Kim Kelly Takes Tech CEO Spot At Startup Arroyo

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After Kim Kelly left her job as chief operating officer of Insight Communications Co. 10 months ago, her next job almost was in Iraq, helping the new government establish free elections.

Instead, she’s decided to become the CEO of a startup technology provider pitching new applications to the cable industry.

Presumably being chief executive at Arroyo Video Solutions Inc. — a Silicon Valley firm that’s drawn $13 million in capital from Comcast Corp., Time Warner Inc. and other private investors — will be a lot safer than the Iraq job might have been.

But Kelly last week made clear there’s still a bit of a culture shock, going from the top operating job at a top-10 cable company to top job at a would-be cable vendor that doesn’t have any revenue yet.

“I’m excited, but it’s extraordinarily different,” Kelly, who was the Women in Cable & Telecommunications woman of the year in 2002, said last week by phone from Pleasanton, Calif. “It’s basically me and a lot of engineers, and a sales guy.”

She’d caught a discount Jet Blue flight from New York City to meet with the founders one last time before signing the papers, after two and a half months of talking with them.

The trip was so spur of the moment that she couldn’t get a hotel room at the local Hilton, but they put her up on a cot in a parlor room.

“I’ve gone from private planes and the very fancy office, overlooking Central Park, to Jet Blue and a cube,” she said with a laugh. She also described herself as “the industry’s new vendor valley girl.”

But seriously: Arroyo’s first product, she said, is essentially a video-on-demand server, based on such off-the-shelf components as an Intel Corp. computer.

That puts it in competition with several entrenched or at least more-experienced vendors, including SeaChange International Inc., Concurrent Computer Corp. and nCUBE Corp. and also against a new wave of vendors like Kasenna Inc., Broadbus Technologies Inc. and MidStream Technologies Inc.

NOT JUST VOD VENDOR

But Kelly stressed repeatedly that what Arroyo is about is much more than VOD servers.

“I wouldn’t be here if it was a VOD vendor,” she said.

“What it is really is a network architecture,” she said, based on open standards, an approach that worked well for cable with the Data Over Cable Service Interface Specification (DOCSIS) standard that underlies the cable-modem business, the industry’s mainstay profit producer.

Arroyo’s platform also could support the kind of “networked PVR (personal video recorder)” system — with a full array of programs stored at the headend — that Time Warner Inc. tried to achieve with Mystro, Kelly said. Copyright issues involving content storage will eventually be worked out, she said, because the programmers will want to offer content in customer-friendly ways. Technically, it’s certainly possible, she said.

The Arroyo server can today store 2,500 hours of content and handle 12,000 simultaneous streams, vice president of marketing and business development David Yates told Multichannel News in an earlier briefing.

Arroyo’s unit can sit alongside existing servers or allow cable companies to replace legacy equipment, he said.

Arroyo also is intended to enable OpenCable Applications Platform (OCAP) ITV applications. Software video-accelerator features can address problems currently with respect to running OCAP applications: that servers can’t host a lot of applications, and the processing can be very slow.

“We can speed applications 10 times and make older set-top boxes a viable delivery mechanism for OCAP apps,” Yates said.

Kelly said the product is scheduled to go into trials soon with a major cable company she can’t identify.

The co-founders are Paul Sherer, the former chief technical officer at 3Com Corp., responsible for overall technical and Internet protocol strategy there; and Drew Major, a founder of Novell Inc. who was inducted into the Computer Hall of Fame in 1999, according to the company Web site.

“I’ve been early before,” Kelly said. “This would be like the right time.”

She said cable companies can see the sense in basing systems on nonproprietary standards — especially given the current plethora of video-on-demand server vendors bidding on relatively limited business.

The reason why no one has bought up competing VOD vendors and consolidated the market, “even though it doesn’t help to have multiple VOD vendors, is because it’s all proprietary technology,” Kelly said.

“This stuff can ride on a Dell computer,” she said of Arroyo. “An MSO’s existing maintenance contracts can be used for everything. It’s really very smart. And more importantly, these guys are smart technologists.”

Sherer, she said “is the reason why I’m here.” His expertise is in moving bits around very fast, she said, and that’s going to matter in broadening cable’s service offerings.

Kelly said she fully understood the challenges ahead, especially if Arroyo is typecast as another VOD vendor.

But she said the potential was great for sharing in real new-business growth on the cable platform — and that’s vital to cable in competition with two innovative satellite-based digital-TV providers.

ANALYST ON APPEAL

Jim Davis of The 451 Group, a market research and consulting firm to Information Technology companies who’s familiar with Arroyo and who spoke with Kelly, echoed her comments about Arroyo’s intended breadth. “They’re selling themselves as an application platform, and I do think that’s very much of interest to cable operators. I think that’s part of the reason that Comcast and Time Warner took the time to investigate this company and invest money in it.”

He focused on one application that Arroyo also cites: games on demand.

“Of course Comcast already offers games on demand to PC customers,” Davis said. “It would be interesting if they could use the same infrastructure to deliver games and video to both the TV and the PC.

Comcast outsources a games platform from Exent, Davis said. “But I would imagine that it’s less capital intensive to be able to repurpose that infrastructure for multiple applications. And the ability to either do that themselves or have a third party — which isn’t necessarily the server vendor doing those applications — I think is the important part. In other words not just being tied to going back to the vendor and waiting for them to do an application for them is what’s really important. They can use the Arroyo APIs or just write an application to Linux.

“I think that’s what makes Arroyo interesting to them.”

As for Kelly joining, Davis cited Insight’s forced switchout of video-on-demand platform from Diva Systems in 2002 when that vendor went under. Insight assembled replacement parts from SeaChange International Inc., TVN Corp., Cisco Systems and Harmonic Inc.

“Everyone else in the industry knows what Insight went through with Diva,” Davis said. “She’s got that experience and credibility in being able to deliver new technologies and new products and figure out how to fix things when it doesn’t work out. That credibility is going to be important for Arroyo, something not all of the other startups have.”

PLATFORM PROPONENT

While she was at Insight, its acts of progressive behavior as a small-sized public MSO included that early video-on-demand launch, widespread interactive TV deployment and getting into the circuit-switched telephone business.

“I’ve always been a big proponent of platform, and then doing something with it to differentiate against the other multi-video providers,” Kelly said.

If “fully funded” Arroyo doesn’t make it, the Iraq option isn’t open as a fallback.

Kelly said she had seriously been talking with a not-for-profit organization in December about a job helping create the new elections process in Iraq. She said she was waiting for the group to get the contract. But election-building in Iraq is a task she thinks will ultimately go to the United Nations.

She also didn’t see going from being a cable company executive to helping restore order in a war zone as that much of a stretch. There are a lot of logistics involved with setting up an election, after all: getting poll inspectors, ballots, finding places to vote.

“You think about cable — you get to work with all different types of people, that’s what I love about this industry,” Kelly said. “And logistically, I think if you can run a cable system, you can do anything.”

Matt Stump contributed to this report.

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