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CONSUMER-ELECTRONICS OUTFITS HUDDLE IN OPENCABLE MEETINGS

7/05/1998 8:00 PM Eastern

Denver -- Executives from more than 150
consumer-electronics manufacturers and retailers entrenched themselves in OpenCable
meetings here last Tuesday to learn how that process will affect their future product
strategies.

The cable and electronics companies convened in the wake of
the Federal Communications Commission's recent rulemaking on "navigational
devices," which affects both set-tops and in-home electronics like TVs and VCRs. That
ruling tapped heavily into OpenCable as a primary way to make in-home electronics that are
interoperable and available on retail shelves.

Because of that, consumer-electronics vendors needed to
immerse themselves in the one-day learning session to get a head start on how to
accommodate "point-of-deployment" cable modules, which keep premium-cable
signals secure. Both industries also needed to swap thoughts on how to best tackle
"fire-wire" issues, which are critical to high-definition television and in-home
digital networking.

At midday of the one-day event, seven key executives from
cable, retail and consumer-electronics companies squeezed shoulder-to-shoulder onto a
press-briefing dais to discuss the importance of their collaborative work.

"There's no question in our minds that the successful
execution of our OpenCable initiative is critical if we're going to achieve our next round
of revenue growth," said William Schleyer, chairman of the OpenCable group.

He added, "The final piece of this is working with the
consumer-electronics companies -- it's great to work with them now, because [cable's]
relationship with them in the past has been rocky."

Schleyer also cited other OpenCable steps as key markers in
the process so far: the successful solicitation of Silicon Valley players, like Microsoft
Corp. and Compaq Computer Corp. (which recently invested in Road Runner); and the issuance
earlier this year of two sets of OpenCable specifications.

"It's critical that we begin a dialog with the
[consumer-electronics] manufacturers," agreed Richard Green, CEO of Cable Television
Laboratories Inc.

Consumer-electronics executives said they like OpenCable
because over time, it will pave a unified, nationwide way for them to sell TVs and VCRs
equipped with the POD receptacle.

"The important thing about the OpenCable process is
this idea of ubiquity," said Gary Myers, president of Sony Electronics America
Corp.'s digital-network-solutions group. "We, as a consumer-electronics company,
cannot afford to sell products just in Chicago, or just in Boston."

Executives gathered for the event spent the day discussing
those two specification drafts -- one focused on application services, and the other on
functional requirements for advanced set-tops. OpenCable also used the forum to distribute
a 30-page draft "fire-wire" specification, which will be critical to the future
of networked digital devices in homes and to HDTV delivery.

In the short term, HDTV sets that hit retail shelves this
fall will not include any form of digital input, noted James Chiddix, chief technical
officer for Time Warner Cable. This means that operators that deliver HDTV signals over
their systems will have to develop other ways to get those signals from set-top converters
into the HDTV display.

Chiddix said the "straw-man" draft contains a
copyright-protection scheme "that's an amalgam of those available from
manufacturers," and it also contains "some new things, in terms of intelligent
communications and graphics."

Next step: Consumer-electronics companies -- like Sony
Corp. and Thomson Consumer Electronics, both of which sell competing fire-wire techniques
-- will evaluate the draft OpenCable fire-wire specification and make comments for
inclusion in a final specification.

"Where this ultimately leads is to a place where there
are truly digital cable-ready TV sets, VCRs and DVD [digital-versatile-disc] players,
which the cable operator simply outfits with an addressable module with security and
encryption," Chiddix said. "The TV or VCR is able to access broadband assets,
which cable has -- it's good for both industries."

But it won't happen without more hard labor, involved
executives said.

"Over the course of the next year-and-a-half, there
are really tough issues to be resolved between our industry and the consumer-electronics
industry in order to get a set-top into the marketplace that is beneficial to
consumers," said David Beddow, senior vice president of Tele-Communications Inc.'s
TCI Technology Ventures.

At the top of the "tough-issues" list is
developing the POD module and interface receptacle.

Because cable operators must stop deploying set-tops with
embedded security in 2005, MSOs must work fairly quickly to devise the PODs, so that
premium signals can be secured via removable POD cards by that deadline.

Beyond that, Beddow said, other snarly issues include how
to address the HDTV and fire-wire situation, as well as how to define business issues so
that advanced services can work within the boundaries of the set-top boxes that TCI and
other MSOs have on order.

"That means issues of processing power, graphics types
and capabilities and memory configurations," he explained.

Beddow added that TCI is currently favoring Sony's
fire-wire approach while the OpenCable fire-wire specification gets sorted out.

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