IP: Not Just For Speed Surfing Anymore

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Atlanta -- The service platform for high-speed data is
about to go way beyond just speed-surfing the Internet, if demonstrations by key data
suppliers at last week's National Show here are any indication.

At the same time, vendors plowed on with the quest to make
their products interoperate with each other, while mapping out retail-distribution paths.

But IP (Internet-protocol) services took the bulk of the
buzz. In briefing after demonstration after briefing last week, and all over the show
floor, data vendors were explaining a service mix that will let MSOs offer second-line
phone services, streaming video, videoconferencing, telecommuting and virtual private
networks.

"As the world migrates to IP, cable has a fantastic
opportunity to take the lead," said Bob Schack, director of Cisco Systems Inc.'s
Broadband Networks Division. "Cable has a unique window to really become a leader in
this next generation."

Initial plans by IP-phone-service providers call for an
external box that will sit between the cable modem and the phone, called a
"gateway." When commercial, that link will likely be included in the cable modem
via an RJ-11 connector attached to a voice codec inside.

Or, the gateways could be designed as boxes that plug into
the boxes that are already on the side of homes and that pass phone calls from the public
switched-telephone network to in-home wires. In that scenario, which cable operators like,
they and their subscribers could feasibly bypass telco local loops entirely.

Terayon Communication Systems, which hit the
10,000-modems-shipped milestone last week, ran an IP-phone demo in its booth, and it is
similarly bullish on streaming video content, said its CEO, Zaki Rakib.

To display its application, Terayon linked up with
video-on-demand player Intertainer Inc. at the show. Intertainer is a favorite of Comcast
Corp., which invested in the company earlier this year and which plans to test its product
shortly.

Another supplier banking heavily on cable's IP future
is Bay Networks Inc., which logged a deal with Canada's Videon CableSystems Inc. at
the show.

Karl May, Bay's Broadband Technology Division vice
president, said he is recommending that MSOs maximize returns on the data platforms that
they're building, adding that the way to do that is with IP.

"Internet access was the first, mini-killer app,"
May said, adding that telecommuting and business applications are next: They're
bigger, "and they're lucrative."

Also in Atlanta, Bay agreed to lend its cable-modem design
to Hayes Microcomputer Technologies for its modems. The deal calls for Hayes to
manufacture, market and distribute Bay's modems, while giving Bay a leg up on a
retail-distribution path.

Separately, Hayes locked in an arrangement to sell its
Ultra-brand cable modems at Tandy Corp.'s ComputerCity Supercenters, joining @Home
Network's similar announcement two weeks ago.

Com21 Inc. was another data vendor to demonstrate
voice-over-IP here, through an arrangement with Vienna Systems Inc. Com21 also leveraged
its distribution arrangement with Philips Broadband Networks Inc. to snare its biggest
order yet: France Telecom, which operates a cable system that passes 1.7 million homes.

And Com21 factored into TCI.NET's recently released
cable-modem purchase plans as an interim supplier before standards-based products are
purchased and installed this summer, executives confirmed. TCI.NET is Tele-Communications
Inc.'s data unit.

Despite the excitement over IP telephony, some executives
elected to tone down the hype.

Buck Gee, vice president of marketing for Com21, noted that
issues remain before IP telephony becomes a practical reality for cable operators.
"There's equipment that operators can trial with ... but the current DOCSIS
[Data Over Cable Service/Interoperability Specification] standard needs some form of
constant-bit-rate [addition], or else it will be very difficult to provision," he
said.

Latency issues that dictate how long it takes for
someone's voice to gets digitized, packetized, sent over the Internet and reassembled
at the other end need resolution, too, Gee said.

"In general, you need a latency of 250 milliseconds or
less," Gee said. "Otherwise, it sounds like a satellite-phone call, where
there's a lag between when you say something and when it's heard."

Like all other new technologies, the move to IP won't
come without some growing pains, agreed Ian Aaron, president of ISP Channel, a
high-speed-data turnkeyer with contracts to provide its service to 17 operators
representing 500,000 homes passed.

Aaron included tariffing, the fledgling state of IP
technology and housekeeping items, like billing, as obstacles to clear before the service
can really take off.

It will take at least 90 days before those issues are
resolved, he said.

"Our main focus is on evaluating the product,"
Aaron said, describing IP pilot tests being held in the Palo Alto (Calif.) Cable Co-Op
system.

Interoperability of modems was another hot spot at last
week's show. Cable Television Laboratories Inc. corralled one-dozen vendors into its
second, public "Interop," including 3Com Inc., Bay Networks Inc., Cisco and
Toshiba America Consumer Products on headends; and General Instrument Corp., Intel Corp.,
Libit Signal Processing, Motorola Inc., Samsung Electronics America and Thomson Consumer
Electronics on modems.

Involved suppliers said standards-based modems should start
rolling off production lines soon. Samsung said cable operators can expect production
quantities of its "InfoRanger" modems by July. That would follow an expected nod
by the CableLabs modem-certification team in June, executives said last week. Field trials
start this month.

Also as part of Interop, Intel showed the first working
prototype of a cable modem outfitted with a USB (universal-serial-bus) connector. That
development is an important one for operators, because when USB connectors are pervasive,
users can seamlessly plug modems into their personal computers without the need for
Ethernet-card installations.

That demo also linked with Microsoft Corp.'s Windows
98 software, proving that someday, software drivers inside operating-system software will
make cable-modem installations no different than installing phone modems or other
peripherals.

Motorola, a lagger in getting its standards-based product
ready, said it will aggressively change that pattern while setting the stage for a
retail-migration plan as the summer unfolds.

Motorola, which currently leads in market share for
deployed cable modems, also said operators that own its CyberSURFR modems can
"immediately enroll" in the company's new upgrade program. This means that
any MSO that bought Motorola's current-generation cards for its headend processor
after Jan. 1 can upgrade to DOCSIS-based versions free-of-charge.

Operators that bought the cards before Jan. 1 get trade-in
credits of "up to 80 percent" toward the purchase of new, standards-based cards.

Also last week, Zenith Electronics Corp., which recently
initiated a plan to re-energize its cable-modem plans, said it will use chips made by
Broadcom Corp. in its forthcoming data line.

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