Modem Snafu Jolts Cable Data Drive

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The cable industry's high-speed data agenda took a
credibility hit in Silicon Valley in early December, proving that a rare confluence of
glitches in the wrong place can be as volatile as a California wildfire.

Bad luck, mixed with a certain amount of inattention,
seemed to be the primary cause of performance problems that generated a flurry of
complaints from Tele-Communications Inc.'s @Home data-service customers in Fremont,
Calif.

Doubling the whammy, by coincidence, on Nov. 30 the San
Francisco Chronicle
ran a front-page story proclaiming "@Home can't meet
customer demands." The paper based its story on the normal risk advisories that @Home
used in its latest filing with the Securities and Exchange Commission.

The combination of the negative article and the ensuing
blowup in Fremont produced a surfeit of media publicity buttressed by commentary from
skeptical Valley gurus who remain unconvinced that cable has a credible play to make in
their domain.

"It's been a rough week," said beleaguered
@Home spokesman Matt Wolfrom.

TCI.Net officials said all problems were quickly addressed
and resolved with no discernable loss of subscribers in Fremont or carryover to marketing
efforts in other high-speed data markets in the Bay area.

"This was the first time in two years of operations we
had a serious problem in Fremont, [a fact] which was lost in the media coverage,"
said Andrew Johnson, director of communications for TCI's West Division. "We
haven't lost one customer from the incident, as far as I know."

The most fundamental problem in Fremont had to do with a
precautionary move @Home was taking to prevent congestion on the upstream channel, where
useful bandwidth is limited by in-line noise factors. Company technicians inadvertently
configured the routers to set a ceiling on individual bandwidth at 128 kilobits per second
in the downstream as well as the upstream channels, forcing people into download rates
that were much slower than normal.

The effort to stem upstream congestion came just as
problems associated with such congestion escalated severely: Two on-premises customer
routers served, apparently without the customers' knowledge, to reroute and lose
upstream traffic, while a third router did so at the instructions of a hacker.

@Home has implemented new software from Nortel
Networks' Bay Networks unit to prevent runaway router interference on upstream
channels, Johnson said.

"Four or five things happened at once, and we probably
didn't do as good a job as we could have to escalate the attention of enough people
on the problems to prevent them from getting out of hand," he said.

Johnson disputed press accounts attributing some of the
problems to TCI's experimentation with voice service over the crowded upstream
channel in Fremont.

"We've already done three [voice] trials in
Fremont and none have caused us problems with data service," he said.

But unusual and snake-bitten as the situation seemed, the
incident underscored the danger traffic congestion poses for cable at this early stage in
its high-stakes data play.

Sources reported that cable operators are demanding that
modems come supplied with means of prioritizing, tiering and metering data traffic. That,
they say, is helping to delay certifying future modems as DOCSIS-compliant, meaning they
meet all industry standards.

"It's fair to say there's a lot more concern
over tiering and quality of service, which is affecting the certification process,"
said a senior industry executive, speaking on background.

The DOCSIS team at Cable Television Laboratories Inc. is
attempting to complete work on at least some vendors' products before the holidays,
but insiders were skeptical there would be any certifications before late January.

Sources said many TCI systems, which make modem and other
data rollout decisions at the local level, were insisting on such protections before
moving ahead with service launches.

The congestion issue is also on the minds of executives at
Road Runner, the joint venture between Time Warner Cable and MediaOne Group Inc.,
officials said.

Time Warner Cable chief technical officer James Chiddix, in
a recent interview, said charging extra for heavy usage was under discussion, although,
said Road Runner spokeswoman, Sandy Colony, no decisions have been made.

The Chronicle article went so far as to cite
@Home's 10-minute individual session time limit on streaming "TV- quality"
video as an indication of its inability to deliver "video-on-demand." But, as
Wolfrom noted, @Home and the other providers of cable data services have never positioned
themselves as suppliers of VOD services, nor could they, given operators' preferences
for making VOD a product of the entertainment services side of the business.

The Bay area incidents also pointed up the marketing
challenge cable has in the face of ongoing skepticism about high-speed data services.

The task is complicated for TCI by the fact that it has
dozens of systems in the region, all with individual agendas tied to the local
decision-making power that was accorded managers when Leo Hindery became president and
chief operating officer two years ago.

"Some managers are waiting for DOCSIS modems to
launch, and others are moving ahead with new launches," Johnson said.

In one instance of apparent confusion over what the local
agenda is, Dan Brekke, deputy editor of Wired magazine, publicly criticized TCI in
an appearance on ZDTV for what he said was a marketing message that promised service was
available in Berkeley, Calif., where he resides.

"The message was 'sign up now,' but when I
called, the customer-service guy said the company was only 'ascertaining demand'
and that service wasn't available," Brekke said in a subsequent interview.

Johnson disputed Brekke's interpretation of the
marketing message he received, saying that fliers are only alerting customers that it
would advantageous to get on a waiting list now for service.

Whatever the merits, the flood of bad publicity was good
news for cable's competitors.

"I'm talking to an [Internet-service provider]
about getting DSL [digital subscriber line] service," Brekke said.

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