Switzerland is famous for its neutrality. It sat out both world wars. It's a refuge for international finance. It was almost the home of the United Nations. The entire country, it sometimes seems, is dedicated to smoothing ruffled feathers and averting conflict.

And yet, if all goes well, sometime in 2005 Switzerland will be the front line in one of the cardinal business wars of the 21st century—a battle royal for telecommunications supremacy between cable and telephone companies.

In the unfamiliar role of the upstart is 152-year-old Swisscom AG, the Bern-based Swiss phone company. Like all the other privatized European national carriers, it hasn't had to face any competition for much of its history, but it's ready to now. Armed with servers, applications, and appliances made by some of the largest hardware and software merchants on the planet—Microsoft, Hewlett-Packard, and Thomson—it is marching out to meet the enemy on the unfriendliest possible turf: the delivery of television programming.

In the meantime, its main adversary—the country's largest cable provider, Cablecom GmbH, in Zurich—has also been sending squadrons deep behind enemy lines, loaded with some of the latest in telecom technology: an Internet-based telephony service.

The two companies already go head-to-head as rival providers of high-speed Internet access. Now each side is striving to complete a package of offerings known as the "triple play": voice, data, and video—that is, telephony, the Internet, and television. The triple play can triple per-customer revenue, bringing in as much as US $150 per month from some households. And it reduces "churn," the endless migration of customers from one service provider to another, and with it the large expense of replacing departing accounts with new ones. When the dust settles a couple of years from now, it will be easy to tell the winner. The victor will be the company with more customers—and the bigger share of annual revenue from the three Swiss consumer services, each worth about a billion dollars.

The same basic conflict will be waged in nations large and small around the globe. Indeed, the key weapon on which the Battle of Switzerland will turn, a software platform called Internet Protocol television, or IPTV, is already being evaluated in research labs in India, Canada, the United States, and Italy.

But only in otherwise placid Switzerland has IPTV been put into living rooms as well. Swisscom's trial is the most serious test anywhere of a phone company's ability to deliver video and win customers from cable. In other words, only in the land of civility are customers being told to choose between a cable provider and a telephone carrier for what is the most revenue-intensive mode of communications we have: television. Hanging in the balance is the future direction of the telecommunications industry, and that of a big chunk of the entertainment world as well.

For Microsoft Corp., the Redmond, Wash., company behind IPTV, getting a foothold in the production and distribution of digital audio and video is critical to escaping the confines of the personal computer software world it dominates. There are other ways of delivering video across the Internet than IPTV, and there's at least one other equally adept encoding scheme, MPEG-4, but only Microsoft has written a single software suite that has everything a phone company needs to get into the television game.

A business war, like a real war, is won in the trenches, one skirmish at a time. And while the boardroom generals move money and personnel around like chess pieces, it's often the lieutenants who hold the keys to victory and defeat. One such officer is Gerhard Mueller, project leader for broadband services at Bluewin, a Zurich-based brand of Swisscom's that is the nation's largest Internet service provider. (See photo, "He likes to watch")

In mid-September, when I visited Bluewin's offices in an up-and-coming commercial district west of Zurich's fashionable downtown, Mueller wasn't pondering the long-term future of telecommunications. He was worrying about the next stage in the trial. At the beginning of the month, Bluewin had given the IPTV software and hardware to 80 households—60 company employees and 20 additional "friendly" subscribers. Mueller and his colleagues had a couple of weeks before a key milestone. On 1 October they would decide whether to go ahead with plans to roll out the television service, 17 days later, to an additional 600 or so households.

Mueller's immediate problem was whether to move the latest version of Microsoft's set-top-box software, still in development, onto the IPTV network. In the lab, the new version crashed a lot less often than the previous one, which Microsoft had sent Bluewin in August. But were there any hidden bugs he hadn't found? Not moving the software to the production network might leave him without enough data for the big rollout decision on 1 October, in turn jeopardizing the schedule of the trial as a whole.