SBC Chooses Motorola, Scientific-Atlanta

SBC (SBC Quote - Cramer on SBC - Stock Picks) picked Scientific-Atlanta (SFA Quote - Cramer on SFA - Stock Picks) and Motorola (MOT Quote - Cramer on MOT - Stock Picks) to supply new set-top boxes for the telco's planned TV-over-the-Net offering.

The move adds specifics to SBC's highly anticipated effort to deliver advanced video services over its expanding fiber-optic network.

Like the Internet TV service itself, the set-top boxes are still in the development stage. SBC says the devices will run on Microsoft (MSFT Quote - Cramer on MSFT - Stock Picks) Windows IPTV software and allow users a variety of interactive functions like video recording and video on demand.

The stock market reaction was muted Thursday in the wake of the announcement. The nonexclusive agreement between SBC and the two leading set-top box suppliers seems to come as no great surprise to industry observers.

Shares of Scientific-Atlanta were down 38 cents to $36.74, while Motorola fell 19 cents to $20.49 in midday trading Thursday.

Both SBC and Verizon (VZ Quote - Cramer on VZ - Stock Picks) have been extending fiber further into communities to compete with cable companies for the so-called triple play of video, phone and Internet service offering. SBC and Verizon expect to have TV available in a few select markets later this year.

If local video-franchising rules remain intact, the phone companies face a long road toward acceptance, which requires them to get town-by-town approval to sell TV service. But some analysts say federal lawmakers are leaning toward a nationwide licensing approach to help smooth the way for the Bells.

In March, SBC signed a $195 million contract to have Scientific-Atlanta provide a video distribution network for the telco's TV service. The deal calls for Scientific-Atlanta to build a cable TV-like infrastructure handled by two super hubs that feed 41 regional hubs.