Merrill Lynch said Microsoft is in a unique position to drive the adoption of internet protocol television, or IPTV. "Microsoft is not the first company to have developed an IPTV solution," Merrill Lynch said, "but we think this is an idea whose time has come." IPTV would allow consumers to receive various television formats on demand using devices such as personal computers or portables.

Merrill Lynch said five telecommunications companies have announced technical trials for Microsoft's IPTV platform: SBC Communications (nyse: SBC - news - people ), Bell Canada, Reliance Infocomm of India, Swisscom, and Telecom Italia. "We think telcos are increasingly convinced about the need to have a TV service," Merrill Lynch said. "The issue for many is no longer whether to launch but when and how--and on what platform." The research firm added that many telcos will be attracted by Microsoft: "We suspect that many telcos could conclude that their competitive positioning aligns well with Microsoft's." Merrill Lynch said Microsoft faces competition from Motorola (nyse: MOT - news - people ) and Alcatel (nyse: ALA - news - people ).