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The May 31, 2004 Issue Provided by System Dynamics Inc.
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The 2004 National Show -- Opportunities Galore

During the opening general session of the National Cable & Telecommunications Association's (NCTA) National Show, moderator Char Beales asked cable operators to pinpoint their biggest challenge. Cox EVP Pat Esser put his finger on the one that struck us as we viewed the wealth of solutions possibilities during our tour of the show floor. His answer was: "There are so many opportunities, which one(s) do you put the resources up against?"

US cable operators have nearly finished rebuilding their plants. Technologies they've been talking about for years--like HDTV, VOD and VoIP--are real and ready. There are many possible consumer offerings: telephony, home networking, DVRs, VOD, many forms of interactive TV, videoconferencing, services for downloading content to consumer electronics equipment, enterprise services, etc.

But resources are always finite, so priorities must somehow be set. Also, as Time Warner CEO Dick Parsons reminded the audience, "people's habits don't change overnight," so consumer interest and readiness are key. And to keep things even more interesting, competitors are hot in pursuit, with US telephone companies cutting DSL prices, boosting speeds, partnering with satellite operators to provide video, and at least one getting more serious about fiber to the premises.

Paul Allen, Dick Parsons and Brian Roberts --> Click for larger pictureA panel featuring Dick Parsons, Comcast CEO Brian Roberts and Charter Chairman Paul Allen had many words about the versatility and robustness of cable's platform. However, Roberts sounded an appropriate caution: "The biggest challenge over the next five years is how not to rest on your laurels. We're doing better by being pushed."

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With over 200 companies on the exhibit floor, we've chosen to highlight a few of the exhibits and trends which captured our attention.

Cable's "Broadband Home" Pavilion

Back in April 2000, we started writing about what we dubbed "the broadband home" and named our conferences and newsletter with that moniker. So we were flattered that NCTA chose "broadband home" as the phrase to describe their anchor for the 2004 National Show. Its purpose was to showcase a wide variety of broadband consumer products and services now available to homes across America.

The pavilion had a purpose similar to the showhouse we worked on for the 2004 CES and the Builder's Show in Las Vegas last January: showing products and services in the rooms where they would be used. We had displayed many similar products and services at CES--including HDTV, VOD, DVRs, home networking, VoIP, and high speed data--but there were some differences too.

HDTV Jacuzzi tub in "Broadband Home" pavillion --> Click for larger picture"Mirror TV" in "Broadband Home" pavillion --> Click for larger pictureWhile our exhibits stressed affordability for mass markets, the NCTA's home included some "over the top" toys--such as the Jacuzzi tub with built-in HDTV and floating remote control, and the combination vanity mirror/HDTV for shaving and watching programs simultaneously.

Salton Beyond Icebox kitchen entertainment centers --> Click for larger pictureIn the less extravagant range, the kitchen highlighted Salton's Beyond Icebox flipscreen kitchen entertainment center. It mounts under a kitchen counter, contains a TV, DVD and CD player, is broadband ready and has a washable wireless keyboard.

Dave on treadmill with trainer on screen at NCTA "Broadband Home" Pavillion --> Click for larger pictureOur exercise room already has a treadmill, but one of the applications we hadn't seen before was from, which showed a live personal training session via Internet videoconference.

In the learning/resource alcove, we had an opportunity to meet Frank Gallagher, Assistant Director for Cable in the Classroom. Frank showed us their Website which is a resource for educators and parents. If you haven't seen their Webby Award nominated "Shakespeare: Subject to Change", check it out.

Multi-room DVRs Finally Arriving

With DVRs finally taking off in the market, we saw several product demonstrations of the next logical step -- multi-room DVRs. Anyone who has only one DVR, or who has two products from different vendors (we have a TiVo and a Replay) knows why this functionality is what the user wants next.

Ucentric demonstration at Motorola booth --> Click for larger pictureMotorola displayed their Home Media Architecture (HMA), which provides multi-room DVR enabled by Ucentric Systems. The solution uses a DCT6208 or 6412 digital video recorder as the main set-top, which can be accessed from other rooms with legacy digital set-tops upgraded by software download. The solution uses Entropic's IP over coax technology, so the architecture leverages already deployed coax and digital set-tops.

S-A Multi-room DVR --> Click for larger pictureMeanwhile, Scientific-Atlanta Inc. unveiled its own multi-room DVR, the Explorer 8300 MR-DVR. It allows three other Explorer set-tops to access the hard drive of the main box, has a built-in DOCSIS modem and is HDTV-capable. S-A said Time Warner Cable is field-testing the 8300.

Moxi Media Center --> Click for larger pictureMeanwhile, Moxi by Digeo, which has created media center software and services, is now available on both S-A and Motorola equipment. It provides multiple applications, including DVR, DVD, information on demand, jukebox, photos and games. To bring DVR from one room to a second one, they have created the Moxi Mate extension, a small box which connects over coax from the base Moxi Media center to extend the reach of the DVR service' this option costs $79 per TV.

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PacketCable Multimedia

Earlier this year, CableLabs held a PacketCable Multimedia (PCMM) interoperability event with eight participating companies (CMTS makers Arris, Cisco and Motorola; policy server firms Camiant, Telcordia and CableMatrix; and PCMM-defined application managers Ellacoya, Syndeo and Telcordia). The goal of the PCMM specification is to enable cable's IP-based network to deliver a wide variety of graphically-rich real-time services such as video communications and interactive games. The show floor at NCTA was a good place to observe what the specs actually deliver.

Ellacoya demonstrated the Multimedia Service Manager (MSM) software module, which enables the system to automatically identify each application, and then authorize its prioritized delivery on a per-subscription basis. The MSM authenticates and authorizes client requests for application services, based on customer profiles defined by the cable operator. The Ellacoya switch has both application and subscriber awareness, allowing it to measure traffic and enforce policies on a per-application and per-subscriber basis.

Cisco demonstrated several PCMM target applications, including XBox gaming and videotelephony. The demos showed the applications both with and without PCMM and displayed the real difference that QoS provides in these cases. The demonstrations included Ellacoya's MSM solution interoperating with Cisco's Universal Broadband Router (uBR).

Arris showed two PCMM demonstrations: a SIP-based video conference and bandwidth on demand. Both take advantage of the Arris–Cadant C4 CMTS with PCMM software and work in conjunction with Ellacoya's application aware bandwidth manager. At a Business Editor’s Meeting, Arris detailed several examples of custom bandwidth management and the extra revenue-generating opportunities they provide a cable operator. One example was an Express Music Download service. Another was an Xtreme Internet Game Service, in which an MSO partners with a console or PC game developer to provide ultra-low latency bandwidth, with sub-50ms latency. In each case, premium bandwidth services can be sold to low-bandwidth subscribers without changing their basic service subscription.

The potential of PCMM-based services is great and includes the videotelephony applications we discussed above. What we're waiting for now is to see these applications fully developed and marketed to consumers.

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Low-cost Digital Set-tops

Just over a year ago, we wrote an article in Communications Technology called Planning for the All-Digital Future--The End of Analog Television. It talked about the potential for creating a low-cost digital-only set-top, to help speed the transition to all-digital. At that time, the $35-40 price target that was being discussed seemed very far away.

Visionetics Ultra-LYTE all-digital set-top box --> Click for larger pictureAt this year's display of Sony's Passage technology we saw two products which seem to fit the target description: the i-CAN 1000 from Advanced Digital Broadcast at $35, and the Visionetics Ultra-LYTE at $39. We applaud Sony for helping to bring open choice to the digital set-top box market!

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VoIP--Its time has come!

One theme that echoed both in the sessions and on the show floor was the inexorable march forward of VoIP. On the show floor, IP telephony services were being shown by many, including Vonage, 8x8, Gallery IP telephony and the International Packet Communications Consortium (IPCC). Meanwhile, VoIP was discussed in many sessions.

FCC Commisioners at NCTA --> Click for larger pictureIn a session featuring most of the FCC Commissioners, Commissioner Jonathan Adelstein said "VoIP is the most exciting development in telephony as long as we can remember." Speaking about regulation of VoIP, Commissioner Kathleen Abernathy commented " 'Light touch' regulation means you don't want to burden new products with old regulation."

In the CEO session, Time Warner's Parsons commented "By the end of this year, Time Warner Cable will be voice-enabled in every system." Comcast's Roberts indicated their schedule calls for half of their footprint to be VoIP ready by year end, with rollout of telephone service to those customers in 2005. Subsequently, he said that 95% will be covered by the end of 2005, so that service can be offered in 2006 to more than 40 million households. In another session, Charter's COO Maggie Belville told the audience that 3 million Charter homes will be VoIP capable by the end of this year and called voice the glue that kept customers attached.

The exhibits and comments left little doubt that while cable has taken a long time to roll out IP telephony, its time has definitely come.

Consumer Videotelephony -- Continuing the Quest

NCTA's pre-show PR blurbs contained at least four consumer videophone related items, so part of our mission at the show was to check them all out. As we wrote back in February, we see some of the previous impediments to consumer video communications falling away, but are not convinced that we're "there" yet. We've waited so many years for the reality that we've now become the perfect test market: grandparents with a young grandson living 2500 miles away. We tried out several products on the show floor: Worldgate's Ojo personal video phone, SightSpeed's video messaging software, Clique Video's Messenger, and Globalstreams VibePhone. Our goal was to see which if any of these products would qualify for our real-world "grandson test".

Ojo at NCTA "Broadband Home" Pavillion --> Click for larger pictureMotorola has agreed to resell Worldgate's Ojo (pronounced O-JO), a SIP-based video phone appliance, planned for Q3 of this year. The product is said to be compliant with DOCSIS and PacketCable standards, supports 30 fps of full motion video, uses an enhanced version of H.264 digital compression and hi-fi full duplex speakerphone technology. We were impressed with what we saw in terms of picture quality and lip synchronization. This is clearly a person-to person device, unlike other devices such as the D-Link i2eye DVC-1100 which are designed for family communications. Our understanding is that although it is SIP-based and therefore compatible with other SIP video phones, Worldgate encourages putting an Ojo at each end to insure high quality.

The initial product will sell for $700 at retail, or $1400 for two. We think this cost raises serious questions: How much will customers be willing to pay? How fast will the product come down the cost curve? In the past, videophone products selling at over $500 have appealed to very narrow markets. Broadband operators are expected to follow the model of cellphones, charging a lower price for the phone bundled with video service. Worldgate CFO Joel Boyarski pointed out that in today's world, consumer devices like the iPOD seem to be getting great market reception despite their $399 price tag.

Sjoma with SightSpeed --> Click for larger pictureSightSpeed takes an entirely different approach, using the consumer's PC and broadband connection with SightSpeed's software and service. On the show floor, SightSpeed CTO Aron Rosenberg demontrated a video conversation with a person across the country, and we thought it performed very well. Aron offered us an opportunity to try it ourselves at home, and we've started a live trial with several members of our family. We will report later on how we like it.

We're continuing to try various solutions, but so far our best experience has been with a Mac at both ends running Apple's iChat software. Our grandson is being raised in a Mac household and we use PCs at home. We've tried AIM 5.5 which claims to be compatible with iChat, but so far we've been unable to get it to work. So we're still looking for a solution to meet our needs.

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