Broadband Week Direct

Today's report from Web Editor Susan Rush

• Home Media Networks integrates DivX technology

• AT&T, Comcast propose potential debt swap

• Toshiba uses TI's silicon and software

• Microsoft bets on Xbox Live launch

• Comdisco emerges from bankruptcy

• Tiscali and Wanbase team for voice over ADSL

• EchoStar, DirecTV push benefits of combined co.

• Broadband briefs

Home Media Networks integrates DivX technology

DivXNetworks and Home Media Networks believe the PC will become the entertainment hub of the home, and are integrating their products to help make that vision a reality.

Home Media Networks has licensed DivX video compression technology as the default video compression format for all versions of its ShowShifter Home Media Center software, which includes PVR functionality. Financial terms were not disclosed.

The companies are already selling ShowShifter Pro, which integrates the DivX technology, through their web sites. Unlike most desktop viewing software, the ShowShifter software does not require a user to be at a PC terminal to operate it. Its FarView interface is controllable via a remote control.

ShowShifter is designed to let a user playback video files, browse an electronic program guide, watch DVDs, listen to music and watch, time-shift and record television.

DivX recently released DivX5.0. The MPEG-4-based video software is geared to produce DVD-quality video over broadband connections, at file sizes 41 percent smaller than previous DivX versions, according to the company.

Related stories:
DivXNetworks, Wellspring team for VOD, 6/25/02
Online Videophiles Get DivX's Picture, 3/7/02

AT&T, Comcast propose potential debt swap

With approval of the proposed merger of AT&T Broadband and Comcast Corp. possibly only months away, the companies are looking to shore up their balance sheets. AT&T Corp. may exchange as much as $11.8 billion in debt.

In a filing with the Securities and Exchange Commission, the companies said a decision to proceed with the exchange offer will be based on market and business conditions over the next several months, and finalization of the terms of the exchange offer.

The offer consists of two types of transactions. The first involves an exchange of certain series of AT&T notes for new notes that would ultimately become obligations of AT&T Broadband Corp. prior to the merge. AT&T Comcast would guarantee these obligations upon completion of the merger.

The second transaction, which involves the refinancing of existing debt, calls for other series of AT&T notes to be exchanged for new notes that would remain obligations of AT&T.

Neither AT&T, AT&T Broadband, nor any other entity would receive proceeds from the issuance of the new notes in the exchange offer.

AT&T and Comcast's shareholders approved the proposed merger last month. If the deal makes it through regulatory review by the U.S. Department of Justice and the Federal Communications Commission, the deal could close by the end of this year, creating an MSO that will serve more than 22 million subscribers.

Toshiba uses TI's silicon and software

Toshiba Corp. and Texas Instruments Inc. are continuing to work together in the cable modem technology sector. The latest: TI has supplied the silicon and software for Toshiba's PCX2500 cable modem, the companies announced today.

The PCX2500 became the first cable modem to receive Euro-DOCSIS 1.1 certification from the Euro-DOCSIS Certification Board last month.

In the United States, several vendors have received DOCSIS 1.1 certification and are selling DOCSIS 1.1-certified modems or reference designs, including 3Com, Aastra, Accton, Ambit, Arris, Askey, Com21, Conexant, Correlant, Joohong, Motorola Broadband (three models), Quanta Network Systems, Samsung, Scientific-Atlanta, Tellabs, Terayon, Texas Instruments, Thomson, Toshiba, and Xrosstech.

The DOCSIS 2.0 specification was finalized in January and is now in the interoperability phase. DOCSIS 2.0 is an advanced physical layer addition to modem functions. The spec can increase upstream bandwidth for cable modems to 30 megabits per second — three times that of DOCSIS 1.1 units.

Microsoft bets on Xbox Live launch

Look out Sony Corp. and Nintendo, here we come, Microsoft Corp. says. To mark the one-year anniversary of the launch of Xbox, the software giant is aiming to take broadband-enabled gaming console online.

On Nov. 15, Microsoft will begin selling a starter kit for its online gaming service, dubbed Xbox Live, for $49.95. The kit includes a one-year subscription to the broadband-only service, the Xbox Communicator headset and a minigame. Although the online gaming service will only be available to users with a high-speed Internet connection, the kit does not include broadband access.

Microsoft has been trying to make up some lost ground on its closest competitors, Sony Corp. and Nintendo, after entering into the gaming arena late. Microsoft has sold nearly 4 million Xbox gaming consoles, and the company is hoping the online gaming feature will boost sales.

Sony plans to launch an online gaming service later this month for PlayStation 2 owners. Unlike Xbox line, the service will be available to gamers with a dial-up or high-speed Internet connection.

In July, Microsoft named Level 3 Communications Inc. as a major provider of network services for Xbox Live, in North America and Europe. The agreement calls for Level 3 to provide Center Colocation, CrossRoads Internet access and Packet MPLS private network services. Microsoft said it chose Level 3's network infrastructure because of its scalability, performance and flexibility.

Microsoft expects to support seven exclusive games at launch -- Unreal Championship; NFL 2K3; MechAssault; Whacked!, NBA 2K3, Tom Clancy's Ghost Recon and NFL Fever 2003. The company plans to expand its offering to more than a dozen games by the end of the year and at least 50 by the end of 2003.

Related stories:
Level 3 tapped for Xbox Live, 7/22/02
Xbox flies off the shelves in Europe, 5/9/02

Comdisco emerges from bankruptcy

Comdisco has reached its goal, and emerged from Chapter 11 bankruptcy. The reorganized company expects a 90 percent return to its creditors.

The plan for the newly named Comdisco Holding Company is to spend up to three years to wind down the company's remaining assets. The sell-off is expected to bring roughly 90 percent recovery to its creditors. Once creditors realize 85 percent recovery, common stockholders will share in the net proceeds, beginning at 3 percent of the remaining net proceeds, Comdisco said in a statement. The initial distribution to stakeholders will be made prior to Sept. 30, which marks the end of the company's current fiscal year.

A U.S. Bankruptcy Court for the Northern District of Illinois and 98 percent of Comdisco's shareholders and creditors who voted approved the reorganization plan late last month.

Ronald Mishler was named CEO of the reorganized company in July. The company also named several individuals to serve on its reorganized board, including Jeffrey Brodsky, Robert Chefitz, William McIntosh and Randolph Thornton. Mishler also will serve on the board.

Comdisco filed for Chapter 11 bankruptcy protection from its creditors in July 2001. In January, Comdisco sold its electronics and laboratory and scientific leasing units to GE Capital for $665 million.

Related story:
Comdisco will revamp its proposed reorganization plan, 2/20/02

Tiscali and Wanbase team for voice over ADSL

Internet communications company Tiscali Business Services has entered into an agreement with Wanbase, a voice and data network supplier.

Both companies will now jointly offer integrated voice communications across ADSL for home workers and corporate use. This will be achieved by Wanbase receiving ADSL bandwidth, IP VPN and a number of hosting solutions from Tiscali.

The financial terms of the agreement and the cost of the ADSL package were not revealed.

EchoStar, DirecTV push benefits
of combined company

LAS VEGAS -- With the FCC decision on EchoStar's proposed purchase of Hughes Electronics and its DirecTV subsidiary expected by fall, the companies began a two-pronged attack at Satellite Bcstg. & Communications Assn. (SBCA) show in Las Vegas, portraying the combined company as the best means for DBS to reach 27 million to 30 million subscribers by 2005.

EchoStar Executive Vice President James DeFranco and DirecTV Customer Satisfaction Executive Vice President Robert Meyers laid out plans for the companies to fully integrate within three years of completing the sale and to offer bundled packages of video and broadband services to combat a similar strategy currently being used in the cable industry.

Citing the success of Cox Communications in packaging video with cable modem and telephone services, DeFranco conceded broadband was one of the areas that "we need to improve" to remain competitive with MSOs, which also have been rolling out digital programming. With Cox having gained 600,000 subscribers for its voice-over-cable package, DeFranco said the satellite industry needed to be positioned so all services were offered from a single receiver dish. "We need to package a video and a high-speed solution together so that we can offer a one-stop service," he said. DirecTV currently sells its video service separate from its DirecWay satellite-based Internet access service, which thus far has attracted 133,000 subscribers. EchoStar, after investments in WildBlue and StarBand failed to provide it with broadband service, has partnered with DSL providers and is weighing other options. "We have to respond to cable's bundling strategy across the board and the only way we can do that is by combining the companies and leveraging the assets," DeFranco said.

Combining the companies also would be key to expanding the offering of high-definition (HD) programming, the speakers said. EchoStar and DirecTV provide three and four HD channels, respectively, but integration of the companies could boost that to 12, DeFranco said. Noting that EchoStar subscribers who wanted to receive HD currently must deploy a second receiver dish, DeFranco said the combined companies probably could develop a dish that was capable of receiving signals from four different satellites. While HD is a "bandwidth hog" that requires a single transponder to transmit just two channels, the companies eventually will provide a "robust suite" of programming, Meyers said.

While DirecTV and EchoStar presented a case for combining the operations, some companies weren't convinced a deal would be in the best interests of the industry. The combined company would decrease competition, especially in rural markets where there are fewer options other than satellite for getting video and broadband services, said NRTC Senior Vice President Mark Brown, whose group competes with EchoStar in selling DirecTV service. NRTC has long opposed EchoStar's takeover of DirecTV and has said "competition is great for folks in rural areas" because historically it has driven "innovation" in products and services and provided lower prices, he said. "Without that competition there is no driving force for those innovations to happen" in rural regions," Brown said.

Broadband briefs:

• AudioCodes completes interoperability testing

AudioCodes Ltd. and Ericsson have completed testing to determine that AudioCodes' Mediant Cable Access Gateway is interoperable with Ericsson's AXE Switch. Ericsson plans to offer the gateway to its cable telephony systems that connects packet telephony voice networks with public switched telephony networks.

AudioCodes says its relationship with Ericsson will enable it to expand cable telephony trials already underway by initiating large scale deployments.

• HNS installs network for Brazilian Bank

Hughes Network Systems Inc. has completed the installation of a satellite network for Brazilian bank Caixa Economica Federal. The bank will use the DirecWAY satellite system to deliver banking services across Brazil.

• Telco turns to Next Level

Telco Wood County Telephone Company is looking to stay competitive with Charter Communications in Wisconsin, and is turning to Next Level Communications to make it happen.

The company has selected Next Level's Full Service Access Platform to bundle digital television, high-speed Internet access and telephone services to its customers in Wisconsin Rapids. Wood County has more than 4,000 subscribers.