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SBC's Interactive TV Roadmap

Last November, SBC announced plans for Project Lightspeed, a three-year, $4 billion deployment of a fiber-optic network that will provide consumers with phone, TV, and broadband Internet service. In addition to modernizing SBC's (SBC) existing voice and Internet network, the project is a direct move into the backyard of major cable companies (see BW Online, 6/23/04, "SBC: Tying Up Rivals With More Cable?"), who have, in turn, encroached on SBC and others by offering their own phone service.

By transmitting signals over fiber and relying on huge centralized servers to store data, so-called IPTV (Internet protocol TV) has the potential to deliver more channels than cable, as well as libraries of "video on demand" that consumers could stream to their TVs with the push of a button. Recently, BusinessWeek Online reporter Burt Helm spoke with Lea Ann Champion, SBC's senior executive vice-president for IP operations and services, about the possibilities and challenges of deploying this new network. Following are edited excerpts of that interview:

Q: So what will be different about IPTV from standard cable TV for the consumer?

A: I'll start with one of my favorite features -- that's the whole-house DVR [digital video recorder]. Every TV in the house becomes DVR-capable automatically, and if you want to move, you can pause a program in one room and resume it in another. In addition, we're developing and deploying a state-of-the-art distribution network -- literally a video store of content in a video-on-demand library.

Because we're bringing our customers a single IP connection, we're able to entangle applications across the platforms of TV, voice, and computers. We want to adapt [Web portal] functionality to a person's TV set. When I turn the TV on, I want to see the news from [certain] sources, and [personalized] headlines show up, and I get to click on them right there on the screen. I get to watch the news when I want to watch it. Same thing for music videos.

You can also get phone functions -- see call logs or caller ID on the screen. Or a Cingular [Wireless] customer could set a program to record from her phone, because everything can communicate over IP. These applications are on our road map.

Q: You've said you plan to go live in the fourth quarter of 2005. Which of these features will be available when you debut?

A: In our initial launch we will include the basic [TV] content that customers expect, in addition to offering genre-specific tiers that customers can bolt on to their primary channel lineup. There will also be access to video-on-demand options, and three tiers of Internet access.

Q: As you prepare to go live, how much is left to do?

A: We say that the slogan of this team is: "Start fast and pick up speed." We just awarded Scientific Atlanta a $195 million contract to provide our networking equipment, and all our IP video equipment, and we'll be deploying that soon. We're making final selections on set-top boxes and will announce that in the coming months. We are in the process of content negotiations [with media companies and movie studios] and will announce agreements closer to launch. We've also finalized our build plans and will begin construction very, very soon.

Q: Skeptics have cast doubt that a telecom company, without TV experience, can make a successful entry into TV. What's to stop this from being another Tele-TV or Americast, which were failed telecom-TV ventures from the mid-1990s?

A: The bottom line is, the digital lifestyle has evolved in the last 10 years. [Ideas like] time-shifting, digital music, digital videos, are thriving -- so customers' interest in interactivity is clearly growing. Since then, there have been major technology advances that make doing this much more cost-effective. We can bring customers content with one-third of yesterday's bandwidth.

And we've added entertainment executives who've got great experience. They are focused on the acquisition of the content we will be using at launch, and we're making a lot of progress.

Q: You're a large, established company operating under a time crunch. Does that put you at a disadvantage in negotiating deals with content providers like Viacom (VIA), Liberty Media (L), and Disney (DIS)?

A: I think programmers are interested in our platform, and the interactivity gives more eyeballs, more airtime. So far we've been exchanging terms and conditions, and we've gotten no surprises. Some of them are cheering us on, and the costs so far have been just as we anticipated with our strategy. We bring a lot to the table for them. We have millions of customer relationships. They like that, and we may be able to help them launch new channels.

One of the things we've not talked about much here is that we are a sales and marketing leader. For example, SBC sponsored Disney's The Incredibles. We extended the launch of the movie into our own product licensing. Currently it's in our commercials and ties back into the DVD release. And stay tuned, more of that is coming. We've only begun when it comes to creative marketing.

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