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September 26, 2000 Provided by System Dynamics Inc. in association with Pulver.com

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IN THIS ISSUE:

Heard on the Net

The Email Bag
UK and Sweden Updates

"End-to-End IP" -
How Will The ILECs Survive? (Part 1 of 2)

Broadband Home Fall 2000
Oct 3-5, Burlingame, CA

pulver.com 2000 Calendar
Upcoming conferences


Heard on the Net

News about People and Companies influencing The Broadband Home

People News

Greg Langdon has been promoted to EVP of product strategy at Efficient Networks. The company also recently named Kerry Stover as CIO. Previously, Stover was a partner at Andersen Consulting. (www.efficient.com)

ICTV has named Robert Toczycki, previously a senior intellectual property attorney with Carr & Ferrell LLP in Palo Alto, as director of intellectual property; and Terry Beaver, previously sales manager for Concero, as director of business development. Terry will be responsible for developing relationships with platform and integration partners. ( www.ictv.com )

Jay Rolls, formerly with Network Physics, has accepted the position of VP of Business Development at Pacific Broadband. The new company is doing broadband technologies for voice, video, data over HFC. ( www.pacband.com )

E. Jock Ochiltree, formerly President and COO of Information Storage Devices, has been named president and CEO of Sharewave. ( www.sharewave.com )

Telica has named Bryan Sheppeck VP of sales; Mehdi Ghasem director of technical marketing; and Brad Steinka director of software development. Previously, Sheppeck was with AccessLan Communications; Ghasem was at Lucent Technologies; and Steinka was with Nortel Networks. ( www.telica.com )

Arnold Englander, previously of Commerce TV, will become Senior Director of Product Management at VocalTec. ( www.vocaltec.com )

Robert Amman, previously president and COO of Global Telesystems, was named company chairman, president and CEO after the resignation of H. Brian Thompson. ( www.gtsgroup.com )

Leon Blackburn, formerly assistant controller for AirTouch Communications, has been appointed VP and corporate controller at Advanced Fibre Communications. ( www.afc.com )

Catherine Kozik has been promoted to CIO at Tellabs. She will continue to serve as vice president of Global Information Services. ( www.tellabs.com )

Michael MaKieve, formerly of Pacific Bell, has been named COO of Northpoint Communications and Susan Rodriguez, formerly a consultant, was named VP of LEC Relations at the company. ( www.northpoint.net )

Beth Kahn, formerly of Lucent Technologies, has joined DMC Stratex Networks as VP and GM of its San Jose operations. ( www.dmcstratexnetworks.com )

(Please email people@bb-home.com to report a change in your position.)

Company News

--Acquisitions

ADC Telecommunications will acquire Broadband Access Systems in a transaction valued at $2.25 billion. ( www.adc.com ) ( www.basystems.com )

Inktomi has agreed to acquire FastForward Networks in a transaction valued at approximately $1.3 billion. ( www.inktomi.com ) ( www.ffnet.com )

Unique Broadband Systems, a manufacturer of broadband-wireless systems, has signed an agreement to acquire Denmark-based ProTelevision Technologies A/S for $6.75 million. ( http://www.uniquesys.com )

--Funding

ArrayComm, a wireless technology company, secured $34 million in additional funding from a group of investment firms led by Nomura International plc, Cornerstone Equity Investors and American Century. This follows a strategic investment from Sony Corp and FCC approval for a commercial trial in San Diego starting in 2001. ( www.arraycomm.com )

--Other News

Broadcom has announced a single-chip cable modem solution to address the power, temperature and reliability requirements for primary-line IP cable telephony. It integrates a DOCSIS cable modem, HomePNA 2.0, a VoIP DSP, a 4-Channel voice CODEC, and IP security technology and also supports the EuroDOCSIS specification. ( www.broadcom.com )

National Semiconductor has announced a new "set-top box-on-a-chip" solution for the interactive set-top box market. Their technology will be used in set-top boxes to deliver America Online's new interactive TV service - AOLTV. ( www.national.com ) ( www.aoltv.com )

KPNQwest has signed an agreement with Telecom Italia to carry out DSL tests in Milan and Turin, expanding to more cities in the short-term. ( www.kpnqwest.com ) ( www.telecomitalia.it )

Tdsoft and Lucent have signed an agreement to offer VoDSL services in international markets. They will co-market voice gateways and DSL equipment based on the international V5.2 PSTN standard. ( www.lucent.com ) ( www.tdsoft.com )

ICTV announced that it has signed a letter of intent with Cox Communications to deploy ICTV's Digital Platform, including TV E-mail, Broadband Internet TV content, Interactive Services and E-commerce, to a large Cox market. ICTV has opened an East Coast engineering office near Baltimore to handle digital interactive platform projects, including e-mail and set-top integration with third parties and remote management software. ( www.ictv.com ) ( www.cox.com )

Two Way TV has completed an agreement with BBC Worldwide to create a number of new interactive games based on hit BBC Shows, including Antiques Roadshow, A Question Of Sport, and Mastermind. ( www.twowaytv.com ) ( www.bbc.co.uk )

Covad and SBC announced an agreement making Covad an in-region and out-of-region DSL provider for SBC, including $600 million in resale revenue to Covad over six years. SBC also announced plans to invest $150 million to acquire a stake in Covad. In addition, the companies said that several pending antitrust and regulatory legal issues were settled. ( www.covad.com ) ( www.sbc.com )

Hybrid Networks has introduced a new Wireless Broadband Router as part of its two-way system. Sprint has already ordered 16,000 for its nationwide roll out of fixed-wireless Internet service to business and residential customers. ( www.hybrid.com ) ( www.sprint.com )

Pseudo.com, an interactive broadband entertainment network, has folded after a year of tough times. ( www.pseudo.com ) ( www.thestandard.com )

Astracon Inc and Emperative, have announced a partnership to automate connectivity activation and service provisioning across DSL networks. The collaboration will enable end users to auto-provision on-demand broadband applications across complex networks. ( www.astracon.com ) ( www.emperative.com )

New York state regulators have ordered Verizon Communications to make available to its rivals the same wholesale data services that it offers its own data affiliate. By March 2001, Verizon must make it possible for rivals in New York state to lease its telephone lines to offer voice and data services over a single line. ( www.verizon.com )

CableLabs has selected three companies as primary authors of the OpenCable Application Platform, or middleware software, specification for interactive digital cable TV. The companies are Sun, Liberate and Microsoft. Canal Plus, OpenTV, and PowerTV will be additional contributors. On the hardware front, over 70 companies participated in their OpenCable Hardware Developers' Conference. ( www.opencable.com )

Inktomi, Portal, Redback Networks Inc. and Sun Microsystems Inc announced an integrated solution for the delivery of billable broadband services to enable service providers to distribute, personalize and bill broadband value-added services. ( www.inktomi.com ) ( www.portal.com ) ( www.redbacknetworks.com ) ( www.sun.com )

Motorola received certification from the Bluetooth standards body for two Bluetooth PC products -- a PCMCIA card and USB accessory -- which should be available to consumers via PC manufacturers before the end of this year. ( http://www.motorola.com )

Sprint has launched its fixed-wireless, high-speed, Internet-access services in two additional cities, Colorado Springs, CO and Detroit, MI. Separately, Lucent Technologies announced that Sprint has selected its ORiNOCO system to offer high-speed wireless networking within homes, apartment complexes and small businesses, beginning in Phoenix and with other cities to follow. ( www.sprint.com ) ( www.lucent.com )

An upcoming AT&T interactive TV trial will use technology from Liberate. The service will run on Motorola set-top boxes and could lead to a commercial offering. AT&T has been looking for other vendors, despite its previous deal with Microsoft for interactive TV, due to the delays in Microsoft's product. ( www.att.com ) ( www.motorola.com ) ( www.microsoft.com )

National Semiconductor and Proxim have announced a joint effort to develop wireless home networking products based on the HomeRF protocol for 2.4 GHz RF technologies. This follows the recent FCC decision to increase the bandwidth for frequency-hopping, spread-spectrum wireless technology, which was championed by the HomeRF group. Vendors plan to increase HomeRF from current speeds of 1.6 megabits per second to more than to 10 megabits per second. Europe and Japan had already allowed wideband frequency-hopping technology. ( www.proxim.com ) ( www.national.com ) ( www.homerf.org )


The Email Bag - UK and Sweden Updates

The UK: Broadband = TV?

We received an email from the UK in response to our article "Broadband in the UK - Focus on the TV" (BBHR Aug. 13, 2000). It verified our observation that most people in the UK associate "broadband" with the TV: "I met recently with an editor of a new homes publication who stated when asked what she thought BROADBAND was - isn't that something that comes through your TV?"

He viewed this as unsurprising given the large digital TV deployment in the UK and the associated strong marketing push on broadband TV coming from cable, satellite and digital terrestrial providers. Lower PC penetration and the late start on PC broadband access also play a big role. However, the situation seems likely to change with competitive broadband access enabled by local loop unbundling and wireless broadband spectrum becomeing available.

Our correspondent also pointed us to an interesting report by the U.K. Office of Telecommunications (Oftel) on "Consumers' use of Digital TV" ( www.oftel.gov.uk/cmu/research/digi0800.htm ). From a survey done in 1Q2000, it indicates that although digital TV is installed in 1 in 5 UK homes, fewer than 1 in 5 of these make use of interactive services other than the electronic program guide (EPG).

It reports that "General lack of interest, or preference for using the Internet for these activities, were the main reasons for not using digital TV interactive services." It further reports that "Fewer than 1 in 3 consumers said they would be likely to use Internet or email via their digital TV, and was lower still amongst homes with PC Internet."

Its conclusion as to why more consumers are not using the interactive services was "Education and perhaps consumer confidence would appear to be the main issues here. Lack of interest in the services was the main reason for not using them..."

It could be. But it sounds to us like the industry has some work to do in figuring out what people really WANT to use, rather than what they need to convince them to use.

Sweden: If Broadband's There, Can Residential Gateways Be Far Behind?

Stefan Tordenmalm, a Bredbandsbolaget (B2) broadband customer from Sweden (see "Where Will the Broadband Revolution Start", BBHR May 4, 2000) writes that signs of residential gateways are showing up in Sweden.

"Hårdvarubolaget (Hardware company), is working on gateways. I saw pictures in an article. They looked like and were described as the type of gateway that is more like other home appliances than a PC. It contained several building blocks that you attach to a rack. There could be one TV block and one phone block for example. Well, it could be a good product but I would doubt it's anywhere near launch."

We tried to learn more about the company, but must admit our ignorance of Swedish got in the way. We'll report as we learn more. ( www.blokks.com )


"End-to-End IP" -- How Will The ILECs Survive? (Part 1 of 2)

At the Fall Voice on the Net (VON) conference a few weeks ago (Sept. 12-14), we helped organize a session called "End-to-End IP - How Will We Get There?" We came away wondering whether and how the incumbent local exchange carriers (ILECs) will survive the transition to IP-based telephony.

We take it for granted that broadband access of one type or another (cable modems, DSL, direct fiber, satellite, etc.) will become widely available, and that many people will adopt broadband access and install in-home networks. PCs are usually the first end-user devices connected to the broadband network, but telephones won't be far behind. While customers may want to keep some of their existing phones, we think they'll be most interested in new phones with new features designed to work with the broadband network. Since IP is the common theme underlying all broadband access and in-home networks, it seems logical that we'll see consumer-oriented IP-enabled telephones.

We're already starting to see these "IP phones" -- many companies are working on them. They're designed to connect through in-home IP networks to IP-based broadband access networks -- and from there to IP phones in other people's houses. While at first they'll be more expensive than "plain black phones," they'll offer many features and services simply not possible today.

As with any new technology, early adopters will buy IP phones, volumes will increase, and eventually the price will drop so anyone can afford one. It's perfectly reasonable to think that ten years from now, many if not most homes will have at least one IP phone. Plain black phones will go the way of the black-and-white TV and record changer: they won't be thrown out, they just won't be used much.

To take advantage of their new features, IP phones need to connect to each other with "end-to-end IP," without going through today's public switched telephone network. Otherwise, the PSTN will dumb them down so they can't do anything more than a plain black phone. And going through the PSTN will perpetuate the pricing structure designed to recover the capital cost of obsolete central office switches, rather than the much lower cost of the global IP infrastructure.

It seems so obvious that IP phones will win. People may disagree on how long it will take, but we think almost everyone agrees that we'll eventually see "end-to-end IP telephony".

So we would have thought that most companies working on broadband voice for the home would be thinking about "end-to-end IP" and would be working hard to get there.

But that's not what we heard at the conference. While the cable industry seems to be heading in this direction, the telcos - especially the ILECs - aren't.

A recent book "The Innovator's Dilemma" explains why "disruptive technologies" cause strong market leaders to fail while making all the right decisions. "End-to-end IP" seems to place the ILECs in exactly the situation described in the book.

Jeff's Opening Remarks

In his opening remarks at the VON conference, Jeff Pulver observed that the "softswitch" vendors seemed to be preoccupied with recreating the 3000 features of existing central office switches, rather than creating new features and improving the end user experience. Jeff slides listed some enhancements he'd like to see:

  • presence capability for an always-on user

  • supports a variety of edge devices

  • capable of reaching a nomadic and mobile end user

  • multimedia support including Web and video

  • end user configurable

  • third party enhancement

  • handicap friendly and CALEA capable

  • adaptable and rapid management and provisioning

Listening to Jeff, it seemed to us that implementing these features is closely tied to the "end-to-end IP" issue. If a service provider wants to lay the groundwork for these new features, it should be aiming at end-to-end IP and pushing its vendors to provide solutions aimed at it. If a provider is focused on replicating all the existing features in today's network, it's easiest to work through the PSTN - which already has them all; but it delays the emergence of new capabilities.

The "End-to-End IP" Session

The "End-to-End IP" session, on the second day of the conference, was moderated by John Pickens of Com21, and included Martin Taylor of Coppercom, Noam Bardin of DeltaThree, and Don Stanwyck of IP Unity. We thought it was a terrific session and found it both stimulating and disturbing. The speakers all presented cogent arguments for their positions.

John's opening remarks framed the question clearly. He described two approaches to the "third-generation" telephone network. Both include "softswitches" (software controlled switches replacing the older switches).

In the "peer distributed" approach, the softswitches facilitate direct peer-to-peer IP communication between end-user phones. They're involved in setting up the call, but then get out of the way.

In the "hierarchical centralized" approach, softswitches take the place of the older switches, forcing all communications through a re-implementation of today's hierarchical structure. Two users with IP phones might be able to take full advantage of them if both were connected to the same cable system, but not if one wanted to talk to someone connected with DSL.

John summarized his views as follows "I believe that end-to-end VOIP has a very successful prognosis and we are beginning to see the early stages of its success - SIP phones, unified messaging, e-calling in browsers, and even softswitches. I do not believe however that henceforth the game is about reinventing the PSTN on Unix Servers and IP switches, but rather about discovering and enabling cool new voice-based applications which just happen to have gateways back into the PSTN and use the IP infrastructure for switching of the media stream. And the applications are beginning to be shipped today - thus the market is being enabled today (even leaving the legacy vendors behind)."

Martin Taylor said that Coppercom's customers aren't focused on end-to-end IP. Instead, they view voice over DSL (VoDSL) mostly as a one-for-one replacement for today's voice over twisted-pair copper.

Martin may have been deliberately provocative by calling his talk "End-to-End IP - Who Needs It?" but he pointed out that "almost no service providers are looking for a VoIP solution". Since most DSL systems include ATM for transport, and today's switches are all built to work with ATM, a "voice over ATM over DSL" solution fits right in to the existing network. Martin presented an excellent argument for ATM - proven technology, built-in quality of service, no privacy concerns, better efficiency, etc.

At the end, Martin pointed out the "culture clash" between the "IP culture" and the "telephony culture". While the "telephony culture" insists on charging a usage-sensitive price per minute to provide guaranteed service, the "IP culture" accepts "best effort" service in exchange for a flat-rate price. He concluded that "End-to-end IP won't happen unless there's a win/win for both users and service providers".

Noam Bardin made it clear that Deltathree would welcome a world moving toward end-to-end IP. As a provider investing heavily in IP telephony, Deltathree would like to carry the traffic between IP phones without paying hefty fees to the ILECs which originate and terminate today's calls.

Cable Operators Are Moving to Support IP Phones

Major cable operators have made a strong effort to roll out telephony over cable, and reported about 300,000 US subscribers at the end of 2Q2000. But none of this is IP telephony. The systems deployed to date are all based on using the cable plant as a one-for-one replacement for twisted-pair copper, and using the existing digital loop carrier (DLC) interfaces to connect to the PSTN. While many cable operators want to use end-to-end IP, they are well aware of the many issues, especially quality of service, which make it difficult to compete with the ILECs.

The North American cable operators (through their R&D arm, CableLabs) have been working with many vendors for several years to develop a full suite of protocols for IP telephony over cable. These protocols, called PacketCable, are designed for more than telephony, but IP telephony will be the first major application. Together with the updated DOCSIS 1.1 specification for cable modems, they provide a comprehensive approach for overcoming the quality-of-service issues in the "last mile" cable system to the user's home.

Prototype systems based on the draft Packetcable specifications have already been deployed by several cable operators. Systems that have passed CableLabs certification tests will almost certainly be deployed next year, first by cable operators new to cable telephony, and then by the large operators (especially AT&T and Cox) which have initially used circuit-switched telephony over cable.

The Packetcable specs are clearly designed to enable much richer features and applications when two IP phones talk to each other, and we expect that cable operators will over time start supporting IP phones for primary telephony. While operators will include interfaces to the existing black phones in the home and gateways to the PSTN for "off-network" calls, many operators believe that the new features of IP phones provide the path to winning market share in a competitive telephony market.

But nobody is working on the issue of connecting together IP phones in diverse broadband networks. On the current course, it looks like these new features will only work between IP phones connected to cable systems.

Look To The ILECs For POTS

A full picture of the "end-to-end IP" question requires looking beyond just cable and DSL. While these are the most visible broadband access technologies today in North America, other technologies are being deployed successfully in North America and other parts of the world: fixed wireless (Sprint in the US); direct fiber (B2 in Sweden); two-way satellite (Hughes and EchoStar/Gilat in the US).

DSL is the only technology that uses ATM as its native protocol; the others are all based on IP (a few propietary cable modem systems support ATM as well as IP). Thus is it likely that ATM-based broadband telephony will be isolated to the LECs. All the others will almost certainly implement IP-based broadband telephony -- and will seek to bypass the PSTN as IP phones move into homes.

It's perfectly understandable why the incumbent LECs would want to employ ATM and their existing circuit switches rather than directing telephone traffic to IP. They have enormous investments in their circuit-switched infrastructure and the people trained to operate it, and they're understandably reluctant to see it fade away any faster than necessary.

Most of the early customers for VoDSL are businesses - the best telephone customers, with much higher margins than residences. Businesses need lots of the CO-switch features Jeff was talking about - such as Centrex (CO-based PBX features) and direct inward dialing. The service providers already own switches that provide all of these features. So it makes lots of sense for the ILECs to use DSL as an economical alternative to twisted pair copper, rather than waiting for IP solutions with all the same features.

Some competitive LECs are focused on business markets and are also investing in circuit-switched technologies in order to get these same CO-switch features for their customers. Other CLECs will seek to compete in the residential market with new features and will embrace IP.

As customers adopt the new IP phones for their new features and applications, the ILECs will someday find themselves losing market share fast. They're likely to be isolated as the last major providers of circuit-switched "plain old telephone service".

How can they get out of this? See the next issue of BBHR for part 2...


Broadband Home Fall 2000 - Oct 3-5, Burlingame, CA

Time is getting short! We're counting down the days until Broadband Home Fall 2000 and hope you aren't going to miss it. Whether your target is broadband services, content, applications, infrastructure or products, you'll want to hear thought leaders from established and new players describe their visions and plans for this exciting community.

The conference takes place in Burlingame, California (near San Francisco airport) October 3-5, with a welcome reception the evening of October 2nd and an all-conference party the evening of October 4th. That means there will be lots of opportunities for networking with the industry leaders who will be with us.

Our speakers will be key contacts from over 80 participating companies so you can: -- learn the latest about all the sectors that will deliver solutions to real broadband customers

-- build the community of technology, service and content companies which together will speed the reality of solutions to enhance the way real people (not just techies) live, work and enjoy themselves at home.

The conference includes 16 industry perspectives by top executives from all sectors of the Broadband Home community and features 24 breakout sessions, each with industry experts presenting different perspectives, and with lively interaction between the panelists and the audience. Check out the schedule at http://www.thebroadbandhome.com/bbh2000/4.html

Seating is limited so we suggest that you register immediately http://www.thebroadbandhome.com/bbh2000/2.html or call pulver.com offices between 09:00 - 18:00 EDT at +1.631.547.0800 and register on the phone.

If you will require a hotel room, we recommend that you contact our travel agent ParAvion directly by phone at +1.800.927.8137 in the US and at +1.310.670.2970 for those calling from outside the US. Please tell the reservation specialist that you are attending Broadband Home Fall 2000.


pulver.com 2000 Calendar - Upcoming conferences

System Dynamics will be organizing and moderating the Broadband track at several upcoming conferences. (See the complete calendar at www.pulver.com/conference )

The pulver.com Wireless Internet Summit Oct 24-25, New York, NY ( www.pulver.com/wirelesssummit )

VON Asia 2000 - November 13-16, Hong Kong, China ( www.pulver.com/asia2000 )


Subscription and Copyright

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Please send your comments and feedback regarding this issue of our report to editor@bb-home.com. Your suggestions for topics to be covered in future issues would be greatly appreciated.

Sandy Teger and Dave Waks
Sandy and Dave's Report on The Broadband Home
Originally published as The Broadband Home Report
September 26, 2000

editor@bb-home.com
http://BroadbandHomeCentral.com/report



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