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IN THIS ISSUE:
Heard on the Net
Hong Kong and Asia/Pacific -
Business, Buying and Broadband
BBH At VON Asia
Broadband Home Spring 2001
pulver.com 2001 Calendar
Hans Eriksson has joined pulver.com to do "Community Development", focusing on Scandanavia. His role includes helping to push the VoIP Industry forward. He was previously CTO VoIP with Telia. Hans will continue to be located in Stockholm. ( www.pulver.com )
Sarah Hackforth has been appointed Managing Director, Europe, Middle East, and Africa (EMEA) at RiverDelta Networks; she previously held positions with West End Networks, Science Dynamics, and Motorola. Also at RiverDelta, David Whitehead has become Director of Systems Engineering EMEA; he was previously at 3Com and Motorola. ( www.riverdelta.com )
Ian Jefferson has accepted the position of VP Worldwide Sales at Diva Corporation. He was previously at RespondTV. ( www.diva-tv.com )
Sanjay Khare has accepted the position of vice president and CFO of Netro Corp., a provider of fixed-broadband-wireless-access systems. Prior to joining Netro as VP of business development, Khare was a member of the Venture Law Group. ( www.netro-corp.com )
Len J. Lauer, president of Sprintís Global Business Markets Group, has assumed the expanded role as head of Sprintís combined consumer and business operating units, called the Global Markets Group. ( www.sprint.com )
Chris Lee has joined Terayon as a Director. Chris was formerly with Zatso and was a speaker at our Fall 2000 BBH conference. ( www.terayon.com )
David Moss has been named senior vice president of sales at Canal+ U.S. Technologies. ( www.canalplus-technologies.com )
Dr. David Reed has been promoted to the post of Chief Technology Officer of CableLabs. He also continues as senior vice president of strategic planning. ( www.cablelabs.com )
Tony Werner has joined Aurora Networks as President and CEO. Aurora designs and develops optical-transport systems. Werner was previously CTO for AT&T Broadband. ( www.aurora.com )
(Please email firstname.lastname@example.org to report a change in your position.)
Company News --Acquisitions
3Com Corp. has made a deal to acquire the Gigabit Ethernet network interface card (NIC) business of Alteon WebSystems, a subsidiary of Nortel Networks, for $110 million in cash. ( www.3com.com )
BarcoNet is acquiring The Industree, a Dutch cable modem vendor, in an all-stock deal. The Industree currently markets a DVB-DAVIC cable modem system and is developing a EuroDOCSIS solution. ( www.industree.nl ) ( www.barconet.com )
BCE, Canda's largest communications company, has completed its acquisition of Teleglobe, a leading provider of global broadband, data and Internet services. The deal positions Teleglobe as BCE's strategic initiative into the global market for connectivity, hosting and content distribution services. BCE also owns Bell Canada (telephone services in Ontario and Quebec) and Canada's leading ISP and DTH satellite service. ( www.teleglobe.com ) ( www.bce.ca )
Broadband Sports has acquired Action Sports Network, one of the original AOL Greenhouse companies and a leading site for the extreme sports fan. Broadband Sports will become a primary content provider for the AOL Extreme Sports area. ( www.broadbandsports.com ) ( www.asnlink.com )
Broadcom Corp. has agreed to acquire chip maker SiByte Inc. for stock worth up to $2.04 billion. This was Broadcom's 16th purchase since January 1999 and 11th this year. Shortly thereafter came word of acquisition number 12 this year, with an agreement to buy Israeli chipmaker VisionTech for approximately $776.6 million in stock. VisionTech possesses technology in the growing field of personal video recording, which lets users freeze live TV broadcasts and replay or rewind a program while it is being watched. ( www.broadcom.com ) ( www.sibyte.com ) ( www.visiontech-dml.com )
Spirent, a provider of telecommunications testing systems, has signed a deal to acquire Hekimian, for $1.575 billion. The deal will advance Spirent's ability to offer OSS services that manage and monitor DSL, IP, frame relay, ISDN, ATM and private line services. ( www.hekimian.com ) ( www.spirent.com )
Telewest has acquired Eurobell from Deutche Telekom AG for about $406 million/ £200 million. Eurobell is the last significant-sized independent cable operator in Britain and provides phone, Internet, data and CATV services in southern England. ( www.telewest.co.uk ) ( www.eurobell.com )
Western Multiplex Corp. will acquire Adaptive Broadband Corp.for $645 million in stock, in a move to consolidate the emerging broadband fixed-wireless market. ( www.wmux.com ) ( www.adaptivebroadband.com )
Aerocast, a streaming media company for broadband, has received $15 million in initial financing from a combination of Motorola Inc. and Liberty Media. ( www.aerocast.com )
Altrio Communications has raised $125 million in equity and intends to build a "next generation fiber optic telecommunications network" to provide voice, video and data services in Southern California. Altrio is led by cable veterans Dave Rozelle, Ed Liebst, and Dave Large. ( www.altrio.net )
Equator Technologies, a provider of programmable broadband digital signal processors, has raised more than $40 million in strategic and financial private equity investments ( www.equator.com )
General Bandwidth has secured $47 million in third-round financing, for its VOB gateway. This includes an investment from SBC Venture Capital Corporation. General Bandwidth has raised a total of $83 million in the last year. ( www.generalbandwidth.com )
High Speed Access Corp. (HSA) has obtained an additional investment of $75 million from Vulcan Ventures and Charter Communications. HSA sells cable-modem services through smaller and midsize cable operators in "exurban areas". HSA is negotiating to take over the cable-modem portfolio of Softnet subsidiary ISP Channel, and has also started to roll out DSL services to small and mid-sized businesses. ( www.hsacorp.net ) ( www.softnet.com ) ( www.ispchannel.com )
Home Director has closed its initial $55 million financing round, and announced that Motorola has made a strategic investment and has entered into an agreement to develop home networking integration products supported through cable modem systems and advanced digital set-top terminals. Home Director was launched in January as a spin-off of IBM's Home Networking Solutions Unit. ( www.homedirector.com )
Spike Broadband Systems, a provider of fixed-broadband-wireless-access products, has raised $47 million. Spike reportedly will use the funding to meet product demand, increase its sales activities, and also to scale its production and distribution capacity. ( www.spikebroadband.net )
Video Networks (VNI) has secured $66 million in new financing. VNI provides a distribution platform and software applications for the delivery and management of digitized video content, and is working with broadcast networks and cable companies. The company also announced that it will change its name to Pathfire early next year. ( www.vninet.com ) ( www.pathfire.com )
VxTel, a developer of silicon products for broadband communications networks, has closed a $62 million third round of financing. ( www.vxtel.com )
WaveIP Ltd, an Israeli broadband fixed-wireless access company, has raised over $5 million in its first round of venture capital funding. ( www.waveip.com )
The Western Cable Show was held this past week (November 28 to Dec 1) in LA. This is one of the two major annual events for the North American cable industry, and many companies plan their announcemnts to coincide with the show. This year's show was called "Broadbandwagon" so it's no surprise that there are lots of cable-related items below. ( www.cct-assn.org/westernshow )
AT&T Broadband is very much in the news. ( www.attbroadband.com )
Avaya is teaming with Polycom to develop a VoDSL solution for the small to medium size business market. The firms intend to integrate Polycom's Integrated Access Devices (IADs) into Avaya's Partner Advanced Communications System (ACS) to create a VoDSL system for existing corporate telecom systems. Avaya is the former Enterprise Networks Group of Lucent Technologies. ( www.polycom.com ) ( www.avaya.com )
Several items regarding broadband in the UK (see our article in BBHR August 13, 2000):
There are several items from CableLabs, the R&D consortium of North American cable operators. ( www.cablelabs.com )
China Broadband Corp. announced that its joint venture in Shekou, Shenzhen, has successfully tested cable-broadband Internet telephony. Said to be the first network-wide test in China, the technology reportedly achieved high-quality, real-time, end-to-end voice and fax service over Shekou's HFC network. The test connected several residences and offices equipped with integrated telephony cable modems. Full deployment of telephone service over cable will commence immediately following government approvals, which China Broadband expects shortly. ( www.chinabroadband.com )
Also in China, China NetTV Holdings announced that Sichuan Qianfeng Digital Audio/Video Equipment Co. Ltd. (QF Digital) has signed a cooperative agreement with Sichuan Provincial Cable to develop digital cable TV for the province. The joint-venture Chengdu Qianfeng NetTV Co. Ltd. of which China NetTV Holdings owns 51% will be the technology and set-top box supplier. Sichuan is one of the largest provinces in China (population 90+ million) and has a cable subscriber base of over 9 million. QF digital also plans to incorporate WebTV capabilites into their set-tops. ( www.chinanettvholdings.com )
ClearWorks announced several products for bundled broadband services. The proprietary HomeLink solution enables the delivery of broadband services over Fiber To The Home (FTTH) or DSL. The Home Internet Switch supports a variety of broadband IP-based services delivered directly to the home such as VoIP, streaming video and Internet connectivity. ( www.clearworks.net )
Conexant Systems Inc. agreed to integrate its set-top box devices with Liberate Technologies' TV Platform software to develop a next-generation set-top box platform for telephone companies and satellite, terrestrial and cable operators. In other news, Conexant filed an IPO for Conexant Spinco, Inc., its Network Access Division. The new company will focus on providing complete semiconductor and software solutions for manufacturers of Internet infrastructure equipment. ( www.conexant.com )
EarthLink and Hughes Network Systems announced that they will offer two-way broadband satellite Internet services under the brand name "Powered by DirecPC." EarthLink, the second-largest US ISP, will offer its broadband service over satellite, DSL (digital subscriber line), cable and fixed wireless technologies. ( www.earthlink.com )
Excite@Home launched a software-on-demand service that will allow subscribers to rent popular titles ranging from games to business applications. Excite@Home has partnered with Into Networks and Media Station to provide their PlayNow and SelectPlay services, respectively, to its customers. Registered users receive a free 30-day trial of the software-rental service, and can continue the service(s) on a monthly basi. ( www.mediastation.com ) ( www.intonetworks.com ) ( www.home.net )
Gateway has launched a new division, called the Gateway Connected Home, to make the Internet more accessible at home via networking and Internet appliances. It is using a customized instant-on version of AOL's service in the $599 Connected TouchPad, a Web terminal that Gateway, AOL, Broadcom, and Transmeta announced at Comdex. The four companies also announced the $299 Connected Music Player which uses a Broadcom HPNA chip to connect to the home network via phone lines. In 1H01 a tablet appliance called the Connected WebPad is expected with builtin 802.11b wireless networking capabilities. ( www.gateway.com ) ( www.broadcom.com ) ( www.transmeta.com ) ( www.aol.com )
Gemstar-TV Guide and ICTV announced that the two companies have completed an integration agreement to allow users of digital set-top boxes to switch between TV Guide Interactive and various ICTV applications. The resulting solution, which runs on any Motorola set-top, allows cable operators to provide a program guide, e-mail client, T-commerce and broadband content into currently installed systems without a truck roll. Also in ICTV news, they announced a broadband partnership with OpenTV. Cable operators using the OpenTV client-server platform solution can provide ICTV's headend-based delivery of broadband Internet, attachments for email, web linking, and rich links for the currently offered interactive applications to their customers.( www.ictv.com ) ( www.tvguide.com ) ( www.opentv.com )
Gigabit Wireless, a next-gen fixed wireless technology company, announced that it has changed the company name to Iospan Wireless, Inc. ( www.iospanwireless.com )
Hanaro Telecom, Inc., Korea's leading provider of broadband Internet access service, announced on October 23 the launch of video-on-demand service through its multimedia content Web site, Hananet, in an alliance with Serome Entertainment. ( www.hananet.net )
IDC's new report on DSL in Western Europe forecasts that shipments of DSL kits will grow from 1 million in the region this year to 12.4 million in 2004 and will be mainly driven by local loop access and strong price and service competition among all xDSL players. The report says that Germany will continue to be the largest market throughout the forecast period, followed by the UK and France. ( www.idc.com ).
Intertainer announced that it has teamed with Pace Micro Technology, nCUBE and Cisco Systems, Inc., to create an IP-based, end-to-end VOD solution that will allow cable operators to stream real-time video over existing cable networks to digital set-top boxes. (www.intertainer.com)
Jungo Software Technologies demonstrated OpenRG - a Linux-based software solution for broadband residential gateways - to leading broadband chipset and system vendors. OpenRG enables voice over IP (VoIP), web browsing over Bluetooth, bridging and routing, remote web based management and security. OpenRG has been integrated into a cable modem and is now being integrated into a DSL modem. Texas Instruments (TI) agreed to add Jungo's software to TI's broadband cable modems. The two companies demonstrated this technology at the Western Cable Show ( www.ti.com/sc/cablemodem ) ( www.jungoRG.com )
Liberate Technologies announced the availability of its compact software platform allowing network operators to provide interactive services to the large installed base of lower-powered digital set-top boxes (such as the Motorola DCT 2000). In separate news, Liberate and nCUBE announced an alliance to integrate nCUBE's VOD solution with the Liberate TV Platform software using Liberate's newly developed VOD gateway technology. ( www.liberate.com ) ( www.ncube.com )
MeTV Network will conduct a three-month-long consumer trial of its proprietary broadband Video-On-Demand service. It will begin in January in San Diego, CA with 250 consumers using the Internet Express network. ( www.internetexpress.com ) ( www.MeTV.com )
Microsoft unveiled the Microsoft Home in New York, a networked apartment meant to demonstrate how networked products will fit into the life of a consumer in the coming years. Appliances include an Ultimate TV, Pocket PC, and an MSN Companion device; the devices are networked with CAT 3 cables, HPNA, and 802.11b wireless. See a virtual tour at www.microsoft.com/mshome/.
Motorola and Open TV announced a series of deals, including the swap of some assets and the formation of a new joint venture entity to assist digital ITV deployments. Motorola is a major manufacturer of digital set-top box hardware, and OpenTV is a leader in providing middleware for them. ( www.motorola.com ) ( www.opentv.com )
Netpliance, which sold inexpensive appliances for Web surfing, is slashing almost 40% of its jobs and changing its business model in the face of greater-than-expected quarterly losses. The company will effectively stop selling its I-opener appliance and will instead license the product design to AT&T and others and assist in providing service. ( www.netpliance.com )
Nera ASA, a Norwegian wireless technology company, has signed a contract with telecommunications carrier Telenor to supply a pilot system for broadband content distribution via two-way satellite. Telenor plans to trial the system by next June in a small city in the northern part of the country, as a supplement to upgraded cable TV, which will be used in cities and densely populated areas. The system is based on the DVB-RCS standard, with downlink speeds up to 50 Mbps and uplink speeds up to 2 Mbps. ( www.nera.no )
Nortel Networks and Symbol Technologies have reached an agreement to co-develop converged, high-speed wireless voice over IP and data solutions. The first product operates over a standard 802.11 wireless LAN and is currently in customer trials. ( www.symbol.com ) ( www.nortelnetworks.com )
Pacific Broadband Communications (PBC) has announced their new last mile broadband solutions designed for high-speed data, telephony and video services, initially targeted to the cable industry. PBC has built a system that leverages their tightly integrated MAC and PHY technologies and claims to produce higher densities, performance and noise immunity. Well known cable industry members Tony Werner and Alex Best have joined the PBC Board of Directors. ( www.pacificbroadband.com )
Public Broadcasting Service (PBS) and enhanced interactive TV company TWIN Entertainment, Inc. have agreed to produce educational, fully interactive TV games based upon PBS KIDS programs and designed to run across leading interactive TV platforms such as Liberate, OpenTV, and MicrosoftTV. ZOOM will be the initial PBS KIDS program adapted into an interactive TV quiz-game. ( www.PBS.org ) ( www.wgbh.org ) ( www.twinentertainment.com )
Panasonic has introduced its new Broadband Networking Gateway for small office or home office customers. It can connect up to 32 computers and provide high-speed Internet access with firewall protection. Its differentiation is its ability to use Ethernet cable, existing phone lines or wireless communications at the same time. ( www.panasonic.com )
This must be the season for home robots:
ReplayTV has announced it is refocusing its business on software licensing arrangements, especially with the cable industry. In the process, founder Anthony Wood replaces Kim LeMaster as its CEO. Press reports indicate they are laying off up to half their workforce. ( www.replaytv.com )
Rogers Cable is launching Rogers Interactive TV throughout its cable systems. Based on Microsoft WebTV technologies and services, it provides PC-like services over the television set with a wireless keyboard. Rogers completed a customer trial in Toronto earlier in the year. The service is available for C$19.95 a month. Rogers will later deliver additional enhanced TV services built on Microsoft TV Platform software to their customers nationwide. These additional services will be deployed on next-generation Advanced Set Top Boxes and will include faster two-way Internet connections and new interactive programming. ( www.rogers.com ) ( www.webtv.com )
Reciprocal, a small company that provides Random House, Time Warner, and other publishers with digital distribution services for the three competing e-book formats (Microsoft, Adobe Systems and Gemstar-TV Guide International) is introducing a fourth of its own. It will be for both personal computers and Palm organizers. ( www.reciprocal.com )
RTL Television, a German TV broadcaster, intends to add multimedia applications like e-mail, home shopping and home banking to its digital package. The new services will be offered through Panasonic's set-top box which uses Open TV and has a telephone modem for interactivity. ( www.rtl.de/rtlworld.html )
ShareGate has introduced its DSL2000 broadband services gateway used to deliver multiple voice lines with PBX functionality and data access to SOHOs and eventually MDUs over existing twisted-pair wiring. The product is designed to deliver DSL and VoDSL services. ( www.sharegate.com )
StarBand has launched a two-way satellite-based broadband service. Its receiver and dish -- slightly larger than those currently used by direct-broadcast satellite subscribers -- will cost $399 plus $199 for installation. A monthly subscription will cost $69. Starband is a partnership of Israel-based Gilat Satellite Networks, EchoStar, and Microsoft. ( www.starband.com ) ( www.gilat.com ) ( www.echostar.com ) ( www.microsoft.com )
Terayon has launched BandLeader, a new end-to-end VOIP platform for cable operators to transport carrier-class voice services over large-scale hybrid fiber-coax networks. The technology consists of an access gateway at the cable headend and a broadband telephony interface at the subscriber home. The initial gateway supports circuit-switching through a GR303 interface and claims to provide "a smooth migration from circuit-switched to end-to-end VoIP". ( www.terayon.com )
Texas Instruments introduced what it called a complete voice-enabled cable-modem solution for primary-line telephony, secondary-line telephony, and multi-line offerings for multi-dwelling units. The TI solution includes two TI chips and TI's Telogy Software products, which TI called the defacto standard in VoIP solutions. ( www.ti.com ) ( www.telogy.com )
Time Warner has agreed to allow Earthlink to offer high speed Internet access over Time Warner cable systems if the US government approves Time Warner's proposed merger with AOL. The deal incorporates a range of devices beyond PCs including certain forms of interactive TV, although Earthlink does not currently offer any TV services. Earthlink is guaranteed that its terms would be no worse than those offered AOL and that it would be able to offer its services as soon or sooner than any other company, incuding AOL. ( www.earthlink.com ) ( www.timewarner.com )
Universal Music Group is working with Canal+ U.S. Technologies to port "The Viewing Lounge" (TVL) to the Canal+ interactive TV platform. TVL is a Web-based application which allows viewers to create personalized, custom blocks of music video programming, and seems a natural for ITV. The partnership will give viewers the ability to watch and navigate full-screen TV quality music videos. ( www.canalplus-technologies.com ) ( www.umusic.com ) ( www.theviewinglounge.com )
Virata, a semiconductor supplier for broadband communications, has developed a CPE (customer premise equipment) auto-configuration capability for OpenDSL members. The solution should help service providers avoid having to send a technician out to configure the equipment. ( www.virata.com ) ( www.opendsl.org )
Winfire began providing its DSL services in Charlotte and Raleigh, N.C., Fresno, Calif., and San Antonio. Winfire's FreeDSL service allows residents to receive high-speed Internet access and broadband content without activation or monthly service charges. The free service is advertiser-supported; the company also offers several ad-free and higher-speed services with a monthly charge. Winfire plans to reach 40 US markets by year-end. ( www.winfire.com )
Wink Communications announced deals with both Adelphia and Comcast. With Adelphia they will provide interactive programming and e-commerce on TV to its digital subscribers. Adelphia will deploy Wink as a standard digital cable feature, beginning this quarter, and expects to deliver Wink to most of its interactive digital customers as early as the middle of 2001. Comcast Cable subsequently announced an agreement to deliver Wink Enhanced Broadcasting and use the Wink Response Network in all their digital households, which will total over one and one-half million customer homes over the next three years. ( www.wink.com ) ( www.adelphia.net ) ( www.comcast.com )
Yes Television, a UK-based broadband solutions provider for interactive television, signed an agreement with CableandTelecoms (CaT) to form a new joint-venture company, Total Television Australia (TTA). The company plans to be the first to roll out interactive digital television services - including true video on demand (VOD) and Internet to the television - across Australia and New Zealand. TTA later announced a deal with TransACT Communications to provide VOD services for the 100,000 homes and businesses to be passed by the new fiber-based system TransACT is building in Canberra, Australia's capital. ( www.yestelevision.com ) ( www.transactcomms.com.au )
We made our first trip to Hong Kong this month. Our agenda included speaking at several sessions at VON Asia and meeting with broadband companies based in the region. We wanted to learn more about Hong Kong specifically and the Asia/Pacific region more generally, given its dual role as one of the leaders in broadband deployments and as a worldwide equipment supplier for many elements of the broadband home.
From our friends who had been to Hong Kong, we were prepared for the crowds, the views, the mass of vertical buildings, the shopping and the pervasive emphasis on business. One surprise was how these elements intersected. Most business meetings started by being asked "Have you been shopping yet?" followed by offers of helpful suggestions on where to go. So before we tell you about broadband in Hong Kong, we want to let our Hong Kong hosts know that we did our part for the economy in Kowloon and Stanley. We especially treasure the ceramic oil jar, circa 1720, which now has a prominent place in our house.
Background: A thumbnail sketch for those not familiar with Hong Kong
Having been returned by Great Britain to China in 1997, it is now a Special Administrative Region (SAR) with a separate governmental system. Hong Kong has a population of 6.7 million and a land mass somewhat larger than New York City. However, much of Hong Kong is mountainous, and the majority live in the central area with a population density higher that of Manhattan. The HK SAR has approximately 2.2 million households and a GDP per capita of US$26,800.
The central area is bi-lingual, with all signs in both English and Chinese. The outlying areas are said to be more traditionally Chinese than mainland China.
The predisposition of the society seems to be to emulate best practices, wherever they may come from. We were told that Hong Kong looks to the US for much of its technology, to Paris for fashion, to Germany for cars, etc. This attitude plays a role in the products they buy, the technology they use, and the government regulatory policies they follow.
Hong Kong's goal is to build on its current position as a trade and finance hub for Asia, so that it can become the leader in the digital world of tomorrow. To support this thrust they have created a project called "Digital 21". Their leaders believe that making the Hong Kong telecommunications market competitive is important in making it an information and technology center and a prime headquarters location for multi-national businesses. Other countries in the region, such as Taiwan and Singapore also aspire to that same goal and have similar initiatives being supported by their governments.
Broadband In Hong Kong
A recent survey by HK's Census and Statistic Department indicates 49% of households have a PC and about 73% of those are connected to the Internet. Companies we visited say that there are about 250k residential broadband accounts, a penetration of ~11% of households. Broadband is currently being supplied mainly by Hong Kong Telephone (200k subs) and secondarily by HK CableTV (50k subs). We'll talk more about both these companies below.
Because space is at a premium, most of the population is clustered in high rise buildings with many (generally small) apartments. This structure means that broadband connections are shared over a compact geographical area compared with the usual single-family dwellings in the US.
The connection between the building and the central office or cable head end is not the only potential bottleneck for broadband services. The other is the in-building wiring which is often controlled by the property developer, although pre-1995 telephone wiring was owned by Hong Kong Telephone.
What did we learn?
There were three reasons we felt our time getting immersed in broadband in Hong Kong seemed particularly relevant.
1. Broadband is rolling out rapidly in Hong Kong, providing a good opportunity to assess some of the factors that can create significant penetration.
Broadband penetration is over 11% of households in Hong Kong. This compares favorably with penetration of about 5% in the US. Penetration clearly is a result of both supply and demand.
--Supply is made much simpler in Hong Kong because of its high population density, especially the large proportion of families living in multiple dwelling units (MDUs). Most of the housing is well within the distance limits of DSL. We were told that broadband is now available to 95% of the households in Hong Kong.
Supply is enhanced when there are multiple providers competing to attract the customer. In Hong Kong, the main suppliers are PCCW/HKT (the telephone/DSL provider) and HK Cable/i-Cable (the cable modem provider). Government policies (such as broadband interconnection rules) are designed to attract additional participants to encourage the growth of broadband and Internet use.
--Demand is a function of PC penetration which is high, given the many Asian suppliers, the high level of education and the intense focus on business, fashion and staying current. Internet awareness is very high: URLs are all over signs and newspapers and miniature MP-3 players seemed like fashion statements.
Demand is also a function of price. Unlike the substantial price differential between dial-up and broadband in the US, the price differential in Hong Kong is relatively small. PCCW's Netvigator dial-up service costs HK $138/month (~US $17/mo.) and their DSL broadband service costs HK $198 (~US $25). Cable modem service is priced competitively.
2. Many of the same factors are also important in other areas in the region, including Singapore, Korea and Taiwan, and with similar results.
Korea is currently the hot spot for vendors deploying broadband infrastructure and equipment, particularly for DSL; some telcos elsewhere in the region have reportedly had their equipment shipments delayed because so much equipment is being sent to Korea. In July, broadband penetration was at about 12% and some numbers we saw recently indicate it has exceeded 15%. The government is playing a role in this rapid expansion through the Ministry of Information and Communication. It has, for example, created financial subsidies for innovative new technologies, including those in communications.
Hong Kong is competing with Singapore, Malaysia and Taiwan as a prime location for corporations in the Asia-Pacific region. All are strongly encouraging pro-broadband, Internet-friendly environments.
3. Suppliers based in the Asia Pacific region intend to be strong players in manufacturing low cost, high technology broadband products for markets worldwide.
This is the world's leading region for contract manufacturing and one of the companies we met with supplies components for cable and DSL modems, LAN cards and other networking products. This is the front end of the supply chain for many of the products not yet on the market and it is clear that home networking and home gateway products of various flavors are on the drawing boards and that the demand for broadband modems is expected to accelerate.
We had the opportunity to meet with the dominant telephone company PCCW/HKT; the cable operator HKCTV; and the regulator OFTA. We traded views on the evolution of services and networks, the state of competition and open access and the technologies they are betting on. Here's an overview of what they shared.
Pacific Century CyberWorks (PCCW) was formed after Richard Li's young company acquired Hong Kong's dominant telecommunications company, Cable & Wireless HKT. We met with KH Cheng, CTO; Peter W C Lam, who has responsibility for wholesale services; and Eric Yang, the Principal Network Architect. Here's an overview of what we heard, provided in the form of questions we asked and a boiled down version of our interpretations of the answers.
Q: How will PCCW's role in providing broadband services evolve in Hong Kong? A: PCCW is currently the dominant local carrier in Hong Kong and has gone into residential broadband services in a big way. They encourage the deployment of broadband by having a relatively small price differential between dial-up and broadband service. Their broadband service is available to 95% of the households in Hong Kong (although we suspect the reality may be less because of the control building developers and associations have over the building wiring). There is strong pressure from the government for competition, interconnection and increasingly open access (see OFTA section below). This will accelerate as additional new entrants will be allowed into the market in 2003.
As competition accelerates, the retail market for broadband will commoditize. Building/property developers will continue to have and develop close relationships with service providers. There is also the prospect of players who will compete using direct fiber and gigabit Ethernet with pure IP services, including telephony. To prepare for that future, PCCW is positioning itself to be a "communications ASP" by having a low cost underlying structure and selling wholesale to all providers. They envision having a diminishing share of retail customers and will compete to sell value added services.
Q: How does a company grow in a market as small as Hong Kong? A: The China market is the prize that many companies have their eye on. Most competitors in Hong Kong and the Asia/Pacific region are honing their skills to participate in mainland ventures.
Q: What are the relative roles you see ATM and IP playing in your current and future networks? A: ATM will be used initially since it is widely deployed, even to the building in many cases. But the future clearly belongs to IP and PCCW expects to build its future network and applications on native IP.
Q: How is PCCW going to manage such a significant transformation in both direction and mindset? A: It is a big job, but we have both a technical and a strategic plan.
Our second meeting with PCCW included MT Louie and Chuen Law to see their interactive TV services. These services have been available to their customers for about 2 1/2 years and include entertainment -- especially movies on demand -- news, banking, shopping and karaoke. Their vision of interactive TV focuses on content they specifically port to the service; it does not include integration with live TV, nor does it include standard Internet services on the TV.
The iTV service has about 70,000 subscribers, about 22,000 of whom are also broadband Internet subscribers. The pricing is about HK$238 per month (US$30), including some number of movies, or HK$178 (US$22.50) for the service without movies. There is a bundled price for both iTV and broadband Internet, and there are several promotional offers.
PCCW is clearly an important player with big broadband plans and a very full plate of work ahead. We appreciate their candor and the introductions they provided to help us fill out the competitive and regulatory pictures.
Hong Kong Cable TV/i-Cable
HKCTV has the second largest number of broadband data subscribers in Hong Kong. We met with three of the General Managers of i-Cable, the cable modem service subsidiary of Hong Kong Cable TV.
HKCTV passes 1.3M households with its HFC plant (the rest is still microwave and is being re-built.) They have 500,000 cable TV subscribers and since starting to offer broadband Internet in March have gotten about 50,000 broadband subscribers. Because of the many large apartment buildings they serve, in which each of the apartments is a potential source of ingress, they have chosen to use Terayon modems which have high noise immunity, rather than DOCSIS modems.
One of the most important understandings we gained from this meeting was how different regulatory structures can make significant differences in how competitors are able to participate in a market. HKCTV has built a 750 MHz cable plant and is using 470 Mhz for television services. We assumed they would be free to use the additional frequencies for data services, as an US MSO could. However, their franchise requires HKCTV to provide frequencies to competitors offering TV and data services, and they need to get a license from OFTA to use additional frequencies on their plant. They are presently licensed to use only one frequency for data and when traffic exceeds the available capacity, they must get a license to use additional frequencies or must build additional facilities to divide the traffic.
HKCTV is planning a market trial of VoIP in late December. Such trials have to be approved by OFTA. The trial, lasting up to six months for about 50,000 subscribers will be a "best efforts" second line service. Since it is a market rather than a technical trial, they are planning to use H.323, and are deferring a decision on other protocols until committing to a service roll out. Part of the rationale for targeting second line service is that most customers already have a mobile phone which can provide primary line capabilities.
While we saw many differences between Hong Kong and the US, we were struck by the familiar contrast between the environments and cultures of the telco and cable participants. The telcos are the big, established, well-financed, well-staffed players, while the cable company has more of the plant and engineering driven, no-frills, "get it done--fix it later" heritage.
OFTA (Office of the Telecommunications Authority) is the HK telecommunications regulatory organization. Its Web site provides excellent information about the Hong Kong regulatory structure, goals and policies. Their policies are pro-competitive and pro-liberalization.
OFTA has been studying the question of broadband interconnection and issuing consultation papers in the process of finalizing a regulatory framework; the actual broadband interconnection statement was issued on November 14th while we were in Hong Kong. These papers present very clearly the arguments of multiple stakeholders and the rationale for the decisions reached. The net of their ruling was to mandate line unbundling/sharing and broadband open access for both wireline telephone and cable and to intervene in situations only when commercial negotiations between parties fail.
We had the opportunity to meet with Lawrence Kwan, Acting Chief Telecom engineer, to discuss the ruling. Because Hong Kong is small relative to many countries working on pressing issues like broadband interconnection, OFTA tries hard to find and emulate best practices and learning from other countries. This is clearly a huge job, given the range of complex topics which are current.
Hong Kong has been successful in introducing competition in wireline based fixed networks, in encouraging Internet access growth (there are over 100 ISPs although there are about 10 large ones), and current regulations aim at eliminating bottleneck facilities for broadband. The translation of their broadband interconnection rulings into practice, especially in the area of in-building wiring, appears to have some challenges still ahead.
We're especially interested in OFTA's approach to opening the cable TV plant to competitors. The November 14, 2000 statement mandates frequency sharing of both plant and in-building coaxial cable, and reiterates their original licence requirement that HKCTV provide open access. OFTA is emulating what they see as the Canadian model for open access to the cable plant. The devil is in the details regarding how this mandate will be translated into action.
( www.ofta.gov.hk )
We are grateful to the following companies and people who were kind enough to spend time with us describing both the general broadband situation and their current and future plans:`
HK CableTV Ltd./i-Cable -- Allen K.K. Law; Eric L.C. Chau; John Siu
iNeTalk.com -- Norman Chan ( www.inetalk.com/ie/main.asp )
Midcom -- Gregg Forsberg ( www.midcom-inc.com )
Nortel -- Emmanuel Yiu ( www.nortelnetworks.com )
NSM Technology Ltd. -- Alex Wong ( www.nsmtech.com )
Office of the Telecommunications Authority (OFTA) -- Lawrence Kwan
Pacific Century Cyberworks/Hong Kong Telephone -- KH Cheng; Peter W C Lam; Eric Yang; MT Louie; Chuen Law
Redback -- Ben Tay ( www.redback.com )
TeraSpawn -- Philip Chuck ( www.teraspawn.com )
We gave two talks at the recent VON Asia conference, one on the present state of broadband access systems and approaches to telephony over broadband, the second on home networking and home gateways.
Please visit http://www.thebroadbandhome.com/presentations.html for more information. It contains links to download and view our presentations.
Nancy Goguen of TI also spoke in our broadband sessions. Please visit http://slides.pulver.com to register and download her presentation and others from the conference.
Broadband Home Spring 2001 will be held in Miami, February 27-March 1, 2001.
Any readers interested in speaking, or organizing and moderating a session, can visit www.thebroadbandhome.com/speak/index.html . Although the official date for submissions has passed, we'll consider submissions from our readers for another week while we're completing the conference planning.
What Comes Next - The Network or the Gateway?
Those of you we've been fortunate enough to meet may have noticed that we (Sandy and Dave) don't necessarily agree on everything. As we've been planning for the spring conference, we're having another friendly debate "What comes next in the broadband home, the network or the gateway?"
With the majority of North American homes able to receive cable modem or DSL service, and satellite services now rolling out as well, broadband access is starting to be taken for granted (though you couldn't prove it by us - we still can't get it!). But access is just the first element of "the broadband home". Home gateways, home networking, new devices, and new applications and content are additional pieces of the puzzle.
Sandy: "Home networking comes next after broadband access." Once people have broadband access, they start fighting over who uses the PC; even if they didn't have a second PC before, they quickly get one. Then the issue is how to share the fast pipe to the Internet. At that point they start asking their computer-savvy friends how to do it; networking the machines is the obvious answer. Since there are already 20 million US homes with more than one PC and only a million are networked today, there's a great opportunity for the home networking products rolling out next year which don't require any new wiring.
Dave: Yes, but the minute they try to install the network, they discover they need a way to share the IP address the broadband provider gives them so both PCs can be connected at the same time. They could call the broadband provider and they'll discover that most will charge extra for each additional IP address. And they're probably on their own in setting up the addresses, since service providers don't generally provide support for home networking. Instead of paying 5 to 10 dollars a month for each additional address, they could buy a simple gateway for $100 or so which automates address assignment for as many PCs as they want. And it also provides a firewall for security.
Sandy: True, but that's a pretty primitive "gateway" - it's really just a simple router and their computer-savvy friends will tell them to buy it along with the network. The emphasis at first is on sharing the high-speed Internet connection, not on the many additional features a real gateway can provide, like personal portals and telephony.
Once new appliances become compelling and useful, we'll need the ability to integrate additional applications -- and that's when the real gateway comes into play. It'll make it possible to do the many things we've tried to kludge together in our house -- but in a much user-friendlier way. For example, controlling my plant lights, storing digital music and sharing it among devices, programming the PVR from the road...
Dave: Yes, that makes sense if the gateway is primarily serving our needs. But service providers are interested in providing the gateway because they want to generate additional revenue from additional machines -- which are, after all, using more bandwidth. They think you'll find their ability to do remote management of your network configuration well worth paying for. They'll throw in the router and firewall for added security, and many of them have in mind integrating multiple lines of telephony and other value-added services. So they're interested in putting in the gateway -- which might also include a network to make it easy for you to connect additional machines and make them more money.
So, tell us what you think. Do gateways and networks go in together, or do providers and vendors need to focus on one step at a time to bring consumers along the path to the broadband home? We'd love to hear from you - write us at email@example.com.
The good news is that Broadband Home Spring 2001 will have multiple sessions on both networking and gateways, as well as updates on the emerging devices and applications. So we'll have lots of opportunities to explore their evolutions and interrelationships.
The conference schedule including session topics will be available soon. Keep an eye on www.thebroadbandhome.com/bbh2001/index.html for more information including registration and hotel reservations.
pulver.com 2001 Calendar - Upcoming conferences
Broadband Home Spring 2001, February 27-March 1 - Miami, FL ( www.thebroadbandhome.com/bbh2001 )
Spring 2001 Voice on the Net, March 20-23 - Phoenix, AZ ( www.pulver.com/von )
Broadband Home Europe Summit, May 15-17, 2001 - Amsterdam, Netherlands ( www.thebroadbandhome.com )
VON Europe 2001, June 11-14 - Stockholm, Sweden ( www.pulver.com/europe2001 )
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