Hosted Applications Initiative Looks to Include Cable Ops

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The knock at cable's door calling for high-speed-data
solutions in the business sector grew louder last week, thanks to initiatives involving
Cisco Systems Inc. and various partners.

Most dramatically, long-distance carrier IXC Communications
Inc. said it was partnering with Cisco, ISP Channel and independent cable operator
Cablevision of Lake Travis (near Austin, Texas) to develop business services that combine
Internet-protocol telephony and virtual private networks.

At the same time, Cisco was preparing to launch a new
initiative -- the "Hosted Applications Initiative" -- this week in the hopes of
engaging cable and other service providers, vendors and end-users in a standards-based
approach to new types of business services.

"We see IP-telephony services over cable as a key
deployment strategy for our customers," said David Tucker, general manager of
Cisco's enterprise-voice-business unit.

"IXC's trial deployment will lead to refinements
in this technology that will accelerate its mass use by remote users and their
companies," he added.

While most of cable's focus on IP voice has been
pegged to the requirements of toll-quality residential service, the technology and
market-demand factors on the business-services side offer compelling opportunities to
forge ahead with IP-voice-enhanced data services right now, noted Chris Rothlis,
IXC's vice president of new product development.

"We're finding a lot of receptivity to the idea
from cable operators, especially in second-tier markets," Rothlis said.

These markets -- where cable companies are often not
affiliated with the leading cable-data providers, Road Runner and @Home Network -- offer
outsiders like IXC the opportunity to provide expertise, as well as long-haul backbone
support, which can make business services an attractive proposition for cable, Rothlis
noted.

Starting May 17, Austin-based IXC will test the use of VPN
technology to provide remotely located IXC employees with guaranteed bandwidth for
advanced voice and data communications. "We're putting together a coherent
package of VPN and IP telephony in an effort to understand what it takes to support it
from the standpoint of billing, order entry, provisioning and operations management,"
Rothlis said.

While the test is slated to last six months, IXC could move
to commercial deployment in conjunction with cable operators in other markets well before
the trial is over, Rothlis added. "Cable isn't our only point of connectivity in
the local market, but we view it as crucial to our plans," he said.

IXC, with approximately 10,000 route miles of fiber in
place, has focused on wholesale and retail delivery of long-distance voice service, with
integration of data being a key aspect of its strategy as a next-generation carrier.

Like other interexchange carriers, IXC is also looking for
ways to directly access the local customer base in competition with the incumbent and
competitive local-exchange carriers.

"We're not trying to be a CLEC, but rather, we
are focusing on offering second-line enhanced services, assuming that our trial leads us
in this direction," Rothlis said.

In the remote-worker application, the second line over
cable's high-speed-data channel ties employees into their office PBXs (private-branch
exchanges) on the voice side, while connecting them directly to their LANs (local-area
networks) behind the company firewall, he said.

IP voice is but one of the many value-added applications
that small to midsized businesses are looking for from data-service providers, noted
Eugene Lee, vice president of marketing for small and midsized businesses at Cisco.

"We see companies with 500 or fewer employees as the
fastest-growing revenue opportunity for delivering IP-based value-added services,"
Lee said.

Hosted applications -- where the service provider uses the
IP platform to deliver company-specific applications that heretofore have been done on an
in-house basis -- represent an important growth area for Internet-service providers and
software vendors alike.

But the market is awash in confusion and uncertainty, Lee
said. This is why Cisco decided to launch the new initiative, which, as of this week, will
have about 20 participants, including service providers such as GTE Corp. and PSINet Inc.,
and software vendors such as Oracle Corp., Microsoft Corp. and PeopleSoft Inc.

Cisco hopes to bring cable companies into the hosted-apps
initiative, Lee added. But it remains to be seen whether cable companies are up to the
challenge of developing the know-how that is required in the hosted-apps business.

The combination of IP voice and applications such as
unified messaging via cable's high-speed-data pipes is a "killer app" if
operators embrace the opportunity, ISP Channel president Ian Aaron said.

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