Will Streaming Hog Cable Bandwidth?

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Next-generation Internet media-streaming technology went
commercial last week, marking a transition that is sure to have a profound impact on key
aspects of the cable business.

The new technology -- developed by RealNetworks Inc. (RN)
and operating for several months in beta mode -- brings new levels of versatility, quality
and simplicity to the creation and distribution of multimedia content over the Web,
ensuring that the use of video and animation will become more pervasive than ever.

Perhaps most significantly for cable operators, the
platform allows developers to set several streaming modes for a single file, thereby
creating a bandwidth-consuming real-time data feed to anyone accessing such a file from a
cable modem.

The download-rate options range from 14.4 kilobits per
second to a little over 1 megabit per second, said Pete Zaballos, marketing vice president
at RN.

"We're seeing a steady drumbeat of content
development geared for access over DSL [digital subscriber line] and cable, where the top
setting is in the range of 100 to 300 kbps," Zaballos said.

Until now, most streamed-video content, because it had to
be set for a single download rate, was pegged to the most common access rate -- most
recently, 56 kbps.

Even at these rates, the bandwidth hit on cable-data
channels was such that @Home Network limits individual streaming sessions of customers
accessing Web sites to 10 minutes.

The new technology is bound to make matters worse, as
content providers target users who have access to the Web over high-speed links.

Several users consuming bandwidth for streaming at
several-hundred kbps each would leave other users little room on the shared-access channel
for fast downloads of nonstreamed material.

"This is a really important question," said James
Chiddix, senior vice president of engineering and technology at Time Warner Cable.
"People in cable are beginning to spend a lot of time thinking about it."

RN has grown from 14 million registered users over the Web
one year ago to 38 million today, Zaballos said. More than 11 million of those users
installed its "G-2" player during the beta phase, with most of the rest expected
to follow suit quickly.

On the content side, RN reported that G-2 is proliferating
rapidly, with many media companies and others using the new tools, including 90 TV
stations that broadcast live over the Web.

Adding to RN's momentum, America Online Inc. and
Netscape Communications Corp. -- which were reported to be in the advanced stages of
merger talks last week -- have begun shipping the G-2 player with their consumer software.
This ensures that customers are equipped to access streamed media as soon as they install
the AOL support system or the Netscape browser.

RN, of course, is not alone in seeding widely distributed
software with streaming-media players. Rival Microsoft Corp. has taken similar steps with
its "NetShow" player for more than one year, by embedding it in its Windows
operating system, although without the multirate streaming capabilities that RN's
player brings to the bandwidth issue in cable.

According to a recent study by research firm MediaMetrix,
the RN player registered the largest absolute growth of any software product offered over
the Internet, and streaming is now the most used application after browsers and online
programs like AOL's.

At a streamed rate of 300 kbps, Zaballos said, the RN
technology delivers full-motion video at full-CIF (common intermediate format
325-pixel-by-288-pixel resolution), which is comparable to CD-ROM-display quality, in a
window consuming about one-half of the computer-screen space. At 768 kbps, this level of
quality is viewable at full-screen, he added.

Entities such as Broadcast.com, Intertainer Inc. and many
others are developing long-form Internet-protocol video content to exploit the new G-2 and
other streaming-system capabilities. But cable interests generally see little threat to
mainstream cable on-demand and other digital programming operating in the high-quality
MPEG-2 format, Chiddix said.

Still, cable executives recognize that consumers going
online over cable networks will be drawn in increasing numbers to the sports, music and
other entertainment-oriented sites that offer video at rates of 100 kbps and higher.

Chiddix said one obvious response to this likely trend
would be to charge more for higher levels of usage.

"Charging $40 [per month] as a flat rate and saying
that you can have as many terabytes as you want is crazy," Chiddix said. "[The]
$40 [rate] is a good value for the typical online user today, but for tomorrow's
Internet user, such pricing might not make sense at all."

@Home Network sees a role for streaming in its own content
-- for live coverage of events and other applications. The company generally prefers to
use its high-speed distribution system to deliver bursts of video content to users'
personal computers for playback from the PCs' random-access-memory banks, said
Charles Moldow, @Home's vice president for media development.

The company is negotiating with a supplier of new
technology that would lower bandwidth consumption in instances where @Home does use
streaming applications, he added.

But @Home, like the Time Warner-MediaOne Group Road Runner
venture, will be looking at new pricing models to accommodate the changing usage patterns
outside of its content control as broadband access proliferates, said Dean Gilbert, senior
vice president and general manager of @Home.

"You're going to see a lot of experimentation
before we get to any final solutions," Gilbert added.

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