Always On:
S-A's "Avis" Complex
By Gary Arlen
Contributing Skepthusiast
from the June 4, 2001 issue of Broadband Week
Maybe Scientific-Atlanta should name its bucolic new campus "Avis," in deference to the pervading atmosphere, which exudes the message "We're Number 2." Decades ago, the nation's second largest car rental firm promoted its fundamental appeal with the underdog slogan "We Try Harder."
Today S-A, despite its aggressive digital agenda, lumbers under the self-perception that the world sees it as a chronic runner-up to Motorola (the conglomerate formerly known as General Instruments, Jerrold Electronics, etc. that now has its own set of problems).
S-A certainly is trying harder, building on its vision that cable operators in the digital era eventually will lean towards fully integrated "end-to-end" suppliers rather than the multi-vendor approach that is popular today. CEO James McDonald believes S-A can capture a 50 percent share of the cable hardware business by 2004, up from its barely 40 percent share today. His greatest concern is the impact of satellite television on the cable industry.
"We can't let satellites get to 30 million (U.S. homes) or you'll have negative cable growth," he exclaims--a reminder not only of the escalating DBS threat to the cable industry, but also of S-A's dedication to the cable market.
The schizophrenic attitude--enormous belief in its technical capacity tempered by concerns about its marketplace status--permeates S-A as the company heads into the broadband realm. Even its current loyal focus on the cable TV market seems questionable during this competitive phase in which technology-based operators are plundering each other's turf.
Simply put, S-A is haunted by the ghost of past cable marketing. Although there's plenty of good buzz about its new products and aggressive positioning, that Number 2 haze lingers. Not to mention a corporate name that sounds like a 1950's hobby catalog. Even the highlight of its 50th anniversary celebration was a gimmick event in which the Georgia governor ordered a pizza via an interactive TV hookup. That's a stunt that has been trite in every incarnation during the past 15 years (not to mention that there's a magnet with a pizza joint's phone number on every refrigerator, providing as much interactivity as most customers need in pizza purchasing).
S-A officials fret that the company is overwhelmingly known as a set-top box manufacturer, although its headend and outside plant equipment are the heart of its digital package. During a recent visit to S-A's facilities, a featured segment was a peek into the lab rooms where the company and its customers replicate field conditions, such as temperature extremes, to test outside hardware and wiring. Yet the opening segment of the day's guided tour focused on the range of set-top boxes and the flexibility of next-generation STBs aimed at cable operators. It was an important part of the story, but its centerpiece placement put the spotlight on the very products that S-A wants to integrate into its bigger picture.
Ultimately that is what is so frustrating about S-A's situation. Here is a company perfectly suited for its market. Its digital technology is undeniably first-rate. McDonald proudly touts that 15 percent of his payroll consists of engineers--a solid ratio working on the next wave of digital technology. The company's "Creative Edge" program, like those of its competitors, is supporting applications and services for the digital/broadband platforms, which will give operators innovative content as they roll out those technologies.
S-A even has made the most of experiences that outsiders have written off as failures. Its long alliance with Time Warner Cable put S-A in the center of the Full Service Network interactive project in Orlando in the mid-1990s. Although cynics dismiss that venture as a failure, in truth the field experiences and technology lessons were manifold. The legacy of FSN works its way into the design, scaling and processing aspects of S-A's next generation products.
Moreover, Motorola, the major competitor, is stumbling on several fronts, most of them related to its other businesses (especially mobile wireless) that are distracting from its cable focus. The problems are encouraging traditional Motorola cable customers to look toward S-A (as well as to other vendors and system integrators) for alternatives in the broadband realm.
In other words, there's a moment of opportunity here.
S-A is gearing up for this assault on numerous fronts. Its SciCare initiative, a customer-support operation that also is a revenue center, is prepared to handle the inevitable problems of maintaining the new digital technology. Its system architecture engineers are looking at larger issues involving multiple services in the crowded digital environment. Right now S-A is developing fiber-to-the-home in terms of a mini-Local Area Network, optimized for video. It is starting to focus on optical transport systems, leveraging its recent investments and partnerships with ventures such as Luminous Networks. On the point-to-point wireless front, it is drawing on the resources of BridgeWave.
These alliances--comparable to ones that its competitors are lining up--will help S-A face the next level (pun intended) of competition. But they do not guarantee that S-A will emerge from its second-rung status. The company appreciates that change is permeating the digital rollout, and it is geared up to handle all segments of the business ... from silicon to storage to software. CEO McDonald waxes eloquently about "velocity" of change, noting that, "The rate of change is proportional to the absolute change."
It's another reminder that S-A is hostage to the shrinking cabal of customers. S-A's fate, more than ever, depends on its ability to convince core prospects that its approach in one that works. Which means the ideal name for that new campus may be Spanish: "Aviso" -- putting the cable industry on "Notice" that S-A is trying harder to evolve beyond its long-running Number 2 position.
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