Cable-Phone Vendors Ready IP Products

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The short list of cable-telephony manufacturers that stuck
it out through the dry spell of 1996 and 1997 are rising to the forefront again, saying
that their grasp of that market segment will ready them for the coming age of
Internet-protocol telephony.

In separate interviews with Arris Interactive (the joint
venture of Nortel and Antec Corp.), Motorola Inc. and Tellabs Operations Inc., all three
manufacturers appeared to be on a phased track to introduce IP-phone variations to their
existing product mix.

But don't look for anything resembling AT&T Corp.'s
"Nirvana" -- primary-line phone service delivered using IP-over-cable to
residences -- anytime soon. A host of technical issues remain, vendors said, like
powering, adding "class-calling" features and handling back-office issues such
as billing.

"There's a pretty good body of evidence to say that
IP-based cable services like telephony are going to start," said Jim Lavin, vice
president of marketing for Arris. "But at the same time, it's clear that
circuit-switched telephony will have a very long life."

That's because of technical issues that are not
insurmountable, but that are certainly needful of sustained engineering attention,
cable-phone vendors said.

At the top of the list: resolution of powering issues, so
that operators providing phone service can keep phone lines operational even when the
power is out.

The conundrum is not new -- every MSO pursuing
circuit-switched cable-phone services has faced the question of whether to provide battery
backup or network power. And now, there's a new wrinkle: advanced in-home electronics,
like cable modems and digital set-tops with built-in cable modems.

Most existing hybrid fiber-coaxial phone systems draw 2
watts or less for a two-line device, said Ken Kraft, director of marketing for Tellabs'
broadband-media group.

But as so called convergence devices start entering the mix
-- such as advanced-digital set-top boxes with integrated cable modems -- the powering
issue raises its head again, in a decidedly more wattage-hungry way, Lavin and others
said.

That's because advanced-digital boxes and cable modems
typically draw 30 watts or so per device, which could drain the capabilities of
plant-powered scenarios, he added.

"Every cable modem out there draws 15 watts or
more," Lavin said. "The advanced-digital boxes go even higher, to 30
watts."

MSOs like Tele-Communications Inc. are bullish on
integrated devices as a way to offer Web-browsing and packet services, like telephony, via
the TV.

Primary-line telephone, also called "lifeline"
telephony, means that the phone line stays live even if the power goes out. But if that
primary line is being delivered over an IP device connected to a cable modem or built into
an integrated set-top/cable modem, the network-powering beast raises its head in another,
uglier way than in early discussions of powering specific to circuit-switched cable-phone
service, vendors said.

"I don't think that anyone in the world is prepared to
spend money today for some IP network that they're not sure will do what they want,"
said Dick Day, corporate vice president and general manager for Motorola's
multimedia-markets division. "If the cost points don't make sense, it'll never
happen."

Nevertheless, the vendor community said they're not
surprised by AT&T's aggressive targets to launch IP-phone service over the TCI plant
that it plans to acquire next year. That's because AT&T needs a way to fend off
regional Bell operating companies, which are infiltrating the long-distance market
segment, Day and others said.

"AT&T's plans encourage us to speed up our
internal programs," Day added.

TCI executives said recently that the MSO's Fremont,
Calif., system -- the first TCI system to receive cable-modem service -- will likely be an
early proving ground for IP telephony.

But the vendors also pointed to technical challenges that
are daunting, at best, before IP-phone service can be marketed as a primary-line
alternative to circuit-switched phone service. These include calling features like call
waiting, call forwarding and caller ID, among many others.

"Obviously, circuit-switched telephony won't go away
quickly, but it certainly will migrate away," Day said.

Day added that Motorola recently formed an "expansion
team" that aggregates the work of several units inside the company to rally around IP
services. The goal: to come up with a migration plan for users of Motorola's existing,
circuit-switched cable-phone product.

Day said he didn't want to put operators in an
"upgrade by forklift" situation when any transition from cable to IP phone
happens. As such, Motorola will come up with a migration plan, not unlike how it is
handling the shift of customers from its proprietary cable modems toward standardized
devices.

The vendor community said their plans, while obviously
different from each others', will loosely track with a phase-in approach that first
tackles ways to interconnect circuit-switched traffic from the headend out to the
public-switched-telephone backbone. Then, they'll develop IP phone for second-line
services while they're working to phase in the third product element: primary-line IP
telephony.

Tellabs, which introduced an Ethernet port into its
circuit-switched cable-phone device last year, considers itself to be in a good position,
executives there said.

"To some degree, we're ahead, because we already
provide some combination of circuit-switched and IP packets," said Don Lemley,
planning manager for Tellabs' broadband-cable-phone group.

Even ambitiously, the availability of lifeline IP-phone
equipment for broadband networks is 18 months away, the vendors said. That tracks with
targets initially set by Cable Television Laboratories Inc.'s "PacketCable"
initiative, which is working on IP business and technical issues.

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