U S West to Take On Cox in Ariz.

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U S West Communications last week became the first carrier
to detail its deployment of a new, fiber-rich approach to providing video that could
significantly lower the costs for delivering telco TV.

The Denver-based carrier said it will refine its network to
make use of fiber and VDSL (very high-speed digital subscriber line) technology to deliver
digital-TV and Internet-access services to a market base of 400,000 households in the
metropolitan Phoenix area by year's end.

GTE Corp., Bell Atlantic Corp. and SBC Communications Inc.,
turning away from existing approaches, are looking at the same technology to ease their
entry into video services, according to industry insiders.

"We're the first telephone company in the country
to offer this service, and Phoenix will be the first city to have it," said Solomon
Trujillo, president and CEO of USWC. "You can sign up by doing nothing more
complicated than calling your phone company."

Despite its upbeat assessment of the market opportunity,
USWC's move in Phoenix was widely seen as a reaction to Cox Communications
Inc.'s move to launch voice and data services in the market. Cox has slightly over 1
million homes passed in the Phoenix area.

"It's probably no coincidence that they're
launching video services in a market where a cable company is moving into telephony,"
said Vern Mackle, a telecommunications analyst with International Data Corp.

While VDSL "makes a lot more sense" than other
approaches to telco video, the incentive to get into TV services appears to be low, Mackle
added.

"We're going to see small pockets where phone
companies have to roll out services like this because cable is offering voice," he
said.

"What U S West is doing is predictable," said
David Andersen, vice president of public affairs for Cox. "The fact that we're
in their business has prompted them to try to enter ours."

The threat of triggering such competition won't deter
Cox from moving forward with similar multiservice rollouts elsewhere, Andersen added.
"We'll have voice and data services up and running in all nine of our cluster
markets, representing 85 percent of a total of 3.3 million homes passed, by 2000," he
said.

Andersen added that there have been no similar reactions to
Cox's plans by telcos in other markets, other than in Omaha, Neb., where USWC has
long operated a competing cable service.

USWC, however, looks at its agenda differently, said David
Beigie, a spokesman for the telco. Asserting that its 17,000-customer base in Omaha
represents 58 percent of homes passed, he said, USWC has established a strong business
case for moving into full-service operations on a large scale.

"What's driving this is the fact that we believe
that the provider that can offer the highest-value package of multiple services is going
to hold onto the customer the longest," he said.

USWC said it has contracted with the Phoenix Suns National
Basketball Association team, now affiliated with Cox, for exclusive carriage of games
starting in 2003. All regular-season and playoff games at home will be part of the basic
video package, officials said.

Trujillo said that along with providing 120 to 150 channels
of digital TV and Internet access at rates of up to 1 megabit per second, USWC's
TeleChoice service will include such enhanced features as TV display of telephony caller
ID, voice-messaging notices and hyperlinking between TV programming and Internet Web
sites.

He also noted that the company is working with Intertainer
Inc. to develop a video-on-demand service to be introduced at an unspecified future date.

If the VDSL system works as billed, it will offer a more
telco-network-friendly approach to launching a full slate of consumer broadband services
than the other means that have been tried so far, including hybrid fiber-coaxial,
fiber-to-the-curb and wireless cable.

This is because the system uses the same modulation
techniques used in ADSL (asymmetrical DSL), but over shorter lengths of copper. That
allows telcos to provide video, along with data services, over existing wires, from
fiber-termination points that are at or within easy reach of fiber that's already in
place.

"Until VDSL showed up, any fiber technology that came
on the scene required ripping up backyards," said Bill Weeks, vice president for
technology at NextLevel Communications, the privately held spinoff from what was NextLevel
Systems Inc. (since renamed General Instrument Corp.), which is supplying the USWC
build-out.

"Now, telcos can place the electronics at a
feeder-based interface and enter the broadband market quickly," Weeks said.

Weeks added that his company would be able to supply system
components, including an ATM (asynchronous transfer mode) gateway that serves as the home
terminal, interfacing the TV, telephone and personal computer with the telephone line at
costs low enough to be cost-competitive with cable.

"People fail to recognize how fast the cost curve is
falling for ATM," he said, noting that telcos are ordering the technology for ADSL
deployments, as well as for VDSL.

"Instead of expensive cable boxes for every TV set or
modems for every computer, you have one box that does everything for your entire
home," Trujillo said. "One box and one phone line will connect everything."

Several other carriers are looking at VDSL as a
full-service architecture. GTE, for example, is moving away from further HFC deployments
in favor of this architecture, said a company source, asking not to be named. The company
is weighing responses to a recent request for proposals before announcing a vendor and
deployments, he said.

As planned by USWC, the implementation of VDSL involves the
extension of fiber to distribution areas serving anywhere from 200 to 500 households via
the copper wiring that's already in use, Beigie said.

"If you're within 1,000 feet [over copper wire]
of the [distribution area], you're capable of receiving service at over 50 megabits
per second," he said.

Weeks said the NextLevel system will deliver signals at 20
mbps to 25 mbps per line over longer copper-link distances of 4,000 to 4,500 feet.
That's enough throughput to support simultaneous video feeds to three TV sets from
the ATM switch at the distribution area, along with high-speed data and voice. USWC is
still weighing what the minimum data rate and maximum line distances will be in its
deployments, Beigie said.

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