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The CDN Cable Modem Newsletter

  this is an issue of Cable Datacom News, which is about cable modems.
  It is available from Majordomo@lists.primenet.com
  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 
  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
  * * * * *    C A B L E   D A T A C O M   N E W S   * * * * *
   Tracking the Development of High-Speed Cable Data Services
  Vol. I, No.1  * * * * * * * * * * * * * * * * *   March 1996
    Published Monthly by KINETIC MEDIA Phoenix, Arizona USA 
            Copyright (c) 1996. All Rights Reserved 
                          C O N T E N T S
    High-Speed Will Start Slowly
    Jones Intercable's Internet Channel to Offer High-Speed 
    and Dial-Up Access
    An Interview with Emily Nagle Green, Forrester Research 
    Senior Analyst, People & Technology Strategies
    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 
  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
  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.
      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 
  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 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 
  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 
  Subscriptions are available for $245 per year. 
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