IPTV can offer a wealth of TV content on demand

The tie-up will exploit the growth of the next-generation VDSL network, which with bandwidth of up to 50 megabits per second can carry far more content.

Launched later this year, the service will offer high-speed video-on-demand and other TV services to 10 cities.

Several European firms have already launched similar services.

'TV revolution'

The new tie-up will use fast-emerging technology known as Internet Protocol Television (IPTV).

Microsoft and Deutsche Telekom will help create a revolution in TV entertainment for consumers across Germany Steve Ballmer, Microsoft Q&A: Internet Protocol Television

IPTV is a way of transmitting TV programmes and other content over the net, either via a phone or cable line.

The technology allows packets of data to be sent across by broadband to computers or special set-top boxes, through which consumers can view live programmes or choose what they want to record.

Although at an early stage of development, several firms have either launched IPTV or are trialling services in Europe.

France Telecom launched an IPTV service - MaLigne TV - in 2003 which is now available in 10 million homes.

Fast Web offers a similar service in Italy while Home Choice and Kingston Communications are among UK firms using broadband to transmit TV programmes, films and other content.

Richer content

The new German venture will be available to customers in Berlin, Cologne, Munich and other cities later this year.

Microsoft will provide the software to underpin the service while the two firms will share marketing costs.

"Working together, Microsoft and Deutsche Telekom will help create a revolution in TV entertainment for consumers across Germany," said Steve Ballmer, Microsoft's chief executive.

Germany is a notoriously difficulr market for multichannel TV Adam Daum, Gartner analyst

Deutsche Telekom said the new technology would give customers a richer range of content, customised to their own needs and interests.

A leading analyst said that telecoms firms need to offer additional multimedia services to remain competitive.

"Deutsche Telekom is the last of the major European telecoms firms to declare its plans and timetable for entering this market," said Adam Daum, an analyst at research firm Gartner.

But he added: "Germany is a notoriously difficult market for multichannel TV and the challenge for Deutsche Telekom will be to use IPTV to deliver a new TV viewing experience - one that consumers really value."