Broadband Week Direct

Today's report from Web Editor Susan Rush

• Companies Align To Advance Broadband Entertainment

• Firms End Fiber-Optic Accords With Metromedia

• OpenTV Wins Patents

• Comcast Gets System Upgrade Underway

• Debtholders Close In On Control Of NTL

• Promise Of Any Movie, Any Time, Is Here

• Broadband Briefs

Companies Align To Advance
Broadband Entertainment

Consumers' appetites have been whet, and the digital set-top box marketplace is poised for growth, one analysis says. Century Embedded Technologies and VT Media Technologies are joining forces to capitalize on this popularity by delivering cost-effective STB systems.

Research from Gartner Dataquest indicates that digital set-top box systems are the fastest-growing consumer video application, projecting 49 million units will be shipped this year. By 2005, that number is expected to grow to 92 million.

To get their slice of the STB pie, Century and VT will focus their efforts on the low-cost broadband/IP STB market. The companies intend to combine their engineering, sales and marketing resources. The goal of the alliance is to bridge the gap between low-cost hardware and the features needed for today's advanced set-top box systems, the companies say.

Software developer Century brings a range of products from server and management applications for the head-end to content encryption and video streaming applications to the alliance. VT Media will supply hardware.

The companies believe the future of broadband entertainment will depend on the availability of low-cost devices that offer consumers video streaming, pay-per-view, video-on-demand and Internet access.

This alliance is not the first time Century and VT Media have worked together. Earlier this year, the duo released the VT100, a broadband set-top box priced below $150, aimed at the residential digital TV market.

Firms End Fiber-Optic Accords With Metromedia

From Times Wire Services

Metromedia Fiber Network Inc. said Sunday that Verizon Global Networks and Genuity Solutions terminated their fiber-optic agreements with the company.

In a news release, Metromedia said Verizon Global has paid $235 million under a $350 million contract to lease fiber-optic capacity.

Genuity Solutions already had paid $140 million of a similar contract worth $ 200 million.

Officials at parent companies Verizon Communications Inc. and Genuity Inc. weren't immediately available to comment on the matter.

Metromedia said Verizon is "continuing to engage in discussions" concerning its relationship with the company.

Metromedia warned in mid-March that it may file for bankruptcy if it cannot restructure its debt. In October, it avoided a bankruptcy filing by securing $ 611 million in lender and vendor financing.

The telecom company said March 18 that it may default on the $975 million of convertible notes it issued to Verizon Communications in March 2000.

Metromedia expects to begin negotiations with debt holders "shortly" regarding a consensual restructuring of its obligations.

The White Plains, N.Y.-based company moved a step closer to an expected bankruptcy filing April 1, when it announced that it defaulted on roughly $675 million in debt. The defaults effectively dismantle the $611 million financing package arranged in October, as a missed payment on one part of the package led to defaults on the rest.

OpenTV Wins Patents

OpenTV is moving full speed ahead in the interactive television marketplace with the addition of four new technology patents.

Since January, the iTV company has landed four new iTV patents in the United States and Europe. The first entails integration of new user input devices, such as graphic tablets into "the realm" of digital set-top boxes. The patent, issued by the United States Patent and Trademark Office, deals with a system designed to enable use of natural writing or voice instruction as alternate forms of input methods for interactive applications, OpenTV says.

The others, issued in Europe, pertain to efficient text and data compression techniques for set-tops, a transaction-based iTV system, and iTV security via transaction time stamping.

"These patents demonstrate OpenTV's...ongoing commitment to developing and expanding our intellectual property portfolio both in the U.S. and in Europe," OpenTV CEO James Ackerman said in a statement.

OpenTV software is used in more than 23.5 million set-tops around the world. The company has 92 issued patents worldwide.

Comcast Gets System Upgrade Underway

Cabler Comcast Corp. is launching an initiative to bring high-speed Internet service to more residents of the Constitution State.

Comcast will upgrade its cable system in Connecticut by investing millions of dollars. The project will enable the delivery of cable modem services to more than 80,000 customers in Middlesex County and southeastern Connecticut. By the end of the summer, the third largest cable company will have upgraded electronics and other equipment for 2,196 miles of fiber-optic cable in the state.

The enhanced system will not only deliver high-speed Internet access, but HDTV and video-on-demand services as well.

Debtholders Close In On Control Of NTL

NTL Inc. bondholders are closer to gaining control of Britain's biggest cable-television company by converting their $11.5-billion of debt into equity, investors say.

Liberty Media Corp., a cable-TV company controlled by John Malone, ended talks over taking a stake in NTL on Friday, leaving bondholders in a stronger negotiating position. "The best solution is for NTL to convert all outstanding bonds to equity, leave the bank debt and have a rights offering," says Fred Woollard, who owns $20 million of NTL bonds at Hunter Hall. The money manager says he would be interested in putting more equity into NTL.

Liberty Media, based in Englewood, Colo., had been in talks with NTL since February. New York-based NTL, which is on the verge of the biggest-ever corporate bond default, is expected to reach an agreement with bondholders and bankers this month and then enter Chapter 11 proceedings, investors say.

NTL has shed 99.6 percent of its market value in the past year after a spending spree by Barclay Knapp, its chief executive, went sour and left the company with $17.5 billion in debt. In January, it appointed Credit Suisse First Boston, J.P. Morgan Chase & Co. and Morgan Stanley Dean Witter & Co. to advise on a restructuring.

Bondholders will probably wind up owning at least 95 percent of the company, analysts and investors have said. They may invest $1.14 million more into the company, the Sunday Times reported yesterday. Bankers are expected to be repaid in full.

NTL spokeswoman Alison Kirkwood declined to comment on negotiations with bondholders or bankers.

Angelo, Gordon & Co., Franklin Resources Inc., Huff & Co. and Appaloosa Investment Ltd. are among members of an unofficial bondholders committee that own 50 percent of NTL's bonds. They proposed swapping debt for ownership of NTL and requested the company miss interest payments due April 1 on $1.3 billion of junk bonds.

NTL has until May 1 to make the $ 74.2-million interest payment or its debt may be called into default. UBS Warburg is advising the bondholder committee, bankers say.

"Liberty coming out of the picture for the time being may bring NTL a step closer to agreeing to terms of the restructuring," says Aizaz Shaikh, a credit analyst at BNP Paribas. "Things are coming to a head."

NTL, which faces bond interest payments of $824.5 million this year, last week raised $300 million from the sale of its Australian broadcast business. It has enough cash to last until September, investors have said.

Promise Of Any Movie, Any Time, Is Here

By Peter J. Howe, Globe Staff

Going back more than a decade, virtually every multibillion-dollar plan announced by telephone and cable television companies to build powerful new networks serving millions of U.S. homes included some version of "video on demand" -- access through your television set to a giant jukebox of movies and shows any time of day or night. Now, after years of hype and false starts, video-on-demand finally is starting to show up in significant numbers.

Time Warner Cable, the second-largest U.S. cable system after AT&T Broadband, has launched services in 13 markets -- including Portland, Maine, this winter -- giving subscribers access to typically 125 to 150 movies and programs. Seventeen more markets will be added later this year.

More than 3 million of Comcast Corp.'s 8.5 million U.S. cable subscribers have access to on-demand programming, with another 3 million slated to get it this year. And about 7 percent of Charter Communications' 7 million customers in 12 markets can get its 300-title offering. The St. Louis company's cluster of 53 city and town cable franchises in Worcester County and Western Massachusetts is one of 17 additional Charter markets slated to get VOD in the next eight months.

Overall, Cambridge-based Forrester Research estimates in a report coming out later this month, 8.7 million U.S. households by the end of the year will be watching what they want when they want it, instead of waiting for a network broadcast or programming a VCR or digital recorder to tape a show.

Over the last year or so, a combination of factors have made video-on-demand more feasible. Cable companies are most of the way through what In-Stat/MDR estimates is a $ 45 billion-plus makeover of their networks. Many have been upgraded from one-way analog television delivery to two-way digital systems.

In the first nine months of last year, top cable TV companies increased the number of subscribers to digital TV -- the crucial first step to on-demand services - from 8.9 million to 13.8 million, according to Kagan World Media.

The same "Moore's law" dynamic that doubles the speed of computer chips every 18 months has proven to apply to video servers, the storage computers housing movies and entertainment stored in digital forms.

Hollywood studios are trying to head off incipient Napster-like systems for swapping pirated video content, and are willing to negotiate new ways of distributing their "content." Those include both on-demand deals with cable systems and nascent Web sites such as Intertainer, movielink.com, and movies.com that stream film to computer screens - and someday to TVs once PC-to-TV links are improved.

The rapid growth in popularity of satellite TV systems offering 500 channels over set-top boxes, now reaching 18 million U.S. homes, also has jolted cable providers into fighting back with digital TV and VOD offerings. DirecTV and Dish Network deals bundling 40-hour digital recorders with abundant programming have proven particularly competitive with cable.

Broadband Briefs:

• EarthLink Inc. and AOL launched their respective high-speed Internet services to about 250,000 homes in Time Warner Cable's San Diego service area. The companies have launched on more than 20 TWC systems nationally.

• Tachyon Inc. introduces Mobile Network Access, a network connectivity service designed for businesses needing transportable broadband network access. Mobile Network Access combines the company's high-speed satellite service with its Quick Deploy CPE, which includes a network router, a ruggedized satellite dish, a radio for transmitting and receiving data, shipping cases, associated cables and accessories. The system is designed to be assembled and begin delivery high-speed access in roughly 30 minutes. Customers will pay from $600 to $2,000 a month for T-1 service.

• Alcatel inks a multi-million-dollar deal to construct new digital data networks for Guangxi Telecom. Alcatel will supply its 7670 Routing Switching Platform, the Alcatel 7270 Multiservice Concentrator and Alcatel 3600 Bandwidth Managers.