S-A's New 'Gateway' Has Eyes on Europe

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Hoping to grab its share of Europe's maturing interactive-television market, Scientific-Atlanta Inc. last week unveiled the "Explorer 4000DVB," a gateway hub designed to foster a blend of two-way video, voice and data services.

At the same time, S-A also snared its first Explorer 4000 customer-British MSO Telewest Communications plc, which will buy the boxes under a two-year contract as it aggressively pushes interactive cable products and services.

Telewest, which faces fierce competition from digital-satellite and terrestrial-service providers, said it had 315,000 digital subscribers as of Nov. 14. The MSO expects 500,000 of its more than 1.2 million customers to make the shift to digital by the end of the first quarter of 2001.

Both companies declined to say how many of the boxes S-A would ship to Telewest.

"We're negotiating the terms of the contract," said David Alsobrook, director of European business for S-A's subscriber networks division.

S-A and Telewest certainly aren't strangers. The vendor has supplied Telewest with analog boxes for several years, Alsobrook said.

S-A is Telewest's second source for digital boxes. The other is Pace Micro Technology plc, a strong player in the region that is now cutting its teeth in the U.S. with a set-top line designed for cable, satellite and digital-subscriber-line services.

S-A's latest model supports the European Phase Alternate Line (PAL) video standard. The United States uses the National Television Standards Committee system.

Scheduled for availability this fall, the Explorer 4000 also features an integrated, silicon-based cable modem that complies with Data Over Cable Service Interface Specification and EuroDOCSIS standards. S-A said cable operators may also opt for a modem that adheres to Digital Audio/Video Interoperability Council and Digital Video Broadcasting-Return Channel via Satellite standards.

The 4000 box also houses 20 megabytes of FLASH and SDRAM (synchronized dynamic random access memory)-with an option for as much as 84 MB-for interactive applications such as video-on-demand. The 4000 also sports dual 64/256 QAM (quadrature amplitude modulation) tuners, as well as smart-card, universal-serial-bus and Ethernet interfaces.

On the software front, the Explorer 4000 comes with PowerTV Inc.'s operating system and "PowerKEY" conditional-access system, although operators can select from other conditional-access systems, operating systems and middleware platforms.

"European operators are looking for flexibility," Alsobrook acknowledged.

Features included in the 4000 are basically akin to S-A's Explorer 6000 box, which houses a DOCSIS cable modem, Alsobrook said.

S-A declined to disclose the unit cost for the 4000, though prices are expected to drop with volume orders.

Adding Telewest to its roster of digital customers comes at a propitious time for S-A. Morgan Stanley Dean Witter recently downgraded its stock to "outperform" from "strong buy," in part because the firm anticipated slower-than-expected revenue growth from international operators, especially European MSOs.

Though grabbing some set-top business from Telewest is helpful to S-A, the equipment vendor arguably won't get the "lion's share" of the MSO's set-top box business, Morgan Stanley analyst Gary Lieberman predicted. Instead, Lieberman said S-A's involvement in Germany should prove to be more significant.

Earlier this month, S-A said it was part of a Nortel Networks-led consortium to overhaul Kabel Nordrhein-Westfalen's 4.2 million-subscriber broadband network. Other vendors involved in the upgrade include High Speed Access Corp., Motorola Broadband Communications Sector and ADC Telecommunications Inc.

Lieberman said more opportunities for vendors should emerge as Germany's eight other privatized cable systems make similar decisions.

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