Microsoft sits at the heart of a five year transformation that should turn your local bell into a TV provider (provided they aren't Qwest). It's one of the most significant shifts in telecom history, with each bell attempting the transformation in a slightly different fashion.

Video via IP was the star of last year's CES, and should be an even larger player in Congress this year. One of the first major bills proposed this session was the "Advanced Internet Communications Services Act", which aims to put the bells on equal footing with the fairly unregulated cable providers.

"DVDs will remain the predominant mechanism for [film] delivery for the next five years," claims one Netflix executive, when asked by the San Francisco Business Times to chime in on SBC's TV plans.

An analyst recently predicted that within five years, SBC could gain 14% of the pay TV market in areas it deploys fiber (of course another predicts they'll quit the TV business by 2007). On a recent conference call, SBC told us that within five years, they hope to be the number 2 video provider in those areas.

The skinny on all the bell plans:

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Verizon: Fios fiber to the home in select neighborhoods. Between 5 and 30MBps will be data bandwidth, the rest going toward video services. Microsoft has been signed as the software provider for their set-top boxes, and the IPTV service should start springing up in Fios wired markets mid-year.

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SBC: Fiber to the node (or curb), with VDSL to the home in select neighborhoods. SBC claims users will see 20-25Mbps worth of connectivity (data and video) to half of their subscribers (18 million users) within three years. Microsoft will handle the set-top software as part of a $400 million deal. SBC says they'll begin field trials of the TV service they've dubbed "U-Verse" in the middle of this year, with some IP-TV deployment towards the end.

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BellSouth:Fiber to the curb, with ADSL2+ to the home. They hope to offer 12Mbps of bandwidth over a single copper line, or 24MBps over a line-bonded pair. At first Bellsouth says they'll offer 4-6MBps of data bandwidth which they hope to nudge up as needed. Microsoft will also handle the software for their set-top device.

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Qwest: While they have deployed trial VDSL to about 45,000 customers in Colorado and Phoenix, they've remained relatively quiet on the IPTV front, with basic survivability - not Survivor - on their front burner.

While Verizon's Fios will leave plenty of bandwidth for HDTV, both SBC and BellSouth's offerings will rely heavily on compression. As such, you'll notice a recurring theme among all three is Microsoft, who it's estimated has spent $20 billion to position itself as an IPTV player (Bell Canada is also on board). BSOD TV or Tivo 2?

As a wise stop-gap measure, SBC has struck a deal with 2wire to provide users with a satellite/DVR/IPTV hybrid device dubbed MediaPortal, which incorporates Yahoo content. The box should be able to carry SBC video customers from satellite to IPTV as the company works on network upgrades.

BellSouth has been heavily criticized, analysts claiming they're underestimating bandwidth needs. In an apparent response, BellSouth last week issued a statement saying:

"We believe it is possible to provide speeds fast enough to make triple play services over IP a reality using a mosaic approach of fiber and next generation DSL"

Via line bonding, BellSouth knows they can provide up to 24MBps of connectivity to users within a decent distance from the CO. With various compression flavors expected to slash bandwidth requirements by up to 75%, and VDSL expected to be a fairly inexpensive upgrade path, both SBC & BellSouth believe decent IPTV can be done without running fiber to the home.

Realistic?

Check back in five years.