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The CDN Cable Modem Newsletter
- To: isdn@tap.org
- Subject: The CDN Cable Modem Newsletter
- From: James Love <love@tap.org>
- Date: Mon, 11 Mar 1996 23:59:00 -0500 (EST)
this is an issue of Cable Datacom News, which is about cable modems.
It is available from Majordomo@lists.primenet.com
jl
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WECLOME TO CABLE DATACOM NEWS
============================================================
Welcome to the first issue of CABLE DATACOM NEWS, your
source for intelligence about emerging high-speed cable
data services. Each month, CABLE DATACOM NEWS will dig
beneath the surface and investigate the players, technology,
content and strategies that will make or break this market.
As you will read in our interview with Forrester Research
Analyst Emily Nagle Green, cable connections are shaping
up to have a major impact on the on-line marketplace.
Forrester projects nearly 25 percent of Internet and
on-line service subscribers will be connected with
high-speed cable modems within five years -- a total of
7 million cable on-line subscribers generating $1.3
billion in annual revenue.
There is a great deal at stake for cable operators,
broadband networking vendors, Internet service providers,
commercial on-line services, on-line content providers,
multimedia and application software developers, telcos,
electronic retailers, and interactive marketers. Are you
prepared for the changes that lay ahead?
Cable operators must create a sophisticated network and
servicing infrastructure to meet the demands of the
consumer on-line market. On-line content providers and
multimedia software developers must be ready to face the
challenges and opportunities available in a market where
1 in 4 on-line customers have greater than a T-1
downstream connection. Internet service providers and
commercial on-line services, whose growth has been based
on open access through the public telephone network,
must prepare for a world where a quarter of their market
is connected through cable -- currently a closed network
system.
If you haven't done so already, be sure to visit the
CABLE DATACOM NEWS World Wide Web site at
[http:// CableDatacomNews.com]. You'll find a complete
inventory of cable datacom trials and commercial services,
a list of cable modem specs and vendors, and links to
cable datacom Internet resources.
We hope you enjoy our first issue. Please e-mail your
comments and suggestions to [editorial@CableDatacomNews.com]
so we can create a publication that best meets your needs.
Michael W. Harris
Editor, CABLE DATACOM NEWS
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* * * * * C A B L E D A T A C O M N E W S * * * * *
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Tracking the Development of High-Speed Cable Data Services
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Vol. I, No.1 * * * * * * * * * * * * * * * * * March 1996
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Published Monthly by KINETIC MEDIA Phoenix, Arizona USA
Copyright (c) 1996. All Rights Reserved
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C O N T E N T S
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* THE EDITOR'S POST
High-Speed Will Start Slowly
* KEEPING UP WITH THE JONESES
Jones Intercable's Internet Channel to Offer High-Speed
and Dial-Up Access
* ISDN WILL PLAY SECOND FIDDLE TO CABLE
An Interview with Emily Nagle Green, Forrester Research
Senior Analyst, People & Technology Strategies
* CABLE DATCOM NEWS ROUNDUP
Motorola and Sun Partnering for Cable Data
===========================================================
THE EDITOR'S POST
High-Speed Will Start Slowly
===========================================================
Since November, three of the nation's largest cable MSOs
-- TCI, Time Warner and Comcast -- have committed to buy
more than a half-million cable modems from leading hardware
vendors. Now top MSOs are busy creating national, branded
high-speed on-line services: TCI has @Home, Time Warner has
LineRunner, Rogers has WAVE, and Jones has the Internet
Channel. Think the cable datacom market is moving into
high speed this year?
Think again. If a total of 50,000 cable modems are in the
field by the end of 1996, it will have been a banner year.
Look for modem manufacturers to ramp up production in 1997
after another round of technical trials and market tests.
If the market follows normal technology adoption curves, the
elusive half-million mark will be within reach by the
beginning of 1998.
A cable datacom naysayer you ask? Hardly. There's no doubt
high-speed cable data services deliver real value to on-line
users, content providers, and marketers. And unlike interactive
TV services hyped by telcos and cable operators over the last
few years, the revenue upside for cable data services justifies
deployment. However, important technical and service issues
must be addressed before any discussion of "killer applications"
can be seriously considered.
------------------------------------------------
Breaking the Bandwidth Bottleneck
------------------------------------------------
Touted as an interactive extravaganza, the Web and on-line
services typically offer narrowband users a click and wait
experience within what is largely a static graphic and text
environment. Slow transmission speeds frustrate content
providers trying to deliver engaging services, and no phrase
is more likely to make an on-line user scream than "Please
wait while we add art... ."
Cable connections have the potential to break the bandwidth
bottleneck by offering downstream transfer speeds hundreds of
times faster than existing dial-up telephone alternatives.
A 10-megabyte file that takes 90 minutes to download through
a 14.4-Kbps telephone modem flies through a 4-Mbps cable
connection in a mere 20 seconds. Internet access, on-line
services, telecommuting, networked multimedia games, software
downloads, and electronic retailing begin to live up to their
promise on the high-speed cable platform.
In addition to speed, cable modems offer constant connectivity,
eliminating the long dial-in time required with conventional
telephone modems. And continuous cable connections allow users
to switch between different on-line services without the hassle
of logging on and off each one. Of course, going on-line via
cable doesn't tie up the user's telephone line either.
Sounds rosy, but the architecture that delivers this blazing
speed and constant connectivity also presents problems.
--------------------------------------------
Struggling to Swim Upstream
--------------------------------------------
The vast majority of cable systems were built with one purpose
in mind: to efficiently transmit television signals in one
direction, from headend to the home. In fact, about 85 percent
of U.S. cable systems are active in only one direction today.
This works fine for traditional cable TV, but it makes it
awfully hard to deliver two-way data services.
Even on those systems that are two-way active, engineers have
found the return path to be an extremely hostile environment
for data communications. High levels of distortion, noise and
ingress can drown signals trying to swim upstream.
All is not lost. Over the last 18 months, broadband networking
vendors have made major strides in taming this hostile terrain.
Second-generation cable modem systems from manufacturers like
Zenith, LANcity, Intel and Hybrid Networks have shown good
reliability in trials. Cable operators are doing their part too.
Each of the 10 largest MSOs has datacom trials underway and they
are activating the return paths of cable systems in markets they
believe offer the best potential for data services. A reliable,
two-way network solves many problems, but questions still remain.
--------------------------------------------
Share and Share Alike
--------------------------------------------
To deliver data over a cable system, the bandwidth of a 6-MHz
television channel is essentially converted into a Local Area
Network running Ethernet.
The good news is that Ethernet is the standard client-server
networking protocol for personal computers, so many PCs are
already equipped with networking cards. And since it's a
standard protocol, application software and technical support
are widely available.
The downside: Ethernet is a shared bandwidth platform, so access
speeds are constantly in flux, increasing or decreasing depending
on the quantity of data traffic on the network.
New cable on-line subscribers that have been sold on the idea
of 10-megabit-per-second cable modems may be disappointed when
actual transmission speeds vary throughout the day, falling to
500 Kbps or lower. Still, compared to 128 Kbps speeds for ISDN
and 28.8 Kbps for dial-up telephone modems, 500 Kbps sounds
pretty attractive.
-------------------------------------------
Can't We All Just Get Along?
-------------------------------------------
Despite attempts at "clustering," cable system operations are
still notoriously fragmented. Adjacent cable systems, even
those owned by the same MSO, often have totally different
architectures and use incompatible hardware. Cable subscribers
that move across town to a new cable system find they must use
a different set-top box. A far cry from the compatibility
standards of the public telephone network.
Not surprisingly, nearly all cable modem vendors are talking
about implementing "end-to-end" solutions from headend to the
home. As a result, it is unlikely that modems from different
vendors will be compatible for data services on the different
cable systems in the near future. Few consumers will be
interested in shelling out several hundred dollars for a cable
modem that will only work in one geographic locale.
Much to its credit, the cable industry has learned from the
past and is working hard to set standards for interoperability.
Cable Labs, the industry's R&D arm, issued a comprehensive data
communications RFP last April and vendors are due to offer final
proposals next month. Standards should be well in place by the
end of the decade, enabling modems to be sold at retail. To ease
consumer purchase anxiety in the meantime, cable operators are
planning to provide cable modems to subscribers as part of a
bundled service package.
-----------------------------------
Service with a Smile
-----------------------------------
Many consumers are skeptical about their local cable operator's
ability to provide satisfactory customer service for cable
television, let alone high-speed data services to their PC.
Helping a customer edit their config.sys file is a bit more
challenging than refreshing a converter box.
Cable operators need to go a long way toward improving real and
perceived customer service quality to compete in the consumer
on-line market.
--------------------------------------------
Ignore That Man Behind the Curtain
--------------------------------------------
Most cable operators are planning to offer high-speed data
service packages with unlimited Internet access. A forward-
thinking, consumer-friendly approach? Certainly. But if you
look behind the curtain, you see it's the only way many cable
operators can do business -- their back office systems simply
cannot support advanced transactional and metered billing.
If cable operators are serious about becoming consumer on-line
service providers, they'll need to build the back office systems
to support their ambitions. Tracking a hundred thousand on-line
subscribers' usage time down to the second is a bit more complex
than processing pay-per-view movie orders.
---------------------------------------
The Bottom Line
---------------------------------------
Cable operators have the opportunity to deliver data services
better, faster and cheaper than competitors. But they must clear
some major hurdles in the next two years to make high-speed data
a winning business.
Cable operators need to invest heavily in plant upgrades to
improve system reliability and two-way capabilities. They need
to work closely with hardware and networking vendors to set
technical standards and iron out the quirks inherent in a
cable system's upstream bandwidth. Customer service operations
must be improved dramatically and sophisticated back office
management systems must be installed.
These challenges are serious, but by no means insurmountable.
Cable operators certainly have an incentive to rise to the
occasion -- the combined revenue from on-line services, Internet
access and multimedia software is projected to exceed $10 billion
within five years. A small slice of this market will deliver
cable operators a healthy return on their datacom investment.
Don't be surprised if they take the steps necessary to grab it.
===========================================================
KEEPING UP WITH THE JONSES
Jones Intercable's Internet Channel
to Offer High-Speed and Dial-Up Access
===========================================================
A lack of activated two-way cable plant and affordable modems
in volume has put some MSO's Internet plans in the slow lane for
1996. Not Jones Intercable. The nation's eighth-largest cable
MSO is putting the pedal to the metal.
Bill Nestel, president of the Internet Channel, Jones Intercable's
national Internet service, isn't waiting for two-way networks or
cable modem vendor promises to fully materialize.
-----------------------------
Carpe Diem
-----------------------------
"When the modems are delivered, I'll believe it," said Nestel.
"Our job is to work with what's here, not what we think might be
here, and build a business."
Twenty-five residential cable customers are on-line in a high-
speed trial of the Internet Channel on Jones' Alexandria, Va.,
cable system. Connected with a 10-Mbps symmetrical LANcity cable
modem and Netscape browser, Internet Channel subscribers can
cruise through the Alexandria CyberCity, a 3-D simulation of
the real thing, including stores, local hang outs and city hall.
The Internet Channel is not designed for computer geeks. To attract
a mass market, Nestel believes it's critical to offer users a
familiar environment that's easy to navigate. "We're creating an
experience which recreates, in the digital universe, the local
Alexandria community," Nestel said. "We're making our business for
people who are not technically sophisticated. We want to bring
the Internet down to a more common denominator, so people can enjoy
it off the bat."
Jones is in the middle of a $35 million rebuild of its 40,000-
subscriber Alexandria system. Ten self-healing fiber rings are in
place and 10,000 cable subscribers are now connected to two-way
active fiber plant serving 100-home nodes. Jones expects to have
all of its Alexandria subscribers upgraded by mid-1997.
Jones plans to roll out the high-speed Internet Channel service
commercially in Alexandria this year. But what about those
customers in Alexandria, or those in other Jones markets, that
won't be connected by two-way plant anytime soon? The Internet
Channel has plans for them too.
----------------------------------------
There's a New ISP in Town
----------------------------------------
"We'll be providing dual-access services -- one through high-
speed cable and one through dial-up telephone," Nestel said.
"Both services will offer unlimited access for a flat monthly
fee."
An MSO becoming a dial-up Internet service provider... Sound a
little crazy? Not when you think about it says Nestel. Any
Internet service provider -- high-speed or dial-up -- must make
the same investment in servers, Internet connectivity, content
and service support. The choice then is whether to use the
cable system or public telephone network to provide access to
users.
Because most cable systems are only partially two-way active,
"the high-speed business will trickle in as plant is upgraded,"
said Nestel. "The content we will offer will be dynamic in
either a low- or high-speed environment. We'll offer high-
and low-bandwidth versions." Why should Jones let the content
and connectivity it has already paid for be underutilized until
a system's plant is fully two-way in months, or even years?
By offering dial-up service, Jones can generate cash flow to
build its high-speed business and lock-in their customers'
Internet business. Once high-speed service is active in a
dial-up customer's neighborhood, Jones just needs to call and
upgrade them.
-----------------------------------------------------
Thinking Nationally, Acting Locally
-----------------------------------------------------
Nestel says the Internet Channel plans to go beyond the Jones
family and sign up other cable operators to deliver the service
to their customers. "We expect this to be a national service that
can be implemented locally," Nestel said.
Local cable employees will handle cable modem installs and basic
telephone inquiries. But Nestel says a 24-hour-a-day, 7-day-a-week
national help desk will also be available in Denver to provide
technical support to all Internet Channel customers.
For content, The Internet Channel is tapping Jones' cable networks
-- Mind Extension University (ME/U), Jones Computer Network (JCN),
and Great American Country -- as well Jones Interactive, the
company's multimedia development arm. The Internet Channel will
work with outside content providers too, Nestel says. Jones also
plans to create local "cyber cities," like the one in Alexandria,
for other markets.
Of course, the wealth of content on the global Internet will be
available to subscribers. "We believe in open access," Nestel said.
"We'll provide a doorway to the Internet so our customers will be
able to access any service that's out there."
Don't look for Jones to offer high-speed versions of AOL, Prodigy
or other commercial on-line services anytime soon. "I'm not sure
our customers will get anything from them that there not getting
from us," Nestel said.
--------------------------------------------------
Marketing Cyberspace in the Real World
--------------------------------------------------
To bring new Internet users into the cyberspace, Nestel believes
the Internet Channel will need to engage them on their own turf:
the real world. Jones has developed a marketing partnership with
CompUSA to promote the Internet Channel in Alexandria at retail.
Computer shoppers will be able to take the service for a test
drive and sign up for an account on the spot. Jones is also
planning to open a cyber cafe in Alexandria, so residents can
hang out and surf the Net while they sip on some hot java.
---------------------------------------------------
For Cable, the Internet is Like Broadcast TV
---------------------------------------------------
When cable operators first opened their doors for business, they
simply offered consumers better reception of local broadcast
television stations. Over time, brand new local and national
programming services were added to the cable line-up.
Nestel believes the high-speed data business will follow the same
path for cable operators, initially driven by access fees, with
content and commerce coming later.
"The vast majority of content on the Internet is free today, just
like TV in the 60s and 70s," said Nestel. "Then it got to a point
when some people would pay for premium TV services, like HBO."
Nestel and others building high-speed cable data services are
hoping that point isn't too far down the road.
===========================================================
ISDN WILL PLAY SECOND FIDDLE TO CABLE
An Interview with Emily Nagle Green, Forrester Research
Senior Analyst, People & Technology Strategies
===========================================================
In the recent Forrester Research report On-Line Needs Speed,
Senior Analyst Emily Nagle Green projects high- speed cable data
services will capture more than a million subscribers in 1998 and
$500 million in revenue. By the year 2000, cable will surge past
ISDN, winning nearly 7 million subscribers -- close to 25 percent
of the on-line access market -- and more than a $1 billion in
revenue.
As little as a year ago, the conventional wisdom in the on-line
business had the RBOCs dominating high-speed access with ISDN.
Cable modems appeared unreliable, cable operators were talking
more about system upgrades than performing them, and 128 Kbps
seemed like plenty of speed for on-line consumers.
Now many in the industry, including Green, are placing their
bets on cable.
-------------------------------------------
Forget the Conventional Wisdom
-------------------------------------------
What happened to the conventional wisdom about ISDN and cable?
"The assumptions that were made are wrong," said Green.
"People believed that because early cable modems were a little
flaky, they always would be. But the technology has improved.
Second and third generation cable modems can now be depended on
to provide reliable service."
Cable operators have also become serious about system upgrades.
Faced with real competition for video services from telcos and
direct broadcast satellite, systems need to increase reliability,
channel capacity, and picture quality. "Cable must make these
changes to stay competitive," said Green. "What they end up
charging to high-speed data will be a small part of rebuild costs."
With increasing graphical content on the Web and on-line services,
Green believes 128 Kbps speeds will quickly be saturated, creating
an opening for cable. "On-line is moving beyond chat and e-mail.
There's a far richer choice of content and activities, and they
require greater bandwidth than ISDN provides." From the consumer's
perspective, "no amount of bandwidth is ever enough," Green said.
-------------------------------------
More Bang for the Buck
-------------------------------------
Green sees cable becoming the high-speed access provider of
choice for on-line users by offering a more compelling experience
at a better price.
In market trials, many cable operators are offering modems and
unlimited high-speed Internet access for less than $40 per month.
With ISDN, the RBOCs are currently charging an average of $45 per
month plus per-minute usage fees for a service that delivers
significantly lower transmission speeds. Users must also shell
out around $500 for ISDN hardware.
"ISDN has a head start, but it will end up playing second fiddle
to data over cable. The RBOCs can't count on staying ahead.
They'll be outclassed as quickly as cable operators can lay the
line," said Green.
"Cable modems will be in the retail channel by 1998 going for
$250-$350 initially. They'll come down after that. Historically,
the most popular modem at a given time sells for about $200.
Cable modems should hit the $200 window by 1999."
--------------------------------------------------
New Challenges for On-Line Services and ISPs
--------------------------------------------------
The business models of Internet service providers and commercial
on-line services have been based on open access to consumers
through the public telephone network. What happens in four years
when a quarter of their market is connected through high-speed
cable, currently a closed network?
ISPs and on-line services may have to negotiate carriage
agreements with MSOs, much like cable television programming
networks. Or, says Green, "they might think about buying cable
bandwidth in bulk and becoming a reseller."
There are other challenges too. "Cable modems put high-speed in
the last mile, which moves the bottleneck back up the network,"
said Green. On-line services will need to increase the transfer
speeds of their own networks. "They will also need to collaborate
with cable providers to ensure that their content is enjoyable
at high speed."
--------------------------------------------------------
Dealing with a World of Bandwidth Haves and Have-Nots
--------------------------------------------------------
Green predicts a fractured on-line market by the end of the
decade, with about half of on-line subscribers connected
through cable and ISDN, and the other half connected at dial-up
speeds of 28.8 Kbps or less. On-line content providers will
find themselves serving a market of bandwidth haves and have-nots.
"People with high-speed access want to enjoy it, but content
providers can't alienate dial-up users. On-line content providers
will need to offer bandwidth-agile content. Much like you see
Web sites today offering Netscape-enhanced or text-only options,
you'll have navigation options for cable, ISDN, or dial-up users."
-----------------------------------------
On-Line Will Grow-Up with High-Speed
-----------------------------------------
Despite the hyperbole about content being king, the growth of
narrowband on-line services and the Internet has been driven
by communication applications -- e-mail, chat and newsgroups.
Look for content and commerce to finally take off in the
broadband environment.
"Shopping is lame in the low-bandwidth environment. People
don't want to order something by looking at a thumbnail image,"
said Green. "Shopping will be massively enabled by broadband."
Her other picks? Multi-player multimedia gaming, PC-based video
conferencing, and graphically-enhanced e-mail.
"As McLuhan said, new media always looks like the old media
it replaces. At first, TV was little more than radio announcers
reading in front of the camera," said Green. "Today, on-line
looks like print. It's often just a magazine on the computer
screen. Increased bandwidth will play an important part in
the maturation of on-line media. Once the bandwidth is
available, you'll see great new content popping up to
capitalize on it."
--------------------------------------------------------
Forrester Research can be reached at 617/497-7090
or on the World Wide Web at [http://www.forrester.com].
--------------------------------------------------------
===========================================================
CABLE DATACOM NEWS ROUNDUP
===========================================================
MOTOROLA AND SUN PARTNERING FOR CABLE DATACOM
Motorola Inc.'s Multimedia Group and Sun Microsystems have
formed a strategic alliance to jointly develop an end-to-end
system utilizing open interfaces for residential high-speed
cable data services.
As part of the partnership, dubbed the "Cyberspace Alliance,"
Motorola will integrate its CyberSURFR cable modem technologies
with Sun Internet and headend server products. Additionally,
Sun's Solstice Enterprise Manager software will be used
for data network management and Motorola will optimize its
systems for Java software applications.
"Sun's server and systems implementation expertise will
strengthen Motorola's ability to deliver complete voice, video
and data solutions to our broadband customers and accelerate
the deployment of high-speed data networks throughout the U.S.,"
said Motorola Vice President James M. Phillips.
"Similar to the Internet revolution, the widespread deployment
of broadband Internet services to the home will be driven
by technologies that are based on open, not single vendor
standards," said Scott McNealy, president and CEO, Sun
Microsystems.
Motorola has agreements in principle with MSOs TCI and Comcast
for the purchase of 500,000 cable modems. Sun is the leading
provider of UNIX workstations, operating systems, and
networking software.
In November, Lucent Technologies (then AT&T Network Systems),
Hewlett-Packard, Hybrid Networks and Intel created the
"Broadband Link Team," another alliance focused on developing
interoperable products for high-speed data services over cable.
* * * * * * * * * * * * * * * * * * * * * * * * * * * *
CABLE DATACOM NEWS is published monthly via e-mail by
Kinetic Media, Phoenix, Arizona USA. Copyright (c) 1996.
All rights reserved. Additional content is available
on the CABLE DATACOM NEWS World Wide Web site at
[http://CableDatacomNews.com].
Subscriptions are available for $245 per year.
E-mail [subscribe@CableDatacomNews.com] for a
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