Time Warner Readies Pegasus Roll

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Time Warner Cable is gearing up to grab its share of
digital-video-deployment headlines later this year, saying that its "Pegasus"
platform is just about ready to go.

Two weeks ago, the MSO doubled its order with its primary
electronics supplier, Scientific-Atlanta Inc., to 1.1 million S-A Explorer 2000 set-tops.

Pioneer New Media Technologies is also a key supplier, with
its "Voyager" digital set-top line, as is Toshiba America Consumer Products.

Time Warner's progress to date -- not unlike that of
other MSOs that are deploying digital-video services -- hasn't been without some
hiccups.

Commercial deployments originally scheduled for March have
slipped to this fall. But when that time arrives, watch for simultaneous launches in
several of Time Warner's systems, executives said last week.

"Every new-product launch in the cable industry that
involves complex hardware and software systems has been late so far," said James
Chiddix, chief technical officer for the MSO. "Advanced-analog set-tops fall into
that category; so do the first digital set-tops" purchased by Tele-Communications
Inc. from General Instrument Corp., he said. Those deliveries were four years late.

The silver lining to the delays is a more muscular product,
Chiddix said.

"These are also going to be a much better product than
what we originally ordered," he added, noting that S-A's boxes will be outfitted
with more memory, more processing power and a more comprehensive software load that
includes HTML (HyperText Markup Language) and PersonalJava code for interactive
applications.

Chiddix said some of the delays were rooted in an
industrywide decision now known as "the harmony agreement," where key vendors GI
and S-A agreed in 1996 to link their methods for encrypting and providing
conditional-access technology for programs that need to be secured.

"I think that was a good trade-off," Chiddix
said. "There was a danger of the industry being bifurcated at a very fundamental
level -- we, as an industry, were headed right back to where addressable converters took
us, in that once you hooked up a vendor's system, you were hooked to them for
life."

Currently, S-A's Explorer and Pioneer's Voyager
boxes are in the final stages of a Time Warner "acceptance-test plan," or ATP,
said Mike Hayashi, vice president of advanced services for Time Warner.

He wouldn't discuss location specifics, despite
repeated speculation that the tests are under way in the MSO's Austin, Texas, system.

Time Warner's "Pegasus" digital-video
platform, notably, was the root of the specification used by Cable Television Laboratories
Inc. for what is now called OpenCable. When Time Warner first detailed that project, in
1996, it was the industry's first exposure to the notion of passing IP
(Internet-protocol) packets over cable systems, as well as supporting Internet tools like
HTML.

Because Time Warner early on emphasized the need for a
real-time, two-way platform that supported IP, it is now poised to move smoothly into its
plan to add Road Runner, its high-speed-data service, to its cable service.

Plus, Time Warner engineering executives plan to scour this
week's National Show floor in Atlanta in search of video-on-demand vendors, as part
of its requests for information and proposals issued last year to fold in VOD and HTML
applications to the Pegasus platform.

The Pegasus platform also includes graphics acceleration
that supports 8- and 16-bit color, and Ethernet interfaces for connecting to computers,
game players and other peripherals. For starters, it will use a 54-MIPS (millions of
instructions per second) processor, and it will ratchet that up in forthcoming box
iterations.

Jim McDonald, CEO of S-A, which is also Time Warner's
and CableLabs' systems integrator for OpenCable, emphasized that the focus on just
digital set-tops as the medium for advanced, interactive services is not enough.

"We've spent $150 million over the last five
years -- $120 million of it went into software and systems, and less than $20 million of
it went into building the box," he said. "Everybody talks about boxes, but
they're a very small part of the overall system."

More important, he said, is the delivery of end-to-end
systems that yield solutions, "as opposed to the mind-set of shipping amplifiers,
line extenders, headends and set-top terminals."

McDonald said S-A's interactive experiences with Time
Warner's Full Service Network in Orlando, Fla., as well as similar tests with U S
West Inc. in Omaha, Neb., and with BellSouth Corp., now afford the manufacturer "at
least an 18-month lead" over its bitter competitor, GI.

"Everybody thought that we were crazy" to
continue working on interactive applications when that market went belly-up two years ago,
McDonald said. "Who's crazy now? It's all swung back around."

To receive digital-video signals, Time Warner has said that
it will work with Tele-Communications Inc.'s HITS (Headend in the Sky) service, while
readying some multiplexes from Home Box Office's Hauppage, N.Y., facility, reasoning
that it will require feeds that are tailored to the MSO's specific needs.

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