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The November 14, 2001 Issue Provided by System Dynamics Inc.
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In This Issue

Heard on the Net

Cable Broadband Maturing

Columbia Seminar
"The Broadband Economy"

Fulfilling the Vision of the Broadband Home -
A Visit with Ucentric Systems

Call for Speakers
Broadband Home Spring 2002 In Seattle


Heard on the Net

News about People and Companies influencing The Broadband Home


People News

Patrick Bennett has been named senior VP of sales at Covad Communications. Bennett was previously at Tessco Technologies. ( www.covad.com )

Ed Breen has been named president and COO of Motorola, Inc. effective year-end. He has been EVP and president of the company's Network Sector since Motorola and General Instrument merged. ( www.motorola.com )

Chris Brightman is starting work for Network Associates in the UK after leaving his previous job at Telcordia. ( www.nai.com/international/uk )

Kenton Chow has been named EVP and CFO of Catena Networks. He was previously with Sun. ( www.catena.com )

Wil Cochran has been named president and CEO of Atreus Systems. Cochran had been co-founder of OnPREM Networks which was sold to Copper Mountain, where he served as GM of its MTU Division. ( www.atreus-systems.com )

Jim Farmery is leaving Terayon to join a UK government development agency for the Yorkshire and Humber Region in a business development role for digital industries.

Michael P. Foley was named President and CEO of Alopa Networks. He was previously President of Excite@Home-Canada. ( www.alopa.com )

David Hunter, previously one of the founding directors of rival Thus, has been appointed to the new post of product development director at Fibernet; he will direct creation of new services for the company's wholesale DSL business. ( www.fibernet.co.uk )

Kent Libbey has become VP of marketing for iVast Inc. Kent was previously at Excite@Home. ( www.ivast.com )

Steve Marlowe was promoted to Director of Engineering for Pace Micro Technology Americas cable operations. ( www.pacemicro.com )

Mark McKeown of Two Way TV Ltd is relocating from London to become vice president of Content for Two Way TV (US). ( www.twowaytvus.com )

George Merrick was appointed president and CEO of Com21. He was previously CEO of Advanced Rendering Technology Ltd. ( www.com21.com )

Thomas Moyes has been named CFO and senior VP at Liberty Livewire Networks. He was previously CFO of Veon, which was acquired by Philips Electronics. ( www.libertylivewire.com )

Bill O'Shea has been appointed president of Lucent Technologies Bell Labs; he will also continue as Lucent's EVP of strategy and marketing. Jeff Jaffe will report to O'Shea and become President of Bell Labs Research and Advanced Technologies; before joining Lucent, he held research and management positions with IBM. ( www.bell-labs.com )

Pagoo opened a Strategic Technology Center and has hired Phil Hoster, Paul Jones, and Jean-Francois Catz to work with CTO and co-founder, Sylvain Dufour. Prior to joining Pagoo, Hoster and Jones were with Cisco and Catz was with 8x8. ( www.pagoo.com )

Cynthia Ringo, former CEO of CopperCom, has joined Blueprint Ventures as general partner. ( www.blueprintventures.com )

William Schleyer was named CEO of AT&T Broadband replacing Dan Somers. Schleyer is a former MediaOne Group/Continental Cable executive, as are David Fellows who was appointed CTO and Ron Cooper who becomes COO. ( www.attbroadband.com )

Stephen Silva was promoted to executive VP and CTO of Charter Communications. He was previously senior VP of corporate development and technology. ( www.charter.com )

Catharine Trebnick has been hired as Senior VP of Marketing at CPLANE. She was previously the founder of Technology Marketing Strategies. ( www.cplane.com )

Carl Vogel was named president and CEO of Charter Communications. He was previously senior VP of Liberty Media Corp. and CEO of Liberty Satellite and Technology. ( www.charter.com )

Ann Zeichner has joined Blueprint Ventures as venture partner. Ann was previously VP of sales and marketing at NorthPoint Communications. ( www.blueprintventures.com )

(Please email people@bb-home.com to report a change in your position.)


Company News

--Acquisitions

Aastra Technologies Ltd. is purchasing the Lucent Technologies Digital Video business. Financial terms of the deal were not disclosed. ( www.aastra.com ) ( www.lucent.com )

Aerie Networks is acquiring the Ricochet wireless broadband network assets and intellectual property for $8.25 million from bankrupt Metricom . Aerie plans to reactivate the 17 metropolitan markets initially deployed by Metricom. ( www.aerienetworks.com )

EarthLink has acquired Cidco Inc. for $5 million. The acquisition adds about 120,000 subscribers to EarthLink's base and enables its Internet service through home devices. ( www.earthlink.com )

Echostar is buying Hughes Electronics Corp from GM for $25.8 billion, creating the second-largest pay TV service in the US. They will have about 16.7 million subscribers, 17 percent of the U.S. pay-TV market and over 90 percent of satellite TV services for US homes. The combined company would use the EchoStar name and adopt the DIRECTV brand for its services and related products. The deal is subject to regulatory clearance. ( www.echostar.com ) ( www.hughes.com ) ( www.gm.com )

Juniper Networks is buying Pacific Broadband Communications for about $200 million in stock. The acquisition enables Juniper to reach out from its core backbone presence and allow it a bigger role in delivering broadband services over cable. ( www.juniper.com ) ( www.pbc.com )

Liberty Media Corp. announced that pending antitrust approval it will buy the assets of TeleColumbus, Germany's third largest MSO, from Deutsche Bank AG. Although terms were not disclosed because the agreement is nonbinding, reports from Merrill Lynch and Lehman Brothers value the deal at approximately $700 million, or $500 per subscriber, based on Liberty acquiring 1.4 million of TeleColumbus' 2.2 million subscribers. Deutsche Bank will receive a 12% stake in Liberty Kabel Deutschland GmbH, a subsidiary aggregating Liberty's German cable operations. ( www.libertymedia.com ) ( www.telecolumbus.de )

MobileStar Network has struck a deal to sell most of its assets to VoiceStream Wireless, a subsidiary of Deutsche Telekom, which agreed to invest as much as $2.5 million to enable MobileStar's high-speed wireless Internet access network to resume operations until the deal is completed. MobileStar has operated Wi-Fi networks in hotels, airports and coffee houses. It has had a high profile among wireless service providers through its contract with Starbucks, for which it equipped 700 outlets. ( www.mobilestar.com ) ( www.voicestream.com ) ( www.telekom.de )

NetRatings Inc. has agreed to purchase Jupiter Media Metrix in a transaction valued at $71.2 million. ( www.nielsen-netratings.com ) ( www.jmm.com )

Occam Networks, a broadband loop carrier access equipment supplier, has entered into a merger agreement with Accelerated Networks. The combined companies will be called Occam Networks. ( www.occamnetworks.com )

Scientific-Atlanta is purchasing BarcoNet NV, a provider of digital transmission solutions for broadband networks in Europe and Asia. The deal is valued at approximately USD154 million. ( www.sciatl.com ) ( www.barconet.com )

Uniden America Corporation has acquired the assets and intellectual property of Broadband Gateways. Uniden has plans to start releasing a series of broadband products for cable and DSL, based on BBG's Evolo home gateway technology, in mid-2002. ( www.uniden.com ) ( www.broadbandgateways.com )

Wind River Systems bought Next Level Communications Telenetworks business unit for an undisclosed amount. Telenetworks employees will be hired by Wind River. ( www.windriver.com ) ( www.nextlevel.com )

--Funding

2Wire announced the completion of its latest round of financing totaling $61 million, with co-lead investors Technology Crossover Ventures and Oak Investment Partners. ( www.2wire.com ) ( www.tcv.com ) ( www.oakinv.com )

Acme Packet raised $16 million in a second round of funding led by Menlo Ventures. ( www.acmepacket.com ) ( www.menloventures.com )

IntelliSpace announced that it has secured $70 million in funding with the close of its Series B round. ( www.intellispace.net )

Ikanos Communications, Inc., a developer of next-generation broadband silicon solutions, has raised $5.1 million in its second round of Series C funding. ( www.ikanos.com )

Legend Silicon announced its second round of financing to extend its technology and product development in China. ( www.legendsilicon.com )

Neoteris Inc. received $5 million in funding. The networking security firm has appointed Jim Clark as its chairman. ( www.neoteris.com )

NxtWave Communications has secured $12.5 million in venture funding. ( www.nxtwavecom.com )

PacketFront Sweden AB has received series A financing from London-based European Equity Partners (EEP). ( www.packetfront.com ) ( www.eeplp.com )

--Other News

AT&T Wireless is closing its fixed wireless business, dubbed "Project Angel", taking a US$1.3-billion write-down. The service reportedly had 47,000 users but was an AT&T corporate initiative and not strategic for the newly-separated AT&T Wireless operation. ( www.attws.com )

Cedar Point Communications, a new company with an impressive advisory board, is creating Cable Media Switching Systems, a category of headend equipment for cable operators to offer telephony services. Their products are based on the PacketCable architecture and are intended to address both economic and reliability problems faced by MSOs in rolling out telephony services rapidly. ( www.cedarpointcom.com )

MSO Charter Communications will deploy Microsoft's interactive television software in a million homes. It said it would use the technology to create a premium service package including VOD and digital video clips. ( www.charter.com ) ( www.microsoft.com )

Excite@Home travails continued over the past month, including temporarily stopping taking new customers for its cable-modem service, then striking deals to resume new customer provisioning by affected cable affiliates pre-paying to fund new customer provisioning. AT&T's bid to buy out @Home for $307 million has faced opposition from both shareholders and bondholders in bankruptcy court. @Home is facing a December 4th date for the auction of its assets, putting pressure on AT&T to make a better offer. Meanwhile Excite@Home reached a deal to sell Excite.com, for $10 million. putting the Excite portal in the control of iWon. ( www.home.net ) ( www.att.com ) ( www.iwon.com )

The Home Phoneline Networking Alliance (HomePNA) released the market requirements document for the HomePNA 3.0 specification to its members. The alliance says the spec will be optimized for performance, enabling broadband entertainment, voice, multi-PC file and Internet sharing applications without disrupting phone service and while delivering QoS at a throughput rate of up to 100 Mbps. The HomePNA technical committee will review submitted proposals before announcing the final 3.0 specification which is scheduled to be finalized and ready for release in Q4 of 2002. ( www.homepna.org )

InnoMedia announced its MTA 3300 Multimedia Terminal Adapter for broadband service providers. The standalone device can hook up to any access device to deliver IP voice across cable, ADSL, wireless local loop, FTTH or satellite broadband IP access networks. ( www.innomedia.com )

Intel announced availability of its new suite of wireless networking products based on the next-generation IEEE 802.11a standard, which transmits information five times as fast as the current 802.11b version. The base station will support both standards. ( www.intel.com )

The Nikkei English News Service reports that eight companies, led by Internet Initiative Japan Inc. (IIJ), Cisco Systems KK and Oracle Corp. Japan , announced that they have built a new broadband system for content distribution. The companies have begun field tests, and expect to launch services in April 2002. Other involved companies are EMC Japan KK, Itochu Techno-Science, Sun Microsystems KK, Sony and H-P Japan Ltd. ( www.iij.ad.jp/index-e.html )

Intertainer Inc. and Microsoft announced the availability of Intertainer's VOD subscription service in 35 markets. The subscription service is called FirstPass, and gives users unlimited access to content for $7.99 a month. Additional fees apply for pay-per-view offerings of full-length feature films. ( www.intertainer.com ) ( www.microsoft.com )

Into Networks and RealNetworks announced that new streaming broadband games such as Driver, Centipede and Monopoly are available for RealArcade, the Internet game service. The site is enabled by Into Networks' software technology and enables consumers to play CD-ROM-quality games and to rent popular software titles. ( www.intonet.com ) ( www.realnetworks.com ) ( www.realarcade.com )

Jungo Software Technologies and software developer Gatespace have jointly designed an open services residential gateway. ( www.jungo.com ) ( www.gatespace.com )

Lumenati has announced a broadband "residential digital media center" set-top that can view any kind of Internet content, from MP3 to VOD, via broadband. ( www.lumenati.com )

Microsoft and Samsung signed a deal in Korea covering co-development of home/entertainment appliances. Microsoft's contribution will be Media Player and eHome technologies, while Samsung will produce the associated consumer electronics. ( www.microsoft.com ) ( www.samsung.com )

Microsoft kicked off their multi-million dollar marketing campaign for Windows XP in NY, impacting all phases of the broadband home. Those who attended BBH Fall 2001 had already previewed some of the products and demos shown in NY, like those from Lumenati and SONICblue. The latter's ReplayTV 4000 DVR enables users to have multiple recording units that communicate and share files with each other in the home and over the Internet. ( www.microsoft.com ) ( www.lumenati.com ) ( www.SONICblue.com )

NTL has launched a less expensive consumer version of its cable modem service costing 14.99 pounds ($21.70) a month for 128 Kbps speeds, about the same price as many ISPs charge for their unmetered 56 Kbps dialup services. NTL is also bundling the cable modem service on its "Triple Play" offering costing 29.99 pounds ($43.40) a month for 128 Kbps Internet access, a phone line and basic cable services. ( www.ntl.com )

NTT is reported by Reuters to be investing $219 million in NTT Broadband Initiative, its high-speed Internet subsidiary, in order to prepare for a rollout of broadband Internet services. NTT reportedly created another subsidiary earlier this year to deliver content for high-speed broadband access. ( www.ntt.com ) ( www.ntt-bb.com/NTT-BBe/ )

OpenTV has launched its iTV e-mail application with DIRECTV Latin America. DIRECTV Mail is initially expected to be available to more than 400,000 subscribers in Venezuela and Brazil, and to subscribers in other regions of Latin America between the fourth quarter of 2001 and the second quarter of 2002. The e-mail service is part of DIRECTV's Interactive service, which launched last year in Brazil and recently in Venezuela. ( www.opentv.com ) ( www.directvla.com/newcc )

Scientific-Atlanta has completed an agreement with Pacific Broadband Communications, giving S-A exclusive marketing and distribution rights in North America and non-exclusive rights worldwide to Pacific Broadband's Kodiak CMTS. ( www.sciatl.com ) ( www.pbc.com )

SBC plans to slow the build-out of its high-speed network, "Project Pronto," by halting deployment in smaller, less-dense cities and suburban areas around larger markets. ( www.sbc.com )

SONICblue announced an agreement to license its ReplayTV digital video recording software technology to Matsushita Kotobuki Electronics Industries, Ltd. (MKE). In other news, shortly after previewing its ReplayTV 4000 DVR at the XP launch, it was sued by Walt Disney, Viacom and GE, seeking to stop SONICblue from shipping the DVR. They claim that ReplayTV 4000's ability to let users automatically delete commercials and send digital copies of shows over the Internet will hurt their revenues, and letting viewers send stored programs to others infringes their copyrights. ( www.sonicblue.com ) ( www.mke.panasonic.co.jp/en/ )

Sony and AOL Time Warner have agreed to collaborate on development of networking devices for broadband connected homes. They intend to develop gateway technologies linking different devices and sharing entertainment content and an Internet browser compatible with Sony's networked consumer electronic devices. The announcement contained few specifics, and analysts noted its proximity to the upcoming Microsoft Xbox debut. ( www.sony.com ) ( www.aol.com )

Speakeasy.net and Listen.com have partnered to distribute a digital music subscription service. Named Rhapsody, the service is oriented toward broadband subscribers and offers online radio, on-demand music playback, contextual music information and user recommendations. ( www.speakeasy.net ) ( www.listen.com )

Sprint is taking a US$1 billion charge to shut down its integrated voice-and-broadband ION service and is also closing off new broadband wireless subscribers. Sprint says it is not abandoning MMDS altogether and will continue providing fixed wireless service to existing customers. They indicate they are waiting for additional progress on second-generation MMDS technology. ( www.sprint.com )

Telecom Italia's fixed telephony and Internet division, TI Wireline, announced it will invest GBP3.2bn over the next three years, reserving up to GBP1.6bn for broadband deployment. The company's Imagenio project has suffered delays, but says it has signed up 75,000 clients in three months for its 256 Kbps ADSL. ( www.telecomitalia.it/index_uk.asp )

Terayon has launched Imedia Semiconductor, an independent semiconductor business which will design, manufacture and sell advanced broadband silicon and software systems to enable cable-equipment manufacturers to build products for near symmetric voice, video and data broadband services. ( www.terayon.com ) ( www.imedia.com )

Videotron has launched their TV-based iLLICO Internet services including email, Web browsing, chat, and local content in Quebec. It is available first to subscribers already using Scientific-Atlanta Explorer digital set-tops. Over the last year Videotron has been taken over by media giant Quebecor so much of the interactive TV portal content has been adopted from existing Quebecor sites. Videotron charges an extra C$10 (E7) a month for the services. ( www.videotron.ca ) ( www.quebecor.com )

WideOpenWest launched a long distance voice service over broadband via a joint deal with Gemini Voice Solutions. The WideOpenTelephone service will deploy with WOW's rollout of broadband Internet and digital cable to Denver metro markets. It is WOW's first launch in a residential market and charges $35 a month for 1,000 minutes of intrastate and state-to-state calling. Customers will use the RBOC for local service. ( www.wideopenwest.com ) ( www.geminivoice.com )

WINfirst, a Fiber-to-the-home provider, launched broadband service to customers in Sacramento. It will provide cable TV, telephone and 10 Mbps Internet access to each home as part of its bundled services. ( www.winfirst.com )

--Public Policy

The Telecommunications Industry Association 's president Matthew Flanigan has requested that President Bush appoint a "broadband czar". The czar is proposed as part of a nine-point national broadband policy plan that includes such things as technology-neutral tax credits to all service providers to extend broadband connectivity to residential customers, relief for operators of FCC unbundling requirements covering new broadband network elements; allocation of more spectrum for next generation wireless services; and support for local government financial incentives to broadband network builders. ( www.tiaonline.org )

...This Month's Smiles:

Don't discount the value of sewers in the high tech world. CityNet Telecommunications says it has finished constructing its inaugural last-mile broadband access network, through the sewers of Albuquerque, N.M. CityNet's strategy is to exploit the lack of fiber connectivity between densely populated urban areas and local metro area fiber networks. And by the way, old postal tubes are good too -- Fastweb is using them in Rome. ( www.citynettelecom.com )

We've said before that the specifics of broadband applications may vary by region. Although head-to-head interactive games are interesting, we wonder how successful something called Fruity4some, the new TWO WAY TV game on NTL, would be in the US. Players can "pick their favourite fruity character" and place them on a grid to get four fruits in a row. We'll stay in touch with our friends at Two Way TV to find out if this is a big hit in the UK. ( www.twowaytv.com )

And finally, if video conferencing still isn't as good as being there, you might want to try teleportation. Teleportec's new "teleporters" transmit holographic images of people over high-speed circuits. So if you don't want to travel to give that speech at a conference, Teleportec can project your life-size image onto the podium where you are supposed to speak, allowing you to see the audience remotely and communicate with them interactively. ( www.teleportec.com )


Cable Broadband Maturing

We're getting close to one of the North American cable industry's major events -- the Western Cable Show -- to be held across the street from Disneyland in Anaheim just after Thanksgiving. Everyone in the industry tends to synchronize announcements with the Western show (and with the National show in late spring), so we've seen a flurry of cable announcements in the past month.

Tracking an industry over a long period helps us understand how seemingly isolated events form coherent trends. We've put together some recent announcements to give our readers a clearer picture of their context and the trends we see from them.


"Cable ISPs" have served their purpose

In the early days of cable modem service, just about everything had to be invented. Cable modem standards (DOCSIS) didn't exist; cable systems had a lot of technical problems; there was no pricing structure or marketing materials; specialized broadband backbones and a delivery architecture needed to be developed -- and the cable guy had no idea how to install something on a user's PC. The cable industry tends to operate like an extended family, and the notion that they'd each have to invent everything to roll out data services didn't seem sensible -- so the concept of "cable ISPs," like @Home and Road Runner, was born. Reporting on the formation of @Home in November 1995, USA Today said that "The hottest new cable service has nothing to do with TV".

A lot has changed since 1995. We have DOCSIS cable modem standards, with over 40 companies now making compliant products. Many of the early problems have been addressed and solved, and specialized companies are dealing with the outstanding ones.

We think we've now transitioned thru the stage in which "cable ISPs" were needed to develop, aggregate and dispense the specialized knowledge and services to run high speed data over cable; it seems appropriate that the functions these companies once performed for multiple MSOs are now reverting back to the individual cable operators.

  • Road Runner, which was primarily a vehicle for serving Time Warner Cable, has been impacted the least. ( www.rr.com ) ( www.aoltimewarner.com )
  • High Speed Access Corp. (HSA) has agreed to sell the bulk of its cable modem assets to Charter Communications for an estimated $81.1 million in cash. About 70 percent of HSA employees will be transitioned over to Charter management. Since HSA operated a turnkey cable modem business with about 57 other MSOs, most partner MSOs were opting to also buy HSA assets and take over their own cable modem service. What will remain for HSA is its international business (e.g., its contract with Callahan Associates International for IP and network design for the German Kabel Nordrhein-Westfalen cable system. ( www.hsacorp.net ) ( www.charter.com )
  • As noted above in the "news" section, the Excite@Home story is not yet complete, but it seems likely that when the dust settles, most of the functions it previously performed for AT&T, Cox, Comcast, etc. will be taken over by the MSOs. Canadian MSO Cogeco Cable Inc. announced that it will shortly complete the conversion of its high-speed Internet service in Ontario from Excite@Home to an independent service and assume all provisioning, customer support and servicing for its Ontario high-speed Internet customers. ( www.cogecocable.com )

MSOs making progress toward support for multiple ISPs

While cable operators continue to fight the idea of "open" access, they're making progress in enabling multiple ISP access over their high speed lines. Four of the largest (AT&T Broadband, Time Warner Cable, Comcast Cable Communications and Cox Communications, Inc.) are doing trials or rollouts. However, the pace varies considerably.

Time Warner has made the most progress of any MSO in rolling out multi-ISP access. Under the terms of the AOL/Time Warner merger agreement, TWC is required to bring on at least one nonaffilated cable broadband ISP service before AOL begins its high speed service; they are required to add two more nonaffiliated ISPs within 90 days. EarthLink has already launched on 16 AOLTW systems, and has said it plans to steer its broadband customers toward cable rather than DSL, since cable provides larger profit margins. AOL has also launched their broadband service on Time Warner systems in Raleigh and Tampa.

Despite cable operator fears about multiple ISP access, it's interesting that (according to Cable Datacom News), "Time Warner Cable posted its strongest quarter ever for cable modem subscriber additions, adding 252,000 customers in Q3, an increase of 11.5 percent over its Q2 total." ( www.aoltimewarner.com )

Cox has launched a six-month trial of EarthLink and AOL high-speed services over its El Dorado, Arkansas system -- where Cox already has its own ISP, called Cox Express. ( www.cox.com )

With all the turmoil at AT&T Broadband, including management changes and whether it will be sold or spun off, there has been little news regarding its progress on its multi-ISP program, Broadband Choice. ( www.attbroadband.com )


DOCSIS 1.1 will enable new services and revenue

If the events of September 11th hadn't cast such a pall over everything, we would have opened a bottle of champagne in our broadband home on September 27, 2001. That was the red letter day that CableLabs awarded certification to the first DOCSIS 1.1 cable modems. Why do we view this as such a big deal? Five years ago almost to the day, we gave an invited talk at CableLabs promoting cable's revenue opportunities from small business and communications-based services, which required support for quality of service (QoS) in cable modems. Unfortunately, the first cable modem standard (DOCSIS 1.0) provided only "best-efforts" service, so these services had to wait. ( www.cablelabs.com ) ( www.cablemodem.com )

The DOCSIS 1.1 spec adds key QoS capabilities, including bandwidth and latency guarantees. It permits operators to offer many different services over the same cable bandwidth, favoring some services such as primary telephony over others such as "best efforts" Web browsing. Now that CableLabs has certified 1.1 modems (from TI and Toshiba) and granted 1.1 "qualification" status to cable modem termination systems (CMTSs) from Arris and Cadant, the door is finally open for the new services and revenue streams we have been advocating for years. It enables MSOs to deliver services such as IP voice, streaming media and tiered data services over their broadband access networks, and to offer business customers "committed information rate" services similar to those telcos deliver with frame relay. ( www.ti.com ) ( www.toshiba.com ) ( www.arrisi.com ) ( www.cadent.com )

DOCSIS 1.1 is a key element in the PacketCable specifications for IP telephony over cable. Cable companies view QoS as a requirement for primary telephony, and PacketCable is built on DOCSIS 1.1.

DOCSIS 1.1 should become the norm from this point forward. As 1.1 modems and CMTSs from the leading vendors achieve certification, we expect that MSOs will deploy them widely. Until MSOs add 1.1 CMTSs, they can use 1.1 modems with existing DOCSIS 1.0 equipment. 1.1 modems will also be compatible with future DOCSIS modems, such as the recently announced DOCSIS 2.0.


Next generation head-end equipment supports new services and higher penetration

The first generations of cable modem head-end equipment were devised to enter the market quickly and handle low penetrations of best-effort data services. As these products gained market share, start-ups - such as Broadband Access Systems, RiverDelta Networks and Pacific Broadband Communications - took on the challenge of supporting multiple services and service providers while increasing port density, reliability, and usable bandwidth. The recent news that Juniper Networks will acquire Pacific Broadband Communications for $200 million in stock continues the consolidation of start-ups into established players. ADC Telecommunications acquired Broadband Access Systems last year, and Motorola has just completed its acquisition of RiverDelta Networks. ( www.basystems.com ) ( www.pbc.com ) ( www.juniper.net ) ( www.adc.com ) ( www.motorola.com/broadband )

Meanwhile, the cycle continues as new companies once again address the next opportunities and challenges. These include Cedar Point Communications, whose products are intended to address MSOs rolling out telephony services, and others like Narad Networks and Rainmaker Technologies who are working to dramatically expand available bandwidth for all the coming services. ( www.cedarpointcom.com ) ( www.naradnetworks.com ) ( www.rainmakertechnologies.com/ )


MSOs getting tools to automate service management

With Excite@home going under and the need to keep ahead in their race with DSL, cable operators are adopting additional tools to simplify and expedite provisioning. Although DOCSIS 1.1 modems provide MSOs the opportunity to offer tiered services, it also brings the need to manage additional complexity.

In the evolving environment, operators will need to manage IP addresses, maintain several levels of service, allow for dynamic changes in service profiles and throttling of bandwidth level, support real-time activation of new subscribers and ISP selection for multi-ISP access. Emperative, one company targeting this part of service management, has released a new IP address management system targeted to these problems. ( www.emperative.com )


Plant reliability may be a stumbling block

We've been concerned for many years about running critical services over cable networks, which typically have many places where a single failure can impact tens or hundreds of subscriber homes, and are usually not monitored to alarm for failures. It's great that DOCSIS 1.1 and PacketCable enable telephony services, but it's not great if the operator can't isolate plant problems, measure congestion, or target capacity expansion. By the end of this year, one start-up company, Stargus, is promising to launch its DOCSIS-based network software management solution to address those needs. Stargus will take advantage of the tons of data produced by DOCSIS devices but presently largely unused. The Stargus staff includes several leaders of the DOCSIS effort, so they're very knowledgeable to undertake this. Cable operators haven't previously seen much need for this category of product, so the big question will be whether they're prepared to spend money for it now. ( www.stargus.com )

For more information on the Western Cable Show, see http://www.calcable.org/westernshow . We'll be there, and will provide additional perspectives in the next issue of BBHR.


Columbia Seminar: "The Broadband Economy"

On October 26, we attended a day-long seminar "The Broadband Economy: The Emerging Market System in Bandwidth" at Columbia University. Organized by the Columbia Institute for Tele-Information (CITI), a research center for communications economics at the Business School, the day was largely devoted to the prospects for deployment of and investment in residential broadband. The focus was mostly on the US incumbent local exchange carriers (ILECs). ( www.citi.columbia.edu )

The day had some real highlights (especially the treat of hearing Fred Kahn's keynote) and was generally quite stimulating. It had its share of specialized academic work, like James Alleman's talk on "the real options approach", which made us realize how little we know about economics.

The emphasis of the session was strongly biased toward the US and ILECs. We were concerned that it reflected little understanding of cable operators or of broadband outside the US. However, the session was influential in providing us a better appreciation for the obstacles faced by the ILECs as they pursue broadband deployment and gave us some sympathy for their desire to change the current rules.

The most interesting talks were those related to broadband public policy:

  • John Thorne, a Lecturer at Columbia Law School and Senior VP and Deputy General Counsel at Verizon (one of the US ILECs) gave a talk on "The 1996 Telecom Act - What Went Wrong and Protecting the Broadband Buildout". The Act established a new policy framework for US telecommunications, with the intention of promoting competition and reducing regulation. Not surprisingly, Thorne blames the FCC for mis-managing the implementation of the Act in such a way as to create and then destroy the competitive carriers (CLECs). His key point was well made: forcing the ILECs to unbundle network elements and then sell them to the CLECs at a price at or below the cost of new construction removed any incentive for the CLECs to build their own physical infrastructure. Thorne also asserted that the disparity in regulation between the ILECs and the cable operators gives the latter a substantial advantage which they have exploited to gain the dominant share of broadband customers. ( www.verizon.com )
  • Jerry Hausman of MIT gave a closely related talk on "Competition and Regulation for Internet-related Services: Results of Asymmetric Regulation". He argued that there was no broadband monopoly in the US (cable operators and ILECs share the market), and that asymmetric regulation gives a strong advantage to the cable operators: cable is unregulated whereas ILECs are required to sell unbundled network elements to competitors at a discounted price. He blamed "incorrect regulation" for the bankruptcy of the broadband CLECs. He recommended that both ILECs and cable operators be required to provide non-discriminatory access, and that prices should be set by the market rather than regulators. ( www.mit.edu )
  • Alfred Kahn, Prof. Emeritus at Cornell, was the keynote speaker. Perhaps the most influential advocate for deregulation in the U.S. (he is credited with airline deregulation during the late 1970s), he referred to several of his books and articles including the recent "Whom the Gods Would Destroy, or How Not To Deregulate" (see www.aei.brookings.org/publications/books/kahn.pdf ). In his talk, he accused the FCC of "misguided consumerism" and blamed it for excessive regulation in the name of deregulation. ( www.cornell.edu )

While we don't agree that asymmetric regulation is the main reason MSOs have more US broadband market share than ILECs, we came away more sympathetic to the idea that "old wires/old rules, new wires/new rules" would be a reasonable regulatory principle to apply to ILECs going forward. That is, the present rules should continue to be applied to analog telephony and DSL delivered over the existing physical telephone plant, while a new set of rules should be devised to give the ILECs incentives to build a new broadband infrastructure without having to unbundle its elements. The issue will be how to account for "old" and "new" to avoid cross-subsidy.

At the same time, we sympathize with Jerry Hausman's position recommending moving toward more symmetrical regulation - in particular, that cable operators should provide non-discriminatory access at market-determined prices.


Fulfilling the Vision of the Broadband Home -- A Visit with Ucentric Systems

We recently visited Ucentric Systems, one of the most ambitious companies in home networking. It's based in the old mill buildings in Maynard, Massachusetts, and Dave couldn't help recalling his many visits to Digital Equipment which converted these buildings from wool to bits. We met with Allen Frechter (VP Business Development), Patrick Donovan (Director, Business Development), Tim Collins (Director, Product Management) and Amy Thompson (Manager of MarCom).

Ucentric sees the need for a "whole-home converged services" system: a common platform addressing all the family's networking needs for communications and entertainment. This includes the full range of services -- data, voice, audio and video -- and all of the current and future devices appropriate to those services. Thus their vision of home networking includes multiple PCs surfing the Web - but also multiple TVs using a common "personal video recorder" (PVR); audio and video available on demand at any stereo or TV in the home; telephones with advanced features; caller ID appearing on any TV set or PC; and voicemail and email messages available on any screen in or outside the house.

Readers of this report will know that we share this vision, but have viewed solutions as some years away. Ucentric is working to make it a reality in the near term - they're already running trials with several cable operators, and a trial with Sears is about to get under way.

While most companies in the home networking business are hardware vendors, Ucentric believes that software is the key to success. They've created a comprehensive suite of underlying software and a set of reference hardware designs, and are now working to licence their software to many kinds of hardware vendors -- traditional cable vendors, consumer electronics, and PC makers. With their underlying software running on many vendors' hardware, Ucentric will provide a growing suite of applications to address more and more of the user's needs - a strategy similar to that of a well-known company in Redmond.

Ucentric's chartware looks like that of many others who share the vision of the "broadband home." The difference is in the demo - and most of their promises are already fulfilled in the version we saw, which they said was identical to the version now running in their ongoing field trial with Rogers Cable. The demo included PVR functions with simultaneous recording and viewing; viewing and controlling the PVR from multiple TVs; caller ID and call message logs overlaid on the TV screen; viewing email on the TV; and good integration of the PC and TV functions with a common user interface.

Like other "home media servers" (such as the recently released SONICblue ReplayTV 4000), the Ucentric system acts as a central server for audio and video content. It can store TV programs and audio content on its hard disk and send it to any device in the house - over cable to the TVs, and over the air to the stereo systems.

What impressed us most was the integration with the PC. Since the majority of North American homes have PCs, and already use them as the primary platform for email, we've been dismayed that most "interactive TV" systems treat the TV and PC as completely separate domains; more than anything, the lack of email integration has kept us from using our WebTV unit for anything but occasional web browsing. The Ucentric system has a common email repository that can be accessed by any device in the house, and will support many flavors of networking to communicate with PCs -- Ethernet, wireless and phoneline today, powerline in the future.

The Ucentric system can best be viewed as an integrated system incorporating both server and client functionality. The server keeps track of the data - video and audio media, email, phone calls. The TV client -- running on the same hardware -- provides a user interface for TV sets. On the PC, no special client software is required: the Ucentric server runs with the Web browser, instant messaging and other client software the user has already installed and is comfortable with.

While Ucentric talks about distributing their software through multiple channels, their primary approach seems to be the broadband service providers. They'd like to see cable operators distribute systems with Ucentric software in the same way cable set-top boxes are distributed in North America -- purchased in bulk by the cable operator and leased to the customer at a low monthly fee. This way, the up-front capital cost is borne by the cable operator rather than the end user, making it much easier to build a mass market.

We're frankly skeptical of this approach. We've never perceived cable operators as willing to spend sufficient capital to equip advanced boxes with the functionality required to fulfill most user's needs, and we have not seen them willing to offer a choice of boxes with different feature sets to address different customer needs. We believe that the North American satellite model -- the user purchases the set-top and can select the brand and model which provides the desired features at the price he or she is willing to pay -- would make more sense. Perhaps it's time for cable operators to embrace this approach too.

We applaud Ucentric for doing a great job in focusing on user needs (we're told that the "U" stands for user) and we wish them luck in moving from trials to full deployment. If they can show that users and service providers are ready to address the full vision of the "broadband home" now rather than waiting, we expect that many other companies will enter this market.

Meanwhile, we sure wish we had one of these in our house. It comes closer than anything else we've seen to addressing our needs.

( www.ucentric.com )


Call for Speakers: Broadband Home Spring 2002 In Seattle

We're looking for speakers and suggestions of topics to cover at Broadband Home Spring 2002 ( www.thebroadbandhome.com ). To simplify life and reduce travel expenses for those of you who like to attend both Broadband Home (BBH) and VON, they'll be held together in Seattle, overlapping on April 8-9, with VON running thru April 11th. Please feel free to email: speaker@bb-home.com with your ideas/suggestions and please visit: ( www.thebroadbandhome.com/speak/ ) by December 15th to formally submit your proposal.

Note that speakers who have been past delegates at BBH and are familiar with the community have a better chance to be selected to speak at a BBH conference.

You can take a look at presentations from our past conferences to get a feel for what we're looking for. Please visit ( www.thebroadbandhome.com/bbhfall/index.html#present ) for directions.


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