to SBC that encodes TV programming in a compressed format before it's streamed over the Internet. SBC's set-top boxes, which will function like cable set-top boxes, will decode those signals at customers' homes and display the TV shows they request.
  
SBC says that its IPTV service will begin rolling out by late 2005. The service will offer on-demand IPTV programming capable of simultaneously delivering high-speed Internet access and two High-Definition Television (HDTV)-based signals to customers' homes. Other telephone giants, such as BellSouth, Qwest, and Verizon, as well as a host of smaller companies, plan to roll out similar IPTV-based services during the next few years.