In my previous column I introduced Microsoft (News - Alert) Telco 2.0 as a substantive platform play, and now I’d like to explore some of their offerings to further illustrate the possibilities. Looks like my timing was good for this topic, as Microsoft made some important Telco 2.0 announcements at NXTcomm the same week my previous column came out.

Microsoft has been refining Telco 2.0 for some time, but many elements are aligning now to make it attractive as a platform play for a wide variety of service providers. While much of what they are doing has been widely covered by now, I’ve had the benefit of some in depth briefings, and wanted to touch on a few examples here to illustrate what they bring to the platform play value proposition.

As a platform play, Microsoft must be considered in a different context than solutions discussed in other columns, such as Jajah or Ribbit (News - Alert). Their sheer ubiquity makes it very likely that most all of a carrier’s subscribers are using at least one Microsoft offering. No other platform play that I can think of is in that category, and partnering with Microsoft can be mutually beneficial on several levels. Telcos have pain points that Microsoft is very well positioned to address.

First and foremost is a product family that everyone is familiar with, making it easy to grow ARPU. Secondly, Microsoft — like any platform play — brings a service creation environment that works across all product lines, offering endless possibilities for bundling. This gives carriers a much broader repertoire of solutions to address a multitude of market segments — for both business and consumer audiences. In this regard, the larger the carrier, the better the fit, since there will be more opportunities for customized bundles for various end markets. Finally, given Microsoft’s support for open, standards-based technologies — such as SIP

— they can be a source for ongoing innovation, which is essential in today’s market for carriers, as they generally lack the ability take this on internally.

Conversely, telcos are important to Microsoft as they represent a channel for them to remain relevant and visible with end users. The traditional business model for software is evolving and, invariably, the rising force known as Google (News - Alert) is forcing vendors like Microsoft to focus more on Web-based models. This translates into the utility type model where Software-as-a-Service becomes the norm, and now Microsoft is adopting the hosted approach with their Live products. As such, the value proposition of bundling software and services along with connectivity becomes attractive not just for subscribers, but both Microsoft and the carriers. If it’s done well, all parties are further ahead.

So, what makes Microsoft compelling as a platform play? They would say it’s their ability to address what they call the Connected Lifestyle. Microsoft has platforms for all three screens – Windows Mobile for mobile devices, Windows/Vista for PCs, and Mediaroom for TVs. Not only can they deliver services across and among all three screen environments, but they have solid offerings for both home and business use.

Diversity is a good thing, and gives telcos many options for partnering with Microsoft. Let’s look first at the consumer space, where Microsoft can most effectively leverage the three screen market opportunity. For the mass market, they enable service providers to offer a bundle of broadband along with hosted email and IM via Windows Live — for both PCs and mobile devices. The operator gains or retains the broadband subscription revenue along with new revenues from these core applications offered on a hosted basis. An easy way to upgrade this bundle would be to add security and backup features in the form of OneCare.

There may not be any cutting edge services here, but I’m just trying to illustrate how operators can build off of Microsoft, even with just the most basic applications. I should also mention that subscription revenue is not the only business model here. There is no reason why a service provider could not introduce advertising-sponsored variations for email and IM services, thus tapping into revenue streams they could not access previously.

Taking this a step further, Microsoft brings much more to the table on the home entertainment front. By bundling Mediaroom with broadband service, telcos can deliver a complete solution, including IPTV

, VOD, and full integration across all three screens. For tech savvy households, the ability to do things like select TV programs from your PC or mobile phone will no doubt be attractive, and partnering with Microsoft may well be the only way for telcos to do this.

Focusing even further on the youth market, Microsoft gives telcos many options to structure lifestyle-oriented bundles. Gaming is a natural, where telcos could offer a hosted XBox package that includes the gaming console and continuous updates for new releases. For the music market, Microsoft has a subscription service in the works called Musiwave. Here again, telcos can offer this as a three screen bundle, as the service can seamlessly be downloaded to the PC, a Zune player, or even in the car, using Synch.

The business market offers even more interesting possibilities, and I will just cite a couple of scenarios here. On a broad scale, telcos can become Unified Communications providers for both enterprises and SMBs. The starting point would be connectivity, with broadband service and even SIP trunking

. Layered on that, they can offer the full suite of Microsoft solutions on a hosted basis. This would include Office for business applications, SharePoint for collaboration, LiveMeeting for conferencing, Exchange Server for email, and Hosted CRM for business processes.

These can be supplemented by a wide range of hardware and devices the telco could distribute, such as ResponsePoint for SMBs, RoundTable for video conferencing, or a host of handsets and ATAs to support a Microsoft UC solution, such as Polycom, Aastra, Samsung, and D-Link. These are just a few examples of how Microsoft can offer a complete range of solutions that can readily be bundled for businesses and create attractive revenue streams for telcos of all sizes.

To finish up, there’s another important piece to add here — new services. So far, almost everything discussed here are existing Microsoft offerings, which anyone can buy or license as software. The twist here is offering them on a hosted basis, which creates subscription revenue for both the telco and Microsoft. In addition, though, telcos need innovation and new services to keep things fresh and to differentiate from competitors. This is where CSF — Connected Services Framework — comes in, and allows Microsoft to make the software plus services model much richer. The CSF Sandbox was discussed in the previous column, and is currently being supported by 200 developers and over 70,000 ISVs.

This is where mashup-type applications will come from, and the attraction is the fact that they will be fully Microsoft compatible. Not only will they easily integrate across all three screen environments using Microsoft applications, but by being standards-based, they will also work with most Web-based platforms, such as Facebook (News - Alert) or Amazon. This creates endless opportunities for telcos, who can now offer subscribers a steady stream of innovation for any requirement imaginable.

There is an awful lot on offer here and, of course, telcos can pick and choose what works best. Is Microsoft a telco’s best friend or worst fear? I would say there’s a bit of both here, as their Telco 2.0 roadmap is only just coming to market now. So, it remains to be seen how well all these pieces really mesh together, and how ready the market is to adopt the hosted model for Microsoft. It’s not quite an all-Microsoft world out there, but it’s big enough to say that even with some missed steps and delayed deadlines along the way, Telco 2.0 will gain its fair of platform play converts.

Jon Arnold is Principal of J Arnold & Associates, an independent telecom analyst and marketing consultancy with a focus on IP communications. Previously, he was the VoIP Program Leader at Frost & Sullivan (News - Alert), where he was responsible for managing their subscription service for Global VoIP Equipment Markets. To read more articles by Jon Arnold, visit his columnist page.

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