Cable Modems: Easier, More Lucrative and Cheaper

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The rash of releases from cable-modem manufacturers about
their plans to comply with industry standards may finally let up at this week's
National Show in Atlanta, giving way to feature sets and retail-migration plans.

Not that interoperability measures are taking a back seat:
At press time, Cable Television Laboratories Inc. was expecting 14 vendors, including
headend and cable-modem manufacturers, to participate in live interoperability
demonstrations at the show.

Beyond that, cable-modem vendors were shining up their
batch of announcements for the show last week.

At press time last week, 3Com Corp., Bay Networks Inc.,
General Instrument Corp. and Thomson Consumer Electronics were gleefully anticipating an
order announcement from Tele-Communications Inc.'s TCI.NET data division.

Other vendors provided glimpses into their product
strategies, revealing a data landscape that focuses on making things easier, more
lucrative or cheaper for their MSO customers.

One shift that is sure to grab headlines this week from
data vendors was the move into retail.

Most of the big cable-modem names, like 3Com, Hayes
Microcomputer Products and Samsung Electronics America, said they'll talk at length
about the best ways to populate retail shelves with data products.

Hayes, for example, is planning to detail programs with
"leading communications companies and resellers" to deliver two-way cable-modem
systems in the third quarter of this year, according to a spokeswoman.

Ditto for Samsung, which was more secretive about its
specific plans at press time.

3Com is also expected to announce more participants in its
plan to develop "micro-retail" and "nearly national retail" paths for
its U.S. Robotics-branded cable modems. Likely resellers in that arrangement include
CompUSA, Best Buy, Circuit City, Staples, Office Depot, Fry's and ComputerCity.

Operators have said that they need to hear from
manufacturers about how the shift will work from an "operator-owns,
customer-rents" model to a world where cable customers can walk into an electronics
store, pluck a cable modem off the shelf, buy it and get it installed.

The retail model, while tricky, promises to remove a huge
cost burden from MSOs, which are facing per-modem price tags of $350 to $500. What MSOs
want to know from vendors is how quickly cable modems can come off their balance sheets.

Another key piece of retail strategy is how manufacturers
will work with retailers in a cohesive manner, so that customers located in a plant
footprint that's ready for the service can buy modems.

There's a flip side to this that also affects
retailers: how to serve customers who live in areas that are not yet ready for
high-speed-data service, so that they don't unnecessarily buy something that they
can't use.

Motorola Inc., a leader in current cable-modem market
share, also plans to address national-retail-rollout plans, executives said. Today (May
4), Motorola also plans to describe its pursuit of standardized products, as well as its
Internet-protocol-telephony plans.

On the marketing side of things, Cisco Systems Inc. last
week detailed a plan to brand its cable-modem-headend products "NetWorks,"
adding that Sony Electronics Inc. and Samsung are its first licensees.

Cisco's licensees get a product-development kit and a
certification and branding program, executives said. Cisco is also scheduled to disclose
detailed product-strategy information today (May 4).

Emerging from what seemed to be a singular focus on its
1995 order for 3 million set-tops from the Americast telco consortium, Zenith Electronics
Corp. said its attention is again focused on cable modems.

Zenith, which is currently suffering from serious financial
problems, has even established a dedicated business unit for the modems. Bill Luehrs,
president of Zenith's network-systems division, said plans are now under way to
develop standards-based cable modems.

Mark Demange, vice president and general manager of
Zenith's new modem division, acknowledged last week that Zenith is entering the
standards-compliant market a bit behind the pack.

"We intentionally showed up a little bit late, because
we didn't feel that the standards were quite there yet," he said. "Now is
the right time."

He added that Zenith will pursue both the headend and
cable-modem ends of the data-product line, through an arrangement with chip-supplier
Broadcom Corp.

Hybrid Networks Inc. said it will use the show to debut
what it's calling a "Triple Play" modem, which supports two-way cable and
wireless transmissions, as well as one-way, telco-return models.

The manufacturer is also expected to start flexing its
patent muscle soon, and it is already going after other cable-modem vendors, like Com21
Inc., for violations, sources have said.

In private, one-on-one briefings in a hotel suite, Intel
Corp. is expected to detail progress in developing a universal-serial-bus interface for
cable modems -- a move that cable engineers liked because of its ramifications on
cable-modem installations.

When personal computers are outfitted with USB ports,
executives have said, cable-modem installation becomes as easy as plugging a printer or
other peripheral device into the back of a PC -- no more clunky moves to undress the PC,
slip in an Ethernet card and hope that everything works out all right.

As for feature sets, watch for Bay to trot out solutions
for operators that want to delve into business-class IP services, like virtual private
networks and telephony, a spokesman said.

Com21 is also expected to trumpet the IP-telephony tune
next week, reasoning that market conditions are finally in place for operators to consider
the concept.

"This is the year for operators to try IP
telephony," said Buck Gee, vice president of marketing for Com21. "Customers
like the idea because as of now, it's free -- plus the quality has gone up to at
least satellite-phone quality, he added.

The manufacturer is planning to demonstrate voice-over-IP
at its show booth, Gee said. A press briefing Sunday (May 3) was slated to include new
customer agreements, although Gee was mum on specifics at press time.

Terayon Communication Systems, which locked in a supply
agreement with an equity nod from Shaw Communications Inc. last month, will use the show
to demonstrate how its TeraPro modems work with the @Home Network service, as well as to
deliver IP telephony and video-streaming, executives said.

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