Pace Micro Renews U.S. Set-Top Push

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Buoyed by what it called the first commercial rollout of
open-standards-compliant set-top boxes, Pace Micro Technology plc is renewing its push for
U.S. cable-operator customers.

The U.K.-based manufacturer, which boasts deployments of
more than 2 million digital set-tops worldwide, is also pursuing a growing rival to cable
in the United States through its June acquisition of Acorn Group plc's Element 14 Ltd.
set-top division, which included that company's digital-subscriber-line-technology unit.

"The key point for us is that Pace has tremendous
breadth," Pace senior vice president of marketing Andrew Wallace said. "We're
really backing both horses."

Pace's biggest U.S. win so far has been its contract,
announced in February, to supply 100,000 digital set-top boxes for BellSouth Corp.'s
multichannel-multipoint-distribution-system television (wireless cable) service - a deal
Pace is in talks to expand, the company said.

But Wallace added that the manufacturer expects to get
further leverage from its successful launch with Cable & Wireless Communications plc
last month of the standards-based digital set-tops it developed with Cisco Systems Inc.

The "Di4100" box features Cisco's Data Over Cable
Service Interface Specification-based embedded cable modem, and it runs Liberate
Technologies' "DTV Navigator" software, which enables Web browsing through the
set-top.

The initial rollout in northwest England followed last
September's announcement that Cisco and Pace would work together, although they had
initially expected to begin deployments at the beginning of this year.

The pairing was viewed as a key step in Pace's renewed
attempt to enter the U.S. market following an unsuccessful strategy based on licensing
General Instrument Corp.'s "DigiCipher II" conditional-access control and
encryption technology to produce GI clones.

Now, Pace said, its successful deployment of the
DOCSIS-based set-top operating on the "DOCSIS-live" cable network that Cisco
deployed for C&W should give it a leg up among U.S. operators, many of which are
exploring open-standards-based platforms, but none of which has deployed DOCSIS-compliant
set-tops yet.

Plus, Wallace noted, the Di4100 can be configured for U.S.
television standards such as NTSC (National Television Systems Committee) and, through its
DigiCipher II license, it can work with operators using GI headend equipment.

"All of that means it's possible for Pace to deliver
boxes into the United States quite quickly because we already have relevant boxes shipping
and in service in the United Kingdom," Wallace said. "We've got a technology
nobody else has and one that nobody else looks like they'll deliver this year or early
next year. Nobody else has a digital set-top with a DOCSIS modem."

Pace will also supply set-tops to Telewest Communications
plc and NTL Inc. when they launch digital cable later this year. But Wallace said the
company might get much marketing mileage out of the C&W deployment due to the fact
that C&W is mainly a telephone company with cable properties - analogous to AT&T
Corp.

"It's a blue-chip deployment," he said.
"We're working for a telco here that has a good brand and a strong tradition of
careful trialing and high quality."

The tough part of Pace's campaign so far has been to
convince U.S. operators that they can take the risk of stepping away from familiar
providers GI and Scientific-Atlanta Inc.

Wallace said Pace hoped that its work with partners such as
Cisco, Liberate and Hitachi Ltd. - which supplies the "Super H3" chip - helped
to alleviate some of the unfamiliarity.

The company is also expanding its U.S. sales and
engineering operations, partly to support its contract with BellSouth, but also to
escalate its pursuit of American MSOs.

Wallace said he could not estimate when Pace might get its
first U.S. cable order. But he added that the company was in a field trial with one
unidentified MSO, and that others had made inquiries.

"All of the recent corporate transactions mean that a
lot of the old networks have changed," Wallace said. "We really see a fresh view
now and more of an openness to embracing open standards." -BW

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