Broadband Week Direct

Today's report from Web Editor Susan Rush

• The Hits Keep On Coming At Global Crossing

• FCC Begins Comcast Review

• Will You Marry Me?

• SIA: Chip Sales Flat

• Water, Power...And Broadband?

• Telia/Sonera Might Lose Finnish 3G License

• Broadband Briefs

The Hits Keep On Coming At Global Crossing

More shadows of doubt were cast over bankrupt Global Crossing today, following news that the telecom provider was restructuring one of its "exclusive" services contracts.

Global Crossing customer SWIFT, an industry-owned cooperative that supplies fund transfer services to 7,000 financial institutions worldwide, says it will no longer rely on Global Crossing as its "exclusive" service provider.

According to Global Crossing, SWIFT's decision to alter its contract stems from the aftermath of the Sept. 11 terrorist attacks in NYC and Washington, D.C. -- relying on one network provider could leave a company exposed and vulnerable. However, SWIFT reportedly pulled out of its Global Crossing contract due to concerns about the telecom provider's financial and accounting woes, the Wall Street Journal reported, citing officials close to the companies.

Global Crossing joined many of its telecom brothers in Chapter 11 bankruptcy at the end of January. The company also is under investigation by the Securities and Exchange Commission and the Federal Bureau of Investigation.

SWIFT and Global Crossing originally announced a $300 million deal calling for Global Crossing to co-develop and co-manage SWIFT's network operations in Feb. 2001. It remains unclear what role Global Crossing will play, or how much the deal will be worth, once the final details of the new contract have been hammered out. Global Crossing expects the contract will be signed today and plans to release additional details.

In December, Moody's Investors Service lowered all ratings for roughly $10.9 billion of debt and preferred securities of Global Crossing. "The rating reflects our heightened concern that Global Crossing's business plan may be increasingly pressured by protracted softness in global telecom spending and our view that liquidity may be insufficient to sustain a fully funded business model," Moody's said at the time of the announcement. Following news of the bankruptcy filing, trading of Global Crossing's stock was halted on the Nasdaq. The company's stock is now trading on the OTC bulletin board.

FCC Begins Comcast Review

WASHINGTON -- The Federal Communications Commission has started the clock running on its review of Comcast Corp.'s bid to buy up AT&T Broadband, the telco's gargantuan cable unit.

Agency commenced its official 180-day review of the $75 million cable deal late Friday, just in time for the Easter holiday.

Under the schedule set by the FCC, those opposing the merger have until April 29 to file their comments. Proponents then will be given a chance to respond.

Comcast is the country's third largest cable company; AT&T is No. 1. The deal would give the cable combo more than 22 million customers in 40 states.

In addition to the FCC, the merger must receive the blessing of antitrust toppers at the Dept. of Justice.

Comcast's proposal is likely to spark intense debate in Washington, with several Capitol Hill pols promising to hold congressional hearings. No one is predicting the merger will fail, but conditions are expected to be attached.

Will You Marry Me?

In an effort to strengthen their presence in the broadband arena, several companies are proposing unions. The latest: Universal Broadband Communications acquires Monarch Communications and Netopia Inc. buys DoBox Inc.

Telecom provider Universal Broadband Communications (UBC) is snatching up the assets of Monarch Communications, a telecom services reseller, in an effort to boost revenue. Monarch sells services in California, Colorado, Oregon and parts of Mexico, and by acquiring its customers, UBC will "take its next-generation service offerings to a new level," the company said in a statement.

The merger with Monarch is part of a larger plan by UBC to acquire various assets of telecom companies to expedite the deployment of its VoIP network. In October 2001, the company snatched up certain assets of Norstar Communications, a privately held voice and data services provider. The announcement of another deal could come as early as the end of the week, according to a company spokesman.

Broadband gateway developer Netopia eyes its acquisition of DoBox as the quickest way to add parental control, content filtering and family firewall software to its product portfolio. The privately held DoBox designs software tools to enable parents to manage their always-on connections.

"Broadband service providers have identified privacy, protection and parental control as the next generation of 'must-have' features desired by their consumer broadband customers," says Alan Lefkof, Netopia's president and CEO. Addressing consumer needs will be a key element to attracting broadband customers, according to Michael Greeson, senior analyst and director of Broadband Research at Parks Associates. "The next wave of broadband subscribers will demand services that address simple, fundamental consumer needs," he says.

Although financial terms of the deal were not disclosed, DoBox's founders and product development team will join Netopia.

As reported in BroadbandWeek Direct, interactive TV software maker and advanced set-top design firm Digeo announced plans to merger with Moxi last week. The merger is designed to bring development design teams for two advanced set-top box/home networking boxes under one roof.

SIA: Chip Sales Flat

Although the semiconductor industry is expecting growth in the second half of 2002, chips sales remained flat in February, one analysis says.

During the month of February, the chip industry racked in roughly $10 billion in sales, which is virtually unchanged from the numbers posted in a month earlier, according to the Semiconductor Industry Association. On a worldwide basis, sales of semiconductors totaled $10.01 billion in February, which is 35 percent off the $15.5 billion posted in January 2001.

"Flat to slow growth in the first quarter of this year is in line with expectations," says George Scalise, SIA president. "Our forecast calls for the second quarter to be slightly stronger with accelerating growth in the second half of 2002."

On a month-to-month basis, February sales rose two percent to $2.52 billion in the Americas and .3 percent to $3.41 billion in the Asia-Pacific market. The growth posted in these regions compensated for drops elsewhere. Sales dipped slightly more than one percent in both Europe and Japan during the month of February.

"Although business investment has yet to pick up, consumer confidence and inventory replenishing continue to rise, driving the early stages of the overall recovery," says Scalise.

Water, Power...And Broadband?

By Maggie Overfelt

A year ago small businesses even thinking about deploying fast Internet access sat poised waiting for the moment when the broadband revolution would hit them full force and they could finally enact the state-of-the-art speedier services that providers -- DSL carriers, phone companies, satellite operators and cable companies -- had promised.

Revolution? It still hasn't happened for many -- the rate of broadband adoption has been much slower than everyone predicted. Business users represent only 16 percent of the worldwide installed base of DSL customers, reckons Cahners In-Stat, and it's no wonder when you consider the issues small businesses confront in choosing broadband. For one thing, availability is still spotty. Prices have risen. And there's a lack of applications and solutions tailored to fit small businesses' needs. Without such applications, the extra expense of high-speed access--starting at about $160 per month -- may not be worth it.

But that may be just a matter of time. Providers (including the parent of FSB's publisher, AOL Time Warner) are just now promising to focus on the needs of small businesses. And high-tech lobbying groups are asking the Bush Administration to make broadband a national priority, aiming to deploy speedier connections--up to 400 times faster than today's -- to 100 million homes and small businesses by 2010. That goal? Broadband becomes the next utility--like electricity, gas, and telephone service. But before we can say that it's just as important to a business as the phone, we should take a look at why it hasn't taken off, and then see what's in store.

Applications
Blame the stalemate of the Revolution on the fact that the much-promised "killer app" sure to make broadband an absolute necessity has yet to come. And it may not for a while. For example, Microsoft announced in February that it won't be adapting its software to broadband use any time soon. Current software options haven't proven popular either. "Businesses, unlike consumers, aren't looking for multimedia," says John Ellis, director of high-speed strategy for EarthLink. But last year, when providers were talking up the media-rich services that high-speed pipes could be used for--videoconferencing, Web-based accounting packages--they were feeding false hopes. "Everyone's looking for this 'killer app,'" says David Palan, director of small-business marketing at Sprint. "E-mail is the killer app." But is the few minutes saved while waiting for a big download worth the extra money? Not unless your company's productivity relies on fast transport of huge files, experts say. "The next broadband 'killer app' for most firms deals with wireless," says Michael Lauricella, an analyst with the Yankee Group. "But there's a lot of developing that needs to be done."

DSL
Although many major DSL providers have just rolled out packages specifically geared to small business (including networks not shared with consumers and faster download speeds), the service isn't available to enough small firms. You have to be within at least a 15-mile radius of the carrier's central office (located in dense metropolitan areas); otherwise, expansion options are few and pricey. Some providers are looking to integrate DSL with T-1 lines to reach offices outside the radius, but they have yet to find price points that lie below the starting price of T-1 ($ 400 per month).

That's the other problem: DSL prices aren't falling (as predicted last year). Research firm ARS declared in January that overall broadband rates rose throughout 2001--the monthly rate of DSL, for instance, went up 10%. "The DSL challengers were driven out of business by bigger incumbents," says Christine Heckart, president of telecommunications research firm TeleChoice. "And that means prices stay elevated longer."

That's why a group of high-tech executives (including Michael Dell and Intel's Craig Barrett) went to Washington in January, beseeching the Vice President to consider regulation that would open the market for research and development, encouraging the founding of companies that might bring more-competitive pricing.

Cable
Until then, the most obvious alternative seems to be cable. "Sixty to seventy percent of all small businesses in the U.S. are passed by a cable plant," says Ahmet Ozalp of Narad Networks, a Westford, Mass., startup that's attempting to get access to cable pipes so that it can offer extensive bandwidth to small businesses. But so far, cable has penetrated the small-business market by only 5% (ARS). The companies have ignored business customers and instead chased after the consumer market. "It's going to take time for cable providers to implement the technology needed for business-grade service," says the Yankee Group's Lauricella, who notes that the industry's current shared network isn't secure enough for business transactions. "Plus, they have some rough stereotypes to get around--like how cable companies are always late, service is shoddy, etc.," he says.

The Future
The other alternatives, which include satellite and fixed wireless, are still too underdeveloped to be viable. Satellite provider Hughes Network Systems is introducing more media-rich services (like streaming audio) to small businesses, but it still has to figure out a better way to weatherproof its service. All major wireless providers--namely Sprint--have put development on hold until new, next-generation equipment (like reliable antennas) is introduced. "The truth is that no broadband provider is concentrating too hard on small businesses right now," says TeleChoice's Heckart. Broadband a utility? Without that provider focus, faster e-mail and the ability to move swiftly on the Web will just have to do.

Telia/Sonera Might Lose Finnish 3G License

The new company that emerges when Sweden's Telia and Finland's Sonera are combined in the future reportedly risks losing one of the two licenses for third generation (3G) mobile telephony communications it will hold in Finland.

Both Telia and Sonera were awarded a Finnish 3G license in 1999.

But Liisa Ero, a deputy director general at the Finnish ministry of transport and communications, has told the Finnish news agency Startel that one company will probably not be able to hold two licenses even if the law does not explicitly forbid that.

Ero emphasized, however, that it is still too early to talk about what the Finnish ministry will do about the 3G license because it is not even clear yet whether the European Commission will approve the merger. Ero notes that a new application process is a possibility but there could also be other alternatives, reports the Swedish newspaper Dagens Industri.

Broadband Briefs:

• TV Guide Interactive Inc. and WorldGate Communications Inc. join forces to offer an interactive television service without the need for a middleware platform. The ITV package incorporates open platform technology and Concurrent Computer Corp.'s video-on-demand system. The service will be deployed using Motorola's DCT-2000 class set-top boxes.

• Cox Communications Inc. buys roughly 40 Cuda 12000 cable modem termination systems from ADC. the company plans to deploy the systems in Northern Virginia; Santa Barbara, Calif.; Greater Oklahoma; and Greater Kansas. Financial terms were not disclosed.

• ARRIS and Nortel Networks team to provide voice and data solutions to service providers. The partnership calls for the companies to leverage ARRIS' experience of delivering converged services and Nortel's knowledge of carrier-grade packet networks to develop a unified solution for hybrid fiber/coax operators.

• Streaming media services provider ChainCast Networks secures $4 million in financing. The company intends to use the funds to launch new services and software products.

• Monet Mobile Networks launches beta tests of its high-speed, 3G wireless network in Manhattan, Kan. The company plans to deploy its 3G technology in six additional Midwest markets by the end of this year.

• Imedia Semiconductor Corp. launches its second-generation line of fully custom designed cable modem processors based on DOCSIS 2.0.