OpenCable Update: Progress Is Steady

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Sure, steady progress within the OpenCable set-top
initiative is setting the stage for what promises to be an explosive transformation in the
core entertainment business in about 18 months.

OpenCable is already unleashing forces within the consumer
electronics and computer manufacturing sectors that are sure to spawn vast changes in
services and the options operators have to sort through in packaging and marketing those
services. Operators billed the process as a way to get terminal costs off their books
while affording subscribers more choice and flexibility at the local consumer electronics
store.

"Consumer electronics manufacturers are looking at a
whole family of devices that will work with the (OC) specifications," said Laurie
Schwartz, vice president for advanced platforms and services at Cable Television
Laboratories, Inc. "With OpenCable we're saying that a certain set of minimal
services will work with all compatible devices."

The OpenCable opportunity is drawing into the digital
networking arena: makers of TV sets, personal computerss, network computers, specialized
DVD (digital versatile disc) set-tops, generic cards insertable in any type of display
system, video-game-enhanced set-tops and much else.

In the third-quarter of next year, these entities hope to
start rolling out their multi-purpose platforms, providing operators an endless array of
options to deliver services specific to these platforms. That will come on top of the
common denominator cluster of services the OpenCable interfaces support.

This is the vision of the industry's future that came into
focus at an update on OC that was delivered by Schwartz and others at a CableLabs
symposium in Denver two weeks ago. Over 270 entities have now joined under none disclosure
agreements in the discussions surrounding OC, Schwartz said.

The industry has based its timing of completing the
baseline specs for OC the Federal Communications Commission's July 2000 deadline for
having interoperable set-tops available in the marketplace. The goal, Scwartz said, is to
complete these specs by the middle of this year. Interoperability testing could begin once
CableLabs facilities now being used for cable modem testing are freed up and certification
of OC devices to be completed by July 2000.

Much of the work is done, including most of the "crown
jewel" piece relating to preserving operator control over conditional access,
Schwartz noted.

The remaining issue here concerns coming up with a way to
ensure copyright protection against unauthorized duplication of signals transmitted in the
clear between the cable operator-supplied PODs (point of deployment security modules) and
the standalone or embedded OC terminal.

The baseline specs also deal with the physical and
transport layer and data interfaces with the network, how set-tops are initialized and
provisioned, the basic video and audio functionalities of the OC device itself and the
interface with consumer equipment.

Much of this has been done or will be by the end of March,
Schwartz said. Remaining pieces having to do with the network interface elements
supporting video-on-demand functions (such as pause and rewind), the POD copyright
protection issue and final determination of the basic OC device functions.

In addition, she said, the group wants to provide guidance
on "how we get to more advanced devices." Once the VOD structure is in place,
the group wants to develop standards for more advanced applications such as online game
playing that build incrementally on the underlying structure.

A hint of what's in store for the cable industry once OC
devices of every description are available to consumers can be seen in the early success
of digital services, said Comcast Corp. president Brian Roberts. Demand has been so strong
that the biggest hurdle the MSO faces with digital is keeping boxes in supply, he told the
CableLabs gathering.

"There was a time nobody thought there would be a
demand for 70 channels, but the success of digital services demonstrates the demand for
more services is out there," Roberts said. "These things [digital set-tops] are
flying out the door."

With the open-ended capabilities of the basic OpenCable
set-top platform, operators are looking at the value-added services they can build on top
of the core OC service package, often with different ideas of what the top priorities
should be, Roberts noted.

In Comcast's case, the big opportunity appears to be a
model of electronic commerce that "leverages the TV and the Internet," he said.

Chip makers are working in stride with the OC process to
create highly integrated platforms that will make variations on the OC theme cost-
effective across myriad applications, said Kishore Manghnani, vice president of marketing
at chip maker TeraLogic Inc.

For example, he said, it takes about 25 million transistors
to accommodate the processing, decoding, tuning and other functionalities of a General
Instrument Corp. next-generation DCT-5000 set-top, which can now be accomplished with
seven chips as opposed to the 14 the design originally required.

"By next month we will have a single card that handles
DVD, including HDTV decoding, graphics generation and analog cable TV conversion for
viewing on a PC," Manghnani said. "It will be available at retail for $299 by
Christmas, and once the OC specs are finalized, we'll be able to add digital cable for
less than $20."

Variations on such cards will be available to plug into a
PC, a TV or any other display appliance, providing the consumer freedom to connect
whatever device is convenient for viewing at a given moment, he added.

For Sony Corp., OC is the key that unlocks the ability to
coordinate all the content and hardware components of its product base to maximum effect
in the broadband marketplace, said Gary Myer, president of Sony Electronics' Digital
Network Solutions of America.

With networked devices of every description, Myer's company
will be able to download software to support new applications and content, greatly
reducing the costs to consumers of buying such content, he noted.

"It's critical to us that interoperability happen
smoothly and rapidly," Myers said.

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