VOD Shines in Anaheim; IP Telephony Hyped

12/06/1998 7:00 PM Eastern

Anaheim, Calif. -- There was more action on a bustling showfloor than there was news at the Western Show here last week.

The biggest news coming out of the show was more cash fromPaul Allen, this time infused into High Speed Access Corp. and Wink Communications Inc.

Meanwhile, pockets of news dotted the trend landscape here,with video-on-demand and digital set-top applications clearly at the top of the list.

Still, there weren't the kind of head-turners that have sodefined the Western Show in years past. Tele-Communications Inc.'s "quietperiod," in advance of its merger with AT&T Corp., could be part of the reason,observers said. "TCI can't make the big promises this year, and the rest of us arebusy with other stuff," one senior MSO executive said.

Last Tuesday, Allen's Vulcan Ventures Inc. plopped $20million into HSA and $10 million into Wink -- a combined amount that topped the news eventhough it represents mere pocket change for the Silicon Valley billionaire.

Vulcan owns Charter Communications Inc. and Marcus Cable,with a total of about 2.5 million subscribers. HSA will provide high-speed data to 800,000potential subscribers of those MSOs, possibly passing as many as 5 million homes,depending on how big Charter gets via acquisitions by Allen.

A beaming Ron Pitcock, who started HSA one year ago at theWestern Show, said the cash infusion elevates the company to the competitive ranks of@Home Network and Road Runner.

Stephen Silva, Charter's vice president of corporatedevelopment and technology, said Charter was evaluating HSA to serve its"tier-2" markets before Vulcan entered the picture.

"[HSA's local managers] are not just turning on theservice," he added. "They're turning on the service and staying for the trenchwars."

Charter is already aligned with Earthlink Network Inc. toserve major markets such as Los Angeles and St. Louis. And Marcus launched @Home in itsFort Worth, Texas, system.

Pitcock said the cash from Allen -- and from the fiveoriginal investors, who ponied up more money -- is enough to fund the company for theforeseeable future. HSA had no shortage of other potential backers wanting to investbefore HSA chose Vulcan.

Vulcan's Charter systems will also deploy Wink's technologyas part of its $10 million investment into the interactive-TV provider.

Both investments fit into Allen's vision of a "wiredworld," in which "cable is the cornerstone, because it's such a big economiccommitment," said William Savoy, president of Vulcan.

Not surprisingly, Wink CEO Maggie Wilderotter said she was"very pleased" with the investment. "This is a material endorsement of theWink technology from a foremost leader in new media," she added.

Jerald Kent, CEO of Charter, said Wink'senhanced-broadcasting technique "enables us to deliver over 20 networks withinteractive programming to advanced-analog and digital boxes, today."

The $10 million topped off a heady week for Wink. LastTuesday, Time Warner Cable agreed to test the service in its Manhattan system. And justbefore Thanksgiving, both Home Box Office and E! Entertainment Television said they woulddevelop interactive content using Wink's technique.

In Manhattan, the Wink technology will run on GeneralInstrument Corp.'s CFT-2200 advanced-analog set-tops, executives said. Wink called it the"first and only" nationwide pact that Time Warner has signed with a SiliconValley software company to allow program-related data enhancements.

Perhaps the biggest trend coming out of this year's WesternShow was the resurgence of VOD.

More than a half-dozen vendors showcased VOD in theirbooths, while press-briefing rooms turned up MSOs that were ready to buy the gear as thefirst step toward pulling in movie- and content-rental revenues.

The biggest taker: Lenfest Communications Corp., which willextend its Diva Systems Corp. VOD contract to all of its cable systems in Pennsylvania,New Jersey and Delaware, starting immediately.

Plus, Insight Communications Co. said it will deploy Divaas part of a "core digital tier" in Columbus, Ohio; Rockford, Ill.; andBloomington, Ind.

Diva also plans to add on-demand content -- not just movies-- from ESPN, Bravo and Playboy TV. Bravo will contribute its "World Cinema"content, starting in Cablevision Systems Corp.'s system in Monmouth, N.J., in the firsthalf of next year.

Lenfest, which runs systems serving 1.1 million homes,plans to offer Diva's VOD service to every one of its digital-video customers, officialssaid at a press briefing last week.

That links to Diva's work to integrate its service withGI's DCT line of digital set-tops, which Lenfest is deploying. Lenfest was Diva's firstdeployment, in an arrangement that started 27 months ago.

Paul Cook, chairman and CEO of Diva, said he's"delighted" at the progress that has been made since Diva's debut at the WesternShow here last year.

Cook said Diva starts to turn a profit after operating a2,000-stream server in a 20,000-home node for two years, at a 10 percent-penetration rate,based on four buys per home, per month. "At that point, we gocash-flow-positive," he added.

TVN Entertainment Corp. will also launch a digital VODservice next year to complement its 32-channel near-VOD service.

TVN, along with Pennsylvania-based Vivid Technology, hasdeveloped a VOD service that's compatible with any digital set-top box that isinteroperable with GI's technology, said Jim Ramo, president and chief operating officerof TVN.

Any cable system with hybrid fiber-coaxial two-way plantcan implement TVN's new VOD movie-programming service for its customers. The company willbegin to test the service in several yet-to-be-determined systems, Ramo said.

Intertainer Inc., SeaChange International Inc, ConcurrentComputer Corp. and StreamGate Inc. also figured in heavily to the VOD buzz here.

Show-floor wanderers said they liked the looks of VOD.Ramiro Victoria, installation supervisor and safety coordinator for the Jones IntercableInc. system in Oxnard, Calif., said the VOD technology on the show floor was "reallyimpressive." The company plans to add VOD in the future, but it has not yet chosenwhich technology it will use, Victoria said.

On the technology side, the Western Show turned up pocketsof news, with considerable momentum around cable modems, in-home-networking solutions andinteractive applications that run on advanced-digital set-tops.

The big hype machine? Internet-protocol telephony,exhibited all over the show floor despite open admissions by the vendor and MSOcommunities that the category is years away from wide-scale deployment.

"There's just an incredible amount of hype about IPtelephony," noted Michael Harris, an analyst with Phoenix-based Kinetic StrategiesInc.

At the same time, DOCSIS (Data Over CableService/Interoperability Specification) modems were everywhere, but nowhere. Despite alack of certified product, cable-modem suppliers pressed on with advanced feature sets,like quality-of-service guarantees and IP support.

The show continued its explosive growth, as the number ofattendees topped 30,000 for the first time. The California Cable Television Associationreported 30,340 registrants, compared with 28,062 a year ago.

Vendors said they were pleased with booth traffic, addingthat the show floor was crammed last Wednesday and Thursday.

Scientific-Atlanta Inc.'s booth saw heavy traffic,especially on the first day of the show. A spokeswoman said the booth was"wall-to-wall packed" last Wednesday, even though the company had a larger booththan at past shows. Attendees were still hanging around at 6:30 p.m., one hour after theshow closed, she added.

Even tucked-away vendors liked the foot traffic."We're in a corner booth, and [attendance] is way up," said Tom Smaldone,president of Convergys Corp., who added that he thinks that traffic is up by 25 percentthis year at his booth. "I think that there is a lot of interest now in the industryabout the provision of new services."

Smaldone said visitors to his booth have been moreinterested in actually making deals, rather than just wanting information concerningConvergys' products.

"What's different is the kind of services that peopleare requesting," agreed Praveen Rao, vice president of software for PrasaraTechnologies, a Longwood, Fla.-based software company that serves the VOD industry."They are asking about the back office. They want to know how to use thisbusiness."

At Bellcore (Bell Communications Research), which wassituated within the CableNET booth at the show, traffic was up, but people were stillshopping around, said Scott Davidson, executive director of the New Jersey-basedtelecommunications-research company. However, he added that being a part of the newlyredesigned CableNET booth helped to increase traffic.

Floor traffic seemed especially heavy due to the fact thatthere was "less floor because of the construction," said Caroline Bock, seniorvice president of marketing for Bravo Networks. Bock said traffic was higher and moredynamic than in earlier years, adding, "The whole industry is really ending the yearupbeat, which hasn't always been the case in Anaheim."

Brian Quirk, executive vice president of Playboy TV, saidthe show was "livelier than we've seen in a while." Talk surrounding the showfocused on "digital, digital, digital," Quirk added.

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