On New Services, MSOs Speak as One

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Denver -- Senior executives from the top four MSOs laid out
a largely unified approach last week to how they will exploit new technology to support
their aggressive advanced-services agendas for 1999 and beyond.

Whether the topic was high-speed data, telephony or digital
TV, the messages delivered at a Cable Television Laboratories Inc. symposium here ware
strikingly similar: The technical means are in place to foster rapid expansion on all
fronts, even in instances where the ultimate technical solutions might be some ways off.

"The majority of our networks will be upgraded by the
end of the year," Comcast Corp. president Brian Roberts said. "The boxes are
here, and we're delivering the services."

Roberts and top engineers at the other leading MSOs
addressed a number of key issues here, including: how they will handle the evolution to
standardized cable modems; the approaches that they will take to exploiting the OpenCable
digital set-top platform; and the timing for introducing Internet-protocol versus switched
circuit-based telephony services.

Time Warner Cable, Tele-Communications Inc. and MediaOne
Group Inc. also said they will be well past the halfway point, if not close to the end, of
plant upgrades to full two-way capabilities by year's end.

Time Warner has gone the furthest down that road, with 70
percent of its plant upgrades completed at the end of last year and a goal of achieving 85
percent by the end of 1999, according to chief technical officer Jim Chiddix.

TCI executive vice president of engineering Tony Werner
said his company would be in the 50 percent to 60 percent range by year's end, while
MediaOne CTO Bud Wonsiewicz said his company was targeting 70 percent.

The executives shrugged off news of ongoing delays in the
certification
of DOCSIS (Data Over Cable
Service Interface Specification) modems at CableLabs, saying that they would stick to
aggressive expansion of their market bases where they've launched on proprietary
platforms, while moving to the standard platform in new markets.

"We're eager to change over to DOCSIS," Chiddix
said.

But, he added, Time Warner, which deployed about 100,000
modems in the field last year, will deploy "a lot more this year," no matter
what the DOCSIS time line turns out to be.

"We'll support the proprietary modems where those
systems have been deployed, as long as they fit into some tier of service," Chiddix
said. "If we set aside 6 megahertz for the proprietary system and 6 MHz for DOCSIS,
the two can live side-by-side."

"The same is true for us," Werner said, noting
that, by the end of April, TCI will have DOCSIS headend gear in place in 26 systems. With
modem installations moving at 1,200 or so per week in TCI systems, the company expects to
install at least 150,000 new customers in 1999, Werner added.

The executives also made it clear that while there are
still issues to be resolved with respect to OpenCable set-top parameters, the digital
boxes that they're now deploying provide all of the technical foundation that they need to
pursue the most significant opportunities that they foresee. These include broadcast
digital TV and video-on-demand.

In fact, Werner said, there's a way to use these low-cost
boxes for a variety of fairly advanced services without having to resort to more
computerized terminals.

Operators do not have to rely on a lot of processing and
memory in the boxes to accommodate different types of application commands, they said.
Instead, they can use their bandwidth and centralized processing at the headend to deliver
application instructions specific to the service that an on-demand customer has ordered
for however long that service is in use, according to Werner.

"You can download the set of operating instructions to
do VOD, and then get rid of it and go on to the next application," he said.

Mark Coblitz, vice president for strategic planning at
Comcast, agreed.

"We can do a lot of stuff in the headend without
requiring a lot of smarts in the set-top," he said.

Along with VOD, such applications include e-mail and
electronic commerce. It isn't until one gets to the point of needing the type of fast,
high-power interaction required by "twitch games" that the set-top needs to be
equipped with more computer power, Coblitz noted.

Operators were similarly unified on the business case, or
lack thereof, for embedding DOCSIS modems in set-tops, as envisioned by the OpenCable
agenda.

"Building DOCSIS modems into the set-top boxes is
something that doesn't have a real clear business model, as far as we're concerned,"
Chiddix said.

Today's digital boxes come with data modems that operate at
speeds of 1.5 megabits per second "out-of-band" -- without using the spectrum
over which entertainment and data services are typically delivered.

"There's no limit to the applications" that are
possible over these modems, Chiddix noted, although he acknowledged that the advantage of
the DOCSIS approach is that the headends will already be equipped to support that
platform.

Wonsiewicz noted that the limited success of Microsoft
Corp.'s WebTV Networks unit is an "interesting data point," adding that MediaOne
would focus on developing data-to-the-set-top applications that square with the
preferences shown by customers in their choices of Web sites. That would be instead of
sending "unfiltered" Internet data to the TV.

But, he added, the big new opportunity with two-way cable
and digital set-tops that MediaOne will be looking at this year is VOD.

"VOD is going to cross over to becoming an
economically viable service," Wonsiewicz said. At $1 per home passed, the cost of
storing movies has come down by a factor of 10 over the past decade, he added.

The cable executives were also largely united in their
commitments to moving forward with telephony using the switched-circuit platform for early
launches, then moving to the IP platform by the middle of 2000. The exception was Roberts,
who said his company was still weighing the timing of entry into voice services and which
platform to use.

The key issue, Roberts added, is finding a partner.

As previously reported, Comcast has teamed up with MediaOne
and Cox Communications Inc. in a negotiating alliance to pursue dealings with AT&T
Corp.

"This industry is going to be a serious player in
telephony," Roberts said. For cable, he added, the big difference on all service
fronts is that "we're no longer an industry in search of three boxes."

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