As I continue to explore the platform play idea, Microsoft may not be the first company that comes to mind, but as with everything else they do, they cannot be ignored once entering the room. Building on their ubiquity for both home and business use, Microsoft is actually poised to be the biggest catalyst for platform plays of them all. I’m referring particularly to their Telco 2.0 strategy, which is the focus of this and some upcoming columns.

Microsoft has been touting Telco 2.0 since early this year, and as it continues to evolve, it’s clear there’s a vast market opportunity for both them and service providers. The underlying premise is quite straightforward. Service providers — telcos in particular — are losing out as subscriber revenues increasingly shift away from connectivity and basic voice service to the exploding world of Web-based services and experiences. This takes many familiar forms including VoIP offerings, online shopping, online auctions and trading, music and video downloads, search and social networking.

Some of these compete with traditional telecom services while others enable new ways to engage in the broadband world. In some cases revenues are being generated directly from subscribers, and in others, it comes from advertising. For all of these scenarios, however, telecoms are pretty much cut out from the value chain. This is the ‘dumb pipe’ syndrome that carriers very much want to avoid. They may have the subscriber relationship, but if things don’t change, they risk being relegated to being a connectivity provider where the real money is being made off everyone else taking advantage of their network infrastructure.

Looking outside their own world, telcos are faced with all kinds of competition, many of whom understand these issues very well, and have made greater strides in leveraging the Web, IP and new media to create value for today’s subscribers. Aside from the familiar alternatives — cablecos, ISPs, wireless operators, over-the-tops like Vonage and Web/portal operators like Google (News - Alert) (News - Alert) — Microsoft points out that even media companies like Disney are becoming well positioned to take their subscribers away. As voice becomes just another application in the data network, telcos face an uphill and unprofitable battle unless they find ways to tap into these new revenue opportunities.

So, how is Microsoft going to save the day? In short, Telco 2.0. Microsoft figures they have the service delivery platform that telcos lack, and by tying that into their subscriber base, telcos bring the customers and the billing capabilities to monetize these new opportunities. This becomes a win-win for both parties, and allows telcos to become a platform play without overly diluting their brand.

Telcos win by retaining subscribers and regaining their share of wallet, and Microsoft wins by gaining more channels to market. There is no doubt that most telcos have similar pain points and challenges, and they generally lack the ability or will to come up with their own 2.0 solutions. The pace of change is too fast today to start developing these internally, and given Microsoft’s market dominance, telcos would be hard pressed to find a singular platform partner who can match their range of solutions.

I’ll need a separate article to explore these solutions for both home and business, but will hint at a few here. For the remainder of this article, I’d like to focus instead on the impact Microsoft has already made on the telco market. Telco 2.0 may sound like a generic strategy, but in short order, Microsoft has established some pretty strong proof points.

They will readily cite British Telecom and their BT (News - Alert) Vision initiative, which was launched in December 2006. BT Vision is primarily on demand video and digital TV, and while costly to launch, has over 300,000 subscribers, and is adding 7,500 a week. This isn’t really a pure platform play for telecom, but the service does include Microsoft MediaRoom and Xbox 360 today. To me, it’s still a good example of how Microsoft is providing service providers with new offerings and revenue opportunities.

As a whole, BT has very much been at the forefront of moving to all things IP and partnering where it makes sense. This certainly includes Microsoft, especially where BT was an early partner in their Connected Services Sandbox. Microsoft understands the importance of ongoing innovation for service providers, and this initiative is a large scale mashup environment for creating new, web-based applications. For the likes of BT, this can serve as a valuable feeder stream for future services, allowing them to stay at the leading edge with subscribers.

Perhaps more impressive is the mobile market, where Microsoft has made a major impact. In five years time, they state having made 125 mobile partnerships throughout 55 countries. Marquee operators include Vodafone (News - Alert) (News - Alert), Telefonica, Sprint (News - Alert), T-Mobile, China Mobile and Rogers. Collectively, they are reaching 1.2 billion subscribers, which represents about 40 percent of the mobile market today. They may not be doing a lot of Telco 2.0 yet, but the partnerships are in place to develop this, especially as smartphones become more mainstream.

So, is Microsoft’s Telco 2.0 hope or hype? I’d say it’s too early to tell, but so far, I’m siding with hope. In my next column I’ll outline the elements of Telco 2.0, and hopefully that will strengthen the case. Until then, as always, I welcome your comments or experiences on this front.