IP Progresses, Amid Confusion

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Anaheim, Calif. -- Vendors and the PacketCable task force
reported progress on several fronts in IP telephony last week, but not enough to stem
growing uncertainty among operators over how and when to get into the voice business.

Several sources said that AT&T Corp. -- a strong
proponent of delivering telecommunications services over cable in the Internet-protocol
format -- was signaling that it might stay with circuit-switched packetized voice as a
first-line option longer than originally anticipated. AT&T would use the broadband-IP
platform as a means of offering feature-enhanced second-line services.

"There's a lot of confusion right now with all of
the talk about IP telephony, and there's no certainty as to when it will be a viable
first-line option," said Don Lemley, engineering manager for network-access systems
at Tellabs Operations Inc.

"At the PacketCable meetings that we participate in,
you hear people referring to 'primary line,' rather than lifeline service, which
is a step away from the publicly announced goal," Lemley added.

The PacketCable group -- which said last week that it had
completed a draft of some of the specifications for IP-voice-over-cable -- said it intends
to define an end-to-end system of interfaces.

This will allow cable operators to provide basic,
first-line and enhanced second-line services over data channels in conjunction with cable
modems that connect directly to standard Touch-Tone telephone sets. Members of the group
have suggested that it would be possible to launch services on this platform by mid 2000.

But last week, along with the announcement of the first
draft specifications, Cable Television Laboratories Inc. issued a press release that
provided a far less definitive time frame than had been suggested in previous statements.

In the release, PacketCable task force leader Mark Coblitz,
vice president of strategic planning at Comcast Corp., said, "I remain confident that
within the next few years, we will have a highly productive distribution system for
packet-based multimedia on our networks, with software and hardware from many
suppliers."

The specifications, which were not publicized, included the
choice of the simple-gateway-control protocol over H.323 standardized call-control
mechanisms, which had been a hotly contested issue within the group.

SGCP -- which is evolving toward media-gateway-control
protocol in the wake of an agreement on competing proposals among proponents at the
Internet Engineering Task Force -- provides a mechanism by which each client
"gateway" can be addressed individually for call setup and control from a
centralized call processor.

Still to be worked out are other specifications that are
essential to a basic consumer-telephony service, including end-to-end signaling and
security mechanisms, officials said. These specs are to be completed within the first half
of next year, which would allow field trials to begin sometime in the second half, they
added.

CableLabs is set to begin in-house interoperability testing
in the first quarter, with events to be scheduled once or twice a month throughout the
year. At the same time, the PacketCable group will be working on an additional set of
specs for services designed to work with highly intelligent end-user devices, including
personal computers, which will be geared for the SoHo (small-office/home-office) and
telecommuter markets.

Meanwhile, vendors are pushing ahead with innovations and
alliances aimed at jump-starting the IP-voice market in cable as quickly as possible.

For example, ADC Telecommunications Inc. and Cisco Systems
Inc. said they would work together to develop cable-based IP-telephony products, with
shipments of new DOCSIS (Data Over Cable Service/Interoperability Specification)
network-interface units slated to begin in the second half of 1999. The companies stressed
that their goal is to support "lifeline" telephony, with the externally mounted
NIUs to be equipped with a network-powering option.

At the same time, the companies -- using Cisco's
intelligent-networking software and routers, along with ADC's cable-distribution
equipment -- plan to offer a full range of features such as call forwarding, call waiting,
conferencing and caller ID.

In another key move buttressing IP voice, Broadcom Corp.
introduced a reference design for integrating cable-modem, IP-telephony and full-motion
IP-videoconferencing functions into a single system.

The design, employing the "Audacity Internet Telephony
Processor" from 8x8 Inc., supports four industry-standard voice encoding/decoding
options and SGCP, with videoconferencing designed to operate at 384 kilobits per second
using the H.263 video- and G.711 audio-compression options.

For its part, 8x8 continued to expand on its
"Audacity" platform capabilities, introducing an integrated circuit supporting
both MGCP and H.323, and up to eight simultaneous IP-phone calls. Two versions of the chip
are available -- one with a graphics engine for screen phones, and a lower-cost version
for audio-only telephones and gateway products.

Broadcom's embrace of 8x8's voice-over-IP
approach reflects growing support for tight integration as a means of overcoming one of
the big stumbling blocks in packet voice -- latency.

The approach to minimizing latency used by 8x8, no matter
what the packet-framing sizes might be, is to integrate the complete TCP/IP (transmission
control protocol/IP) stack with the audio and, if it's used, with the video coder
processes on a single chip, said Scott St. Clair, director of corporate communications for
8x8.

"Other implementations rely on host processors for the
TCP/IP stack and on DSPs for the coder and related functions," St. Clair noted.

The integrated approach "allows us to pull one byte at
a time from the IP stack, versus polling the host processor periodically, which maximizes
efficiency in the packet-framing process," St. Clair said. The architecture also
allows the system to switch coders on the fly, running all standards from G.711-728
"without missing a beat, depending on bandwidth availability," he added.

These developments drew praise from cable executives
charged with overseeing the development of IP telephony. Remarking on the Cisco/ADC
alliance, Jeff Turner, director of IP telephony for MediaOne Group, termed the
relationship "a big step forward for cable-based IP telephony." In particular,
he said, the alliance should help to solve "the missing piece of the puzzle for IP
telephony in terms of the specialized equipment that our industry needs to provide highly
reliable voice communications."

Similarly, Steve Craddock, vice president of new-media
development at Comcast and chairman of the PacketCable business committee, lauded
Broadcom's move, saying, "We're excited to see the company extend its
expertise to support technology for IP-telephony and videoconferencing applications."
Broadcom's commitment "is an important step toward the development of IP-based
equipment," he added.

But even as IP-telephony proponents cheered the vendors on,
concern was mounting in industry circles that competing claims of various technology
approaches were distracting many operators from deciding on what to do about the telephone
business -- especially when it comes to accepting the partnership proposal tendered by
AT&T as it waits to take ownership of Tele-Communications Inc.

"The message has been confusing, where we're told
that IP is the great advantage that we'll have that makes getting into telephony
worth the effort, even as we're being urged to move forward now because there's
such a big opportunity using the non-IP platform," said one senior cable executive,
asking not to be named.

Lemley said AT&T executives had expressed interest in a
dual-platform approach, such as what Tellabs intends to begin offering late next year or
in early 2000, where NIUs will support both the firm's proprietary packetized
switched-circuit system and DOCSIS connections for delivering IP voice. "They seem to
be rethinking the strategy," Lemley said.

Indeed, another industry executive said, speaking on
background, that operator resistance to the "gold-plated" networking standards
set by AT&T was a significant barrier to completing deals. As a result, he said,
AT&T was backing off, suggesting that there might be an option to deliver enhanced
second-line services over cable in instances where the cable system is not suited to
first-line quality.

Another executive, who has been participating in strategic
discussions between AT&T and cable operators, said one of the surprises in these
meetings has been how far apart the two sides are on network quality. "People say one
thing in public about their networks, but when it comes to signing contracts and
guaranteeing performance, they tell another story," the official said.

Moving away from positioning IP voice as a lifeline
imperative could help to clear some of the confusion, these sources said. That way, they
suggested, IP telephony could become a means of offering enhanced services over
less-than-gold-plated networks, ensuring lower costs of entry and potentially wider
cooperation from potential partners to AT&T.

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