Videotron Details Plans for Packet Telephony

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Le Groupe Videotron Ltee. last week became the first MSO to
outline plans for wide-scale deployment of packet-telephony services, saying that it would
begin tests by mid-1999 and commercial rollouts by the end of the year.

The company intends to offer voice and other advanced
services in the IP (Internet-protocol) format across its 2.3 million-household plant base,
which it is currently upgrading to 750 megahertz, two-way capabilities, said Denielle
Dagenais, Videotron's vice president of investor relations.

"We plan to begin testing with a couple of hundred
customers, to expand that to several thousand through the second half of the year and to
launch commercially by the end of '99," Dagenais added.

Videotron, which began offering high-speed-data services a
year ago, has expanded its market base in conjunction with ongoing plant upgrades, now
passing 650,000 homes and slated to reach 1.8 million by the end of this year.

"We've already created the back-office support and
billing system that we need to support an integrated-service package, so we have a big
head start as we prepare to expand our data services and to add telephony," she said.

The company has begun to put this integrated administration
system to use in support of voice, data and cable services over private-cable facilities
in the Southwestern United States through its subsidiary, Optel Inc., which now serves
more than 500,000 customers, Dagenais noted.

With a large share of its market made up of French-speaking
customers, Videotron has developed its own high-speed service provider, Infinity, to offer
local content suited to their needs, Dagenais said.

But with ever more French-language content coming onto the
Internet, and with Canadian media companies targeting the high-speed-data audience in
French and English, Videotron sees its primary role as that of a service provider, she
added.

The clustering of Videotron's franchises will allow the
company to offer regional long-distance service, as well as local-access services, making
use of an IP backbone that will run across much of Quebec province.

"A year ago, when we began preparing for this, it
looked like it was three years away, but developments have moved much faster than we
anticipated," Dagenais said.

The cable industry's PacketCable task force is working on
cable-specific protocols to be used in soliciting vendor support for IP telephony over
cable. The group has indicated that it anticipates that the type of first-line,
toll-quality services envisioned by Videotron will not become commercially viable until
sometime in 2000.

But Videotron believes that it has found providers with
approaches to the packet-telephony challenge that will solve many of the issues associated
with delivering services that match the functionalities and features of traditional phone
services.

The MSO is building its packet-telephony network on a
next-generation IP-telephony platform jointly developed by Cisco Systems Inc. and Bell
Communications Research (Bellcore). The companies have been working together as the lead
suppliers in Sprint Corp.'s ION (Interactive On-Demand Network) local-access initiative.

In an announcement last week, the two suppliers positioned
the new architecture as a means of delivering and managing a bundled set of broadband
services that include cable TV and Internet access, as well as IP telephony.

"While the delivery networks used by Sprint and cable
are different -- ATM [asynchronous transfer mode] over ADSL [asymmetrical digital
subscriber line], versus IP over cable -- the significant thing is that the core
architecture for provisioning and managing services is the same," said Steve
Chappell, corporate vice president at Bellcore.

The "New World" architecture encompasses routers
and other transport hardware and software from Cisco and operations-support systems and
other telephony-management software from Bellcore. It also includes a new
"call-agent" system that is likely to become a key ingredient of the
specifications to be proposed for IP-telephony applications by PacketCable.

"We've done a fair amount of demonstration of the
system, and it has moved a significant way through the review cycle at CableLabs [Cable
Television Laboratories Inc.]," said Mark Bakies, a product-marketing official at
Cisco.

The call agent -- based on a new protocol developed by the
two companies, known as "SGCP" (single-gateway-control protocol) -- solves the
problem of how the call-setup and direction commands used in the SS7 (signaling system 7)
of the public-switched telephone network can be relayed through the IP domain.

Servers performing call-agent functions can be scattered at
many locations throughout the network, providing interfaces not only to legacy class-5
switches, but also to other intelligent-networking switches and devices that can be used
to add new features beyond those available from the PSTN switches, Chappel noted.

"This architecture breaks up the old monolithic
switching model and allows us to drive a whole different set of services and enhancements
that exploit the full potential of packet technology," he said.

While many of the hardware and software components of the
next-generation network are available on the market, the key call-agent functions -- which
will also use Bellcore's OSS to operate, provision and maintain the Cisco infrastructure
-- are still in development, said Paul Sanchirico, director of marketing for Cisco's
provider line of business.

"We still have some work to do on integration, but the
fundamentals are pretty much in place," he said.

The companies made it clear that achieving an open,
standards-based architecture is essential to their strategy. This means that the final
call-agent solution will conform to protocols worked out at the Internet Engineering Task
Force, which now has SGCP under consideration, along with other proposals. One of these is
Level 3 Communications Inc.'s IDCP (Internet-device-control protocol), which supports the
same type of distributed "virtual-CO [central office]" architecture envisioned
by Cisco and Bellcore.

Level 3, as a Cisco customer, is cooperating with the two
firms as it moves toward launching IP-voice services early next year. So are several other
potential customers to the new integrated-operation solution proposed by Cisco and
Bellcore, including Qwest Communications International Inc. and ICG Communications Inc.'s
ICG Netcom unit, Sanchirico said.

"What we're experiencing here is adoption of this
architecture across multiple provider categories, but Videotron is our first announced
customer," he added.

Cisco and Bellcore are also working closely to pool their
talent resources as mutually supportive system-solution providers, officials said. The new
architectural solution, which has not been named, will be marketed as a total solution or
in pieces, allowing customers to mix elements of the solution with equipment from other
vendors.

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