Broadband Week Direct

Today's report from Web Editor Susan Rush

• ITC decision delivers blow to Gemstar

• Narad, IBM align to offer complete MSO SMB package

• M&As: Liberty buys Wink;
Legerity acquires an Agere chip biz

• WorldGate, Motorola extend iTV partnership

• The Grim Reaper sweeps through Loudeye

• Adelphia lands coin to ride out Chapter 11

• Study: Broadband use alters lifestyle

• Broadband briefs

ITC decision delivers blow to Gemstar

Gemstar-TV Guide International Inc. has been on the warpath for some time now, claiming that its patent is being infringed on. The interactive programming guide developer suffered a setback late Friday, however, when a judge ruled against it.

An International Trade Commission judge has ruled that Gemstar competitors did not engage in unfair trade practices with regards to Gemstar's patented IPGs.

In February 2001, Gemstar alleged that EchoStar Communications Corp., Pioneer Corp. and Scientific-Atlanta Inc. were illegally importing set-top boxes that infringed on its patents. In his ruling, however, Paul Luckern, the ITC administrative law judge, said that Gemstar failed to establish that any of the respondents has infringed on its patents.

"We feel vindicated by the judge's ruling in our favor," said Paul Dempsey, president of the Business Solutions Division at Pioneer Electronics (USA) Inc. Dempsey did acknowledge that the ruling is probably not the end of its fight with Gemstar. Gemstar plans to appeal the decision.

Gemstar has a similar lawsuit pending in federal court. This is not the end of the road for Gemstar's battle, but the ITC's decision may likely set the stage for the federal suit's outcome.

Gemstar has other cases pending, but if the company fails to win, IPG floodgates are likely to swing wide open.

Related stories:
Thomson-Gemstar align anew, 5/1702

Narad, IBM align to offer complete
MSO SMB package

MSOs are increasingly interested in developing strategies for offering broadband connections to small- and medium-sized businesses that fall into their network footprints. Access technologies are currently being trialed in MSO labs, and a new strategic alliance between platform provider Narad Networks and IBM Corp. aims to round out the package with the addition of advanced business services and applications to the package.

The goal of the partnership is to offer MSOs a turnkey way of enabling their HFC network to provision of a full suite of business services to the thousands of small- and medium-sized businesses that run near operators' HFC networks. Narad Networks offers the enabling technology via the Narad Broadband Access Network, which operates over a cable operator's plant in the unused spectrum above 860 MHz.

IBM will provide much of the business services component-including outsourced IT, managed storage, disaster services, and other premium business services-through its' Global Services Group. In essence, the partnership is an integration effort between Narad's unique enabling platform and IBM's pervasive WebSphere suite of software and services, part of a greater initiative within IBM to reach the small- and medium-sized business market. IBM concurrently announced an initiative called Manage IT for Me, a portfolio of more than 20 IT services packaged specifically for the SMB market.

"IBM's commitment to the SMB market allows for a pretty unique partnership between IBM, the MSOs and Narad to provide these services in a compelling way. You're talking about pretty much the entire portfolio of services that a small business would want," explains Ahmet Ozalp, Narad's vice president of strategic marketing.

To this point, Narad's biggest struggles have been to get operators to sign on to the viability of its enabling access technology; they remain in lab testing with multiple operators in North America and Europe, but have yet to have system-wide rollouts with any major MSO partner. But for IBM, Narad's technology is viable, and it was working on integration issues at the time of the announcement.

"Obviously we wouldn't do this if we didn't have a high degree of confidence in (Narad's) technology," says Peter Gaucher, director of segment strategy of IBM's pervasive computing group. "An in-depth technology evaluation has been an integral part of the process leading up to the signing of this alliance."

The first steps in the alliance have already been taken, namely the integration of technology and services between the two. Next up will be the development of complete sales and marketing package that can be pitched to potential MSO customers. What form that services package will take will be driven by specific desires and requirements from the operator community, both sides said.
-Duffy Hayes

Related story:
Narad to ops: Think small, 2/25/02

M&As: Liberty buys Wink;
Legerity acquires an Agere chip biz

In today's tight economy, many companies are snatching up businesses to build their product portfolio. The latest: Liberty Broadband Interactive Television Inc. is buying Wink Communications Inc. and Legerity Inc. is acquiring Agere Systems Inc.'s analog line card integrated circuit business.

Liberty buys Wink
The Liberty Media interactive TV unit has agreed to acquire all of Wink's outstanding stock in a deal valued at roughly $100 million. Under the terms, Wink shareholders will receive $3 in cash for each share of Wink common stock. At the close of the market on Friday, Wink shares were trading around $1.70 a share.

Liberty was attracted to the Wink deal, in part because Wink serves more than 5 million interactive-enabled homes over its network. The company's interactive deployments are across multiple cable systems and satellite platforms.

Wink will operate as a wholly owned subsidiary of Liberty Broadband Interactive Television. Current Wink Chief Executive Maggie Wilderotter will run the unit.

The deal marks the latest acquisition for Liberty as it builds its interactive TV portfolio. Earlier this year, the company acquired ACTV Inc. and majority stock in OpenTV.

Legerity snatches up Agere unit
Agere Systems Inc. is shedding more of its non-core assets. The company has agreed to sell its chip business for directing voice traffic on networks to Legerity Inc. for $70 million.

The deal, which includes the products, technology and intellectual property related to the business, will enable Legerity to extend its presence in the voice network access market. As part of the deal, Legerity will acquire roughly 50 Agere employees.

The acquisition is subject to customary closing conditions and regulatory approval is expected to close during the third quarter of this year.

Last week, Agere sold its 802.11 wireless local area network equipment business to Proxim Corp. for $65 million in cash. As part of the deal, the companies inked a three-year supply pact calling for Agere to provide chips, modules and cards to Proxim.

Agere has been shedding non-core assets so it can focus its efforts on developing components for next-generation network applications.

WorldGate, Motorola extend iTV partnership

Building on its three-year relationship with Motorola Inc., WorldGate Communications Inc. has signed a multi-year deal with Motorola's Horizon Developer Program.

As part of this latest deal, Motorola and WorldGate will continue to work together to develop WorldGate's interactive television service on Motorola's advanced digital set-top boxes, including the DCT1000, DCT2000, DCT2500 and the DCT5100.

As a member of the Horizon Developer Program, WorldGate has already achieved validation for 22 separate releases of its iTV products and applications. WorldGate has launched its interactive products in more than 65 cable systems in more than 12 countries.

ACADIA validation is designed to act as a benchmark for operators choosing software, content and applications. The Application Integration Center is a Motorola subsidiary and is the facility for the Horizon Developer Program. The center is intended to supply the expertise and resources to take a prototype to deployment.

The Grim Reaper sweeps through Loudeye

Looking to save more than $10.2 million annually, webcasting and digital media service provider Loudeye Corp. is reducing its employee roster by 37 percent.

The company has a goal of reaching operating cash flow breakeven by the end of the year, and said the cuts were necessary to stay on target. Once the restructuring is complete, the company expects to have 130 full-time employees in Seattle, New York and Los Angeles. Loudeye will take a $1.7 million restructuring charge in the second quarter.

Among the employees receiving their walking papers was the company's chief financial officer, whose duties will be assumed on an interim basis by Jerry Goade, Loudeye's vice president, finance and controller. As part of its penny-pinching efforts, Loudeye has instituted a 10 percent salary reduction for the company's executives.

This is the second time in four months that Loudeye has reduced its work force. In March, the company cut 12 percent of its staff, including its president and chief operating officer.

Related story:
Loudeye names Heymann to board, 6/14/02

Adelphia lands coin to ride out Chapter 11

By Jill Goldsmith

NEW YORK --- Adelphia Communications Corp. is said to have lined up $1.5 billion in financing through a consortium of banks, much-needed cash that will keep its businesses operating while it restructures after a Chapter 11 filing expected today .

Salomon Smith Barney and J.P. Morgan Chase will arrange the financing along with a number of other institutions, possibly including General Electric Capital, Bank of America, Bank of Nova Scotia and FleetBoston.

Raising that amount of money can sometimes require the participation of as many as 50-100 banks, Wall Streeters said. Lining up the right partners has delayed a bankruptcy filing as the cable company's stock disintegrated and it defaulted on more than $7 billion in interest payments.

But despite Adelphia's financial woes, its cable systems, with more than 5 million subscribers, continue to generate cash. The near-monopoly enjoyed by most cablers in their markets, including Adelphia, makes the ailing business' situation unique.

"If your local Kmart closes, you can go to Wal-Mart or Costco. With cable, many people have no alternative," said Ivan Kallick, a lawyer and bankruptcy specialist with L.A. firm Manatt, Phelps & Phillips. (Kmart filed for bankruptcy earlier this year.)

A bankruptcy court will also serve as a clearing house for litigation as probes and lawsuits abound. The Securities & Exchange Commission and two grand juries are investigating the company, and numerous shareholder class-action lawsuits are being consolidated.

Adelphia's interim management, made up of a committee of four independent directors, is investigating a host of accounting irregularities involving the Rigas family, which founded Adelphia and ran it until recently. Depending on the committee's findings, a restructured Adelphia could consider legal action against the Rigases, though the suits are likely to take years to settle.

Related stories:
Adelphia Communications shouldn't fade to dark, 6/21/02
Adelphia misses another payment deadline, 6/20/02

Study: Broadband use alters lifestyle

By Megh Duwadi

WASHINGTON --- For high-speed Internet users, a new lifestyle may be just a few clicks away.

A study released today by the Pew Internet and American Life Project found that people changed their activities both on and off the computer when they acquired broadband service.

High-speed users go online more often than users of slower dial-up connections, the study found, and they stay on longer.

They were much more likely to create content for the Web or share files, telecommute, download music or game files, or enjoy streaming audio or video.

"When people get an always-on, high-speed connection, they treat the Internet as a 'go to' tool for a wide range of information and communication needs," said Lee Rainie, the project's director.

For the "broadband elite" -- users who perform at least 10 online tasks a day -- unlimited Internet access encourages feats of multi-tasking.

"A member of the broadband elite might be 'instant messaging' friends or work colleagues, listening to a favorite radio station online, booking an airline ticket or scanning an online news site -- all at the same time," the study said.

Offline, the study found, broadband users spent less time shopping in stores, working at their offices, watching television and reading newspapers, partly because they transferred some of these activities to the Internet.

The finding that there is a "broadband effect" on Internet use comes as the tech industry is pressing the government to encourage a faster rollout of the service, in hopes of providing lucrative new products.

While more than 90 percent of U.S. households have access to high-speed Internet service via telephone lines, cable TV or satellite, only 7 percent subscribed to them as of mid-2001, the Federal Communications Commission reported in February.

One reason often cited for the low penetration of broadband services is their high cost, typically around $ 50 a month.

"We don't have a broadband crisis in America," said Rep. Edward Markey (D-Mass.).

"The crisis is that the prices are so high that (consumers) don't want to subscribe to it," he said.

However, President Bush indicated this month at a White House meeting of tech industry executives that federal officials soon may try to stimulate broadband use by restricting competition.

He hinted that the FCC may issue regulations that would free regional telephone companies from sharing their high-speed Internet lines with competitors on an equal basis.

Broadband briefs:

• FastWeb deploys Minerva technology
FastWeb has deployed Minerva Networks networked personal video recording technology for its broadband fiber-to-the-home IP network in Italy. Minerva claims it is the largest networked PVR deployment to date.

• EarthLink rolls out service in Maine
EarthLink Inc. has rolled out its high-speed Internet access to another Time Warner Cable service area in Maine. The service retails for $41.95 a month for speeds up to 2 Mbps downstream and 384 Kbps upstream.

• California school district tabs Aperto
The Center Unified School District in Sacramento County, Calif. has implemented Aperto Networks' second-generation broadband wireless access product to serve its five-site K-12 educational network. The school district uses 5 GHz frequency spectrum, Aperto's PacketWave base station and subscriber units to self-provision up to 8 Mbps data access per site to more than 3,000 students and 267 classrooms.