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September 26, 2001 Provided by System Dynamics Inc. in association with Pulver.com

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IN THIS ISSUE:

A Note From Sandy and Dave
We Will Not Forget

Heard on the Net

Broadband By the Bay
Revolutionary Change, Evolutionary Timeframe

Where Does Fiber Fit?
FTTH and Alternatives

The I's Have It!
Italy Pushes Forward with IP-TV and Iceland Joins In

Understanding Users -
AT&T Broadband Explores Web Tablets

Broadband Home Fall 2001
San Jose, October 1-3


A Note From Sandy and Dave - We Will Not Forget

As native New Yorkers, now living 30 miles from "the city", the tragic events of September 11th in New York City and Washington are difficult to put out of our minds. Our hearts go out to those who have suffered losses and we have them in our thoughts and prayers.

Thanks for the notes of support and friendship we got from around the world, like the one saying "we stand side by side with our American friends on this terrible day." It made us feel like we are all part of a "Broadband Home" community.

We were struck during this event by the strength and importance of on-line communications. When we found it difficult to reach people by phone, the Internet and Web became our primary way of communicating and finding current information.

We have begun the task of moving forward, and after much reflection and discussion with Jeff Pulver, we decided to go forward as planned with the BBH Fall Conference Oct 1-3 in San Jose. See "We Will Not Forget" on the conference website http://www.thebroadbandhome.com/bbhfall/


Heard on the Net

News about People and Companies influencing The Broadband Home

People News

Mark A. Floyd has been named president and CEO of Siemens ICN U.S. He was previously president and CEO of Efficient Networks, until it was acquired by Siemens. ( www.icn.siemens.com )

Ralph Gerbas was named VP and general manager of the newly formed broadband division of Sunrise Telecom Inc. He was previously founder and CEO of Avantron. ( www.sunrisetelecom.com )

John (Jack) H. Nichols III has joined Incanta as senior VP and CFO. He previously held a similar position at NetSchools. ( www.incanta.net )

Mike Noonen was named VP/GM of National Semiconductor's networking division. He was previously Director, New Markets & Technologies, at Cisco. ( www.national.com )

Mark Richman has been appointed CFO of Covad. He was previously CFO of MainStreet Networks. ( www.covad.com )

Jay Rolls has been appointed VP of data engineering at Cox Communications. Jay was formerly at Pacific Broadband Networks but was at Cox earlier in his career. ( www.cox.com )

Doug Seeserman has been named Chief Marketing Officer at Qwest Digital Media. He was previously at AT&T Broadband. ( www.qwestdigitalmedia.com )

Brian Turner was appointed CFO and Senior VP at Realnetworks. He was previously at BSQUARE. ( www.realnetworks.com )

Tony Werner has become chief technology officer at Liberty Media Corp. Werner has made several moves this year, starting as CTO of AT&T Broadband, then to startup Aurora Networks and most recently was VP strategic technology at Qwest. ( www.libertymedia.com )

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

Company News

--Acquisitions

A Novo Group purchased the U.K. service and repair business of Pace Micro Technology for an undisclosed amount. The Pace repair team will move to A Novo's U.K. subsidiary. ( www.a-novobroadband.com )

AM Broadband Services Inc. acquired SRS Communications Corp. and EDJ Communications Inc. for about $6.9 million to expand its business in the service market. ( www.amcomm.com )

American Greetings online subsidiary, AmericanGreetings.com, acquired the BlueMountain.com business from Excite@Home for $35 million in cash. ( www.americangreetings.com )

Netopia is buying Cayman Systems for $11 million. ( www.netopia.com )

Optus has purchased ExciteAtHome's interest in ExciteAtHome Australia . ( www.home.net ) ( www.optus.com.au )

Platinum Equity completed acquisition of ADC 's Access Products Division and Broadband Wireless Group, in undisclosed terms. The renamed new wireless group will operate as Axcera, LLC . ( www.axcera.com ) ( www.peh.com )

--Funding

B2 Bredband AB announced private placement funding of $230 million with a group of investors including Continuum Group Limited and Access Industries as well as existing shareholders. ( www.bredband.com/docs/release_English_01_0907.pdf )

DragonWave Inc. has obtained $14 million in second round financing to be used for radios designed for the fixed broadband wireless access market. ( www.dragonwaveinc.com )

edgeflow Inc. closed its series A funding round with $24 million. Lead investors were Sierra Ventures and Newbury Ventures . ( www.edgeflow.com ) ( www.sierraven.com ) ( www.newburyven.com )

Metabyte Networks raised $10 million in Series B financing, led by Canal+ Technologies and Scientific-Atlanta . ( www.mbtv.com )

Stargus, Inc. announced the close of $10.15 million in Series B funding. The company addresses the network management challenges of MSOs. ( www.stargus.com )

--Other News

AT&T Broadband 's disposition remains uncertain. AOL Time Warner and others have reportedly put in bids, following the rejected proposal from Comcast Corp. The Board of Directors met but has not reached any decision on action. ( www.att.com )

AOL Time Warner is said to be enlisting employees and selected customers to test its new AOL High Speed Cable service, which will connect directly to the service using a cable-modem connection. The test employs a beta version of AOL 7.0 and their new cable connection software. ( www.aoltimewarner.com )

EarthLink launched EarthLink Internet Calling, a VoIP service providing Dialpad's services directly through EarthLink's most popular Web sites. ( www.earthlink.net ) ( www.dialpad.com )

InnoMedia announced the bundling of their BuddyTalk VoIP software with Creative Technology Ltd's Sound Blaster Live! audio cards. This provides a large potential market for Innomedia, whose software provides multi-party, PC-to-PC and PC-to-Phone calling and instant messaging. ( www.innomedia.com ) ( www.creative.com )

Kansai Electric Power Company , the world's eighth largest electric power company, and ITRAN Communications, Ltd. announced formation of Linecom, Inc. , a joint venture company for the development and deployment of power line-based telecommunications systems in Japan. Another member of the joint venture is Matsushita Electric Works, Ltd. ( www.kepco.co.jp ) ( www.ITRANcomm.com )

Kingcom , an Italian operator, has selected Ericsson as the supplier for its IP telephony solution, based on Broadband Ethernet Access. The first of these networks will serve subscribers in the southern Italian city of Salerno with a variety of services including IP telephony, fast Internet and other services. The contract is the first phase of a general agreement to build out similar projects in other cities and enterprises in southern Italy. ( www.ericsson.com )

Lucent Digital Video , nCUBE , NDS , Orca Interactive and Pace Micro formed the Entertainment Technology Group (ETG) which was announced at the International Broadcasting Convention, IBC 2001. The five iTV-related companies combined offering is intended to provide an end-to-end broadband DTV solution. ( www.etg.tv )

Minerva Networks announced a partnership with The Contents Company , a wholly owned subsidiary of SK Group , to deploy IP Television services throughout Korea. The Contents Company will provide live television, near video on demand (NVOD), and VOD to residents of the MDUs which have been connected by fiber under government sponsorship. ( www.minervanetworks.com ) ( www.sk.com )

Motorola and Two Way TV announced a licensing agreement to integrate Two Way TV's interactive infrared protocol technology into Motorola Broadband's DVi digital set-top family, allowing network operators using these set-tops to offer interactive game shows and sporting events. ( www.motorola.com ) ( www.twowaytv.com )

Pace Micro Technology , which previously had integrated DECT technology into their portfolio, has added 802.11b support. ( www.pace.co.uk )

SBC plans to buy the 56% of Prodigy it doesn't own. ( www.sbc.com )

SONICblue will license its ReplayTV digital video recording technologies to Dotcast Inc which will use the technology in its wireless broadband network to deliver movies, music, video games and Internet content to customers. ( www.dotcast.com ) ( www.sonicblue.com )

Sun Microsystems Inc. and Philips Digital Networks ' MP4Net business group are expanding their alliance to develop and promote the MPEG-4 standard for streaming audio, video and graphics. ( www.sun.com ) ( www.mpeg4.philips.com )

Walt Disney Co. and News Corp will launch Movies.com , a joint venture, next year. The VOD service targets users of cable service with VOD and all forms of broadband Internet. The venture will be a new operating company owned equally by the two founders, and will absorb Disney's Movies.com Web site. Disney and News Corp. also plan to make the VOD content accessible to more than 10 million homes via either broadband Internet access or cable. ( www.disney.com ) ( www.newscorp.com )

Widevine Technologies has launched "Widevine VOD" a new security solution, based on "encryption on the fly" technology, for distributing valuable digital content over the Internet, cable systems or proprietary networks. ( www.widevine.com )

--Public Policy

U.S. - Before the attack on 9/11, bills affecting broadband were high on the U.S. agenda in both the House and the Senate. In the House, the Internet Freedom and Broadband Deployment Act of 2001 (H.R. 1542, known as Tauzin-Dingell) was under consideration and in the Senate, the Hollings-sponsored legislation called for the structural separation of the Bell companies' retail and wholesale operations. This year's US technology agenda may now have been sidelined as attention is focused on dealing with the aftermath of the terrorist attacks.

[Editorial note: We hope that attention won't totally be lost on the public policy issues surrounding broadband, given our belief that broadband could be a key element of a US economic stimulus package.]


Broadband By the Bay - Revolutionary Change, Evolutionary Timeframe

In the previous issue (BBHR 9/6/2001) we described our recent trip to California, visiting with companies in Irvine and in Silicon valley. Back at home, musing on our trip, here's how we net it out: At the very beginning of a new idea like residential broadband, the concept seems ridiculous; over time, for some seemingly-radical ideas, pieces come from unexpected places and start aligning in favor of the idea not being so crazy. Ten years ago, to say that you and your friends and neighbors would all want and use megabits of information flowing to and from your home sounded absurd; today, broadband penetration has reached a critical mass and new applications and services are forming a "virtuous circle" around it.

When online services started in the 1980s, home PC penetration was lower than broadband is today. Prodigy and America Online were ridiculed for introducing their services when home PC penetration was less than 10% and 1200 bps modems cost $500. Service penetration passed one million homes as consumer modem prices dropped below $100, and continued increasing as PC prices dropped to and below $1000.

During the '90s, the Internet went from being an academic research tool to become part of peoples' lives -- with email and www everywhere, and stickers on bananas saying "www.chiquita.com". The dotcom boom made the idea of buying from Amazon and eBay part of everyday life for millions. Napster turned the music industry on its heels and forced the record companies to seek a way to satisfy the demand for downloading.

Cable operators saw the potential and invested in plant upgrades and cable modems after pioneers like LANCity took the early risks. The telephone companies, after sitting on DSL for years, decided they needed a tool to compete and took it off the back burner. Now Hollywood studios worry about the "napsterization" of their intellectual property -- which is possible once broadband lets the video bits flow freely.

The idea of sending voice over IP moved from a hare-brained scheme of a little Israeli company called Vocaltec and started replacing "real telephony" at the incumbent behemoths. After some "failures" (aka learning experiences) like Time Warner's Full Service Network, video on demand and interactive television are moving forward.

PCs are now in more than 60% of US homes, and nearly all have Internet access; more than a third of the homes with PCs have more than one PC. About 10% of US homes subscribe to broadband service (mostly by cable or DSL) and more than half of these homes have more than one PC.

People have started caring about whether they can get broadband--some even decide where they'll live based on whether broadband service is available. Upscale developments have started touting that homes are "Internet ready" with category 5 wiring in the walls. A few communities have started putting in fiber--upscale ones like American Canyon in Napa and rural ones like Grant County, Washington. Palo Alto is testing whether fiber to the home should be part of the taxpayer-financed community infrastructure.

Technology companies tend to go for the gold ring--some crash and burn but there are those that emerge from the other side as the new winners. Chip makers compete for who can pack the most function into the smallest silicon and the highest production. Networking companies compete head to head to pack the most functionality in a "cable/DSL router" at the lowest price, with new models arriving every three months.

Meanwhile, the consumer electronics industry, craving new products and revenues after the disappointing experience with HDTV, is starting to see a new path: networked audio and video. Companies are introducing home media servers, Internet radios and video appliances. Established companies like Sony and Thomson Multimedia and new players like SONICblue and Lumenati all vie for the "right" ideas, products and price points.

Pandora's box has been opened. It's too late to stuff residential broadband back inside. The boom allowed new ideas to blossom and some to flourish. Even in today's negative climate, some companies in the valley are brave enough to go for funding. Many of those who have gotten going and want to stay alive have focused their aspirations and reined in their spending. They set more modest goals and understand that they won't get to the ultimate endpoint in days or weeks, but rather by finding a segment that can benefit from what they are doing and selecting those opportunities that move them in the direction they think is right -- and adjusting course as they learn what "right" really is.

Postscript after 9/11

We had intended the first part of this article to be included in the previous issue, but ran out of time and space. In the light of the tragic events in New York and Washington on 9/11, we think it's all the more relevant.

People will want to stay closer to home now. In the near term, broadband will help families get information and communicate better. Broadband already enables effective ways to work from home, and upcoming products and services will provide new ways to communicate and be entertained there.

Residential broadband might have hit a bump in the road, but the direction and movement toward the broadband future seem inevitable. As the digital revolution completes its transformation during the next decade, analog telephony, radio and television will fade away and broadband will become the primary medium for communications, entertainment and education. Its economic impact will be felt first in a redistribution of traditional communications and media revenue and income, and then by the creation of new applications made possible by widespread adoption. Broadband is a global phenomenon, and its effect on the world economy will be measured in the trillions of dollars.

In the light of the Sept. 11 tragedy, residential broadband promises to be a key to global economic recovery. Many now believe that speeding broadband to the home should be part of a forthcoming economic stimulus package.

But the very meaning of "broadband" now takes on more importance. Many of the new applications - such as IP television and video telephony - require substantially more bandwidth (both to and from the home) than today's cable and DSL offerings. As we have written before, people in some other countries enjoy much more robust "broadband" offerings than in the US.

We hope that US public policy will not lock in the high prices and limited functionality of today's broadband services, but rather will reflect the need to redefine "broadband" to realize its full potential to transform the home.


Where Does Fiber Fit? - FTTH and Alternatives

We have written about fiber to the home (FTTH) in several recent issues. Although the US has more residential broadband deployed in terms of numbers, the capability of the broadband infrastructure is falling behind. While the US thinks of "broadband" as cable modems and DSL, users in other counties are benefiting from aggressive rollouts of fiber to the home. Now some US communities and new service providers are starting to invest in FTTH. Some wonder whether US public policy should encourage widespread availability of broadband and whether FTTH should be favored over today's technologies.

If "broadband" is only about high-speed Web browsing and email, then today's infrastructure - comparatively low speed and highly asymmetric - is acceptable. But if broadband is for IP television and for people sharing their videos with family and friends, then more bandwidth and more symmetry is required.

Some would say that the time has come for widespread deployment of fiber to the home. In Milan, Italy, subscribers can already receive the full spectrum of services - data, voice and TV - over high-speed fiber. In the US, Competisys and other private and municipal providers are deploying fiber in a few selected communities.

The incumbent services providers - the cable operators and telephone companies - have many billions of dollars invested in their existing infrastructures, and are understandably loath to throw them away and start all over again to deploy full-scale fiber to the home. If they had to do it all over again, they might start with FTTH, but they'll look long and hard for ways to "tweak" their existing infrastructure in the hopes of getting much of the benefit of FTTH at a fraction of the cost.

So it's no surprise that technology providers are working hard to help them. Narad Networks is working on technology to deliver Gigabit Ethernet over the existing "hybrid fiber coax" (HFC) architecture operated by the vast majority of US cable operators. Rainmaker Technologies claims that its approach could provide 10 Gigabit Ethernet over the same plant. Companies such as Pacific Broadband Communications are using other approaches to increase the throughput of the cable plant.

Meanwhile, some telephone companies have been testing VDSL ("V" stands for "very high speed") - which promises to deliver upwards of 20 Mbps over (short) phone lines to the home.

So it may well be that "one size fits all" isn't appropriate. If vendors can prove in the technology and economics of much higher speed over existing plant, consumers will see the benefit of true broadband much faster than if the entire infrastructure has to be rebuilt with fiber.

( www.naradnetworks.com ) ( www.rainmakertechnologies.com ) ( www.pbc.com )

For more information, see the Broadband Home Report:

  • "Milan's The Place For True Broadband! - FastWeb Rolls Out in Italy" (6/18/01)

  • "'Bredband' in Sweden: Pioneering the LAN model for Broadband Access" (7/27/00)

At the BBH Fall 2001 conference: Industry Perspectives

  • Deborah Lathen, past Chief, Cable Services Bureau, FCC (broadband public policy)

  • Vikram Saksena, CTO, Narad Networks Sessions

  • Broadband Access Evolution - Today and Tomorrow

  • Future Proofing New Homes and Communities

  • Focus on Fiber To The Home -- Where Does It Make Sense? .


    The I's Have It! - Italy Pushes Forward with IP-TV and Iceland Joins In

    Italy Pushes Forward with IP-TV

In BBHR 6-18-2001, we reported on the impressive work being done in Italy by eBiscom and FastWeb on service delivery over IP, including IP-based TV delivery. This month's news confirmed that another player is rolling out this approach in Italy. GoldTV , a provider of broadband television services based in Milan, will use Minerva IP TV headends and nCUBE infrastructure, connected to an extensive Fiber-DSL network, to deliver broadcast quality live television and video-on-demand (VOD) services to residences in the Lombardy, Emilia-Romagna and Veneto regions of northern Italy. Combined, these regions encompass a potential customer base of over 10 million subscribers.

GoldTV recently merged with Logos TV , a provider of sports, education and entertainment content which owns extensive video production rights, including movies and sporting events.

GoldTV plans to multicast up to 50 TV channels over a fiber-DSL network operated by Colt Telecom , a network infrastructure provider based in the UK. The system will be in operation for paying customers by the first quarter of 2002, and will later be expanded for additional applications such as personal video recording (PVR).

( www.goldtelevision.com ) ( www.logosweb.com ) ( www.minervanetworks.com ) ( www.colt-telecom.com )

Iceland Joins In

Iceland is also rolling out IP TV. Digital broadcasting provider NovaMedia will deliver rich media services to Reykjavik's population of 200,000 residences, again using Minerva's solution. NovaMedia will utilize the country's widespread fiber network to deliver an extensive lineup of live TV channels and VOD over an IP-based infrastructure.

The pilot deployment began in early September, to homes with existing Fiber-to-the-Home (FTTH) connections. NovaMedia is deploying IP-based set-top boxes providing 15 channels of TV, with VOD due in October. The plan calls for additional homes to be fiber-enabled and added to the NovaMedia network over the coming months and to deliver IP TV to almost 20,000 households by 3Q2002. It also calls for expanding the channel line-up and adding additional services such as gaming, e-commerce, email, and TV-based Internet access as the installed base grows.

( www.media.is )

Minerva will speak in the session "Foundations of the New TV" at BBH Fall 2001.


Understanding Users -- AT&T Broadband Explores Web Tablets

With so much of the focus today on short term results and cost cutting, we were pleased to learn that AT&T Broadband has been exploring what real broadband users want and how they behave. In the May 5, 2000 BBHR we covered some work by the Broadband Innovation Group at MediaOne Labs. Following the merger with AT&T, this group - now called User Experience Strategy & Design and part of AT&T Broadband - has continued its work under the direction of Marita Franzke. We thank her for sharing with BBHR a preview of their recent research "An In-Home Study of Web Tablets: Blurring the Boundary between Internet Appliance and PC" by Patricia Somers and Ursula Lauper. The study has been approved for publication, so we'll provide an update in BBHR on details for obtaining it once it's available.

Based on studies with selected AT&T Broadband customer households, the group gathered data through in-depth interviews, on-site visits and home observations, usability tests, etc. Their goals were to: 1. understand the functionality people wanted from a Web tablet 2. find out what content people accessed 3. discover the varying roles of Web tablets in everyday life 4. understand the usability issues

Here are a few of the key findings:

  • "the tablets did not take time away from their PCs, but rather increased their overall Internet use"

  • "Using the tablet wasn't something special that participants did instead of their regular tasks; rather its role was more that of a utensil to help with those very tasks."

  • "Tablet Internet content tended to be more varied, as well as more leisure oriented, than the sites visited on PCs."

  • "What differed from the 1999 trial was the desire among many participants to move seamlessly between these realms of the work and entertainment webs."

One of the interesting requirements that came out loud and clear in the study was the need for the Web tablet to share information with the PC.

( www.att.com )

As a result of the industry downsizing, some of the principals from the "User Experience" group have moved to other companies which have similar interests. One benefit of this is that the learning and focus on user needs is being shared with companies such as SONICblue and Intel , where some of the former AT&T folks now work.

Clarke Stevens of SONICblue, an "AT&T alumnus," will participate in the session on "Webpads and Web tablets" at next week's Broadband Home Fall conference to share his perspective on such issues.


Broadband Home Fall 2001: San Jose, October 1-3

"Fulfilling the Promise"

In difficult times, we need each other. There is no question that many short and long term challenges lie ahead. Our "broadband home" industry is uniquely positioned with products and services that promise enhanced communication, information, entertainment, security, and shopping for families and workers. But this is an industry in which the entire ecosystem -- products, services, people, infrastructure and public policy -- needs to mesh to fulfill the promise.

We will be bringing together people and companies from across the whole ecosystem and focusing on fulfilling the promise at next week's Broadband Home Conference in San Jose. The vast majority of scheduled speakers have re-confirmed their participation and some new ones have been added. We encourage you to attend this event.

The conference will highlight how, despite uncertainties in the financial and political situation, residential broadband promises to be a key to global economic recovery. Many now believe that speeding broadband to the home should be part of a forthcoming economic stimulus package.

As we have discussed elsewhere in this newsletter, broadband to and in the home promises a wide range of applications, far beyond Web browsing and email. At the conference, speakers will discuss voice, audio and video applications, and the emerging technologies to make them available throughout the home.

These applications provide great business opportunities for existing and new players and will be a key to economic recovery. Conference speakers will discuss the new home networking products, the impact of new operating systems, the emergence of home media servers as a new consumer electronics category, and new appliances that replace today's TVs and radios with digital technology. At the same time, service providers and independent companies are starting to create new services to install and support home networks.

The conference will include 15 industry perspective speakers and twenty-six panel sessions, many about these new applications and technologies:

Industry Perspectives

  • William Glasgow, President and CEO, @Security Broadband Corporation (home security services)

  • Deepak Srinivasan, CEO, enScaler (streaming media)

  • Steve Ste. Marie, Pres. and COO, Intertainer (video on demand services)

  • Mike Toutonghi, Vice President, Microsoft eHome (new Microsoft initiatives)

  • Joe Crupi, Vice President, Broadband Communications Group, Texas Instruments (voice applications) Sessions

  • Voice Over Broadband - Who Will Survive? (different types of industry entrants and their varying approaches)

  • Broadband Voice - New Applications and Devices

  • Whole Home Distribution Solutions (upcoming technologies to network video and audio throughout the home)

  • Sharing Your Audio and Video (supporting user-created pictures and videos over broadband networks)

  • Foundations of the New TV (Interactive TV)

  • Broadband TV - The New Entertainment Platform

  • Interactive Games

  • Home Automation and Control

  • Webpads and Web Tablets (new devices for wireless networks)

There's lots more, so check out the conference schedule, details and participating companies at http://www.thebroadbandhome.com/bbhfall/ . In response to past requests, we've included a detailed description of each session to help you decide which break-outs to attend - see http://www.thebroadbandhome.com/bbhfall/details2.html .

We continue to hear stories from former conference attendees about the business deals they have consummated as a result of people they met at past conferences. As always, we'll have plenty of networking opportunities, including a reception Sunday evening, an all-conference party Tuesday evening and time at breaks and lunches for schmoozing.

The conference is next week, so we suggest that you register now at http://www.thebroadbandhome.com/bbhfall/register.html . If you plan to attend and will require a hotel room, we recommend that you make your hotel reservation at http://www.thebroadbandhome.com/bbhfall/hotel.html .


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, 2001

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



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