Broadband Week Direct

Today's report from Web Editor Susan Rush

• Nasdaq puts Gemstar on notice

• IP to upstage ISDN

• Component testing reaching 40 Gbps speeds

• Concurrent hits VOD milestone

• Acrowave taps Conexant

• BWA forms new working committees

• XO can close on Forstmann

• Broadband briefs

Nasdaq puts Gemstar on notice

Gemstar-TV Guide International Inc.'s failure to file its second quarter results on time may lead to a Nasdaq delisting.

The TV programming guide provider has received a Nasdaq Staff Determination that since it has not filed its Form 10-Q reflecting its second quarter results, its shares are subject to removal from the Nasdaq National Stock Market.

Gemstar has requested a hearing to review the determination. The company has been assured that no action will be taken prior to the hearing, which will be scheduled anytime during the 30 days following the hearing request. There can be no assurance that the hearing will result in a favorable outcome and its shares will continue to be listed, Gemstar said in a statement.

Gemstar recently has been on the losing end of a few patent lawsuit decisions. Earlier this month, Gemstar said it needed to evaluate the impact of these decisions and would delay filing its second quarter results. The company also said it will restate its results for 2001, to reverse the recognition of roughly $20 million in revenue related to its TV Guide subsidiary.

Its board of directors also is evaluating a management reorganization at Gemstar.

News of the notice sent Gemstar's stock into a tail spin. Yesterday, the shares shed more than 18 percent of their value, down to $3.66 a share from a close of $4.48. As of 11:24 a.m. EDT, Gemstar shares were trading at $4.11.

In May, when Diva Systems Corp. filed for Chapter 11 bankruptcy protection from its creditors, Gemstar snatched up the company's software and technology assets for an undisclosed amount. "We believe the addition of Diva's server-based technology to our IPGs, for example, will accelerate our ability to deliver full-motion advertising, movie trailers and other promotional content to viewers through the IPG," said Gemstar-TV Guide Chairman and CEO Henry Yuen, in a press release at the time of the Diva announcement.

Study: IP to upstage ISDN

Move over ISDN, Ethernet will enable video services to move into the mainstream of business communications, one analysis says.

The move by many users of videoconferencing equipment to convert their existing ISDN infrastructure to an IP-based infrastructure will spark revenue for IP based services in 2006, according to a new report from InStat/MDR, InStat/MDR and CED Broadband Direct are both subsidiaries of Reed Business Information. Revenue is expected to grow at a compounded annual growth rate of 43.5 percent from video conferencing services provided by IP infrastructure. Revenue generated in the ISDN camp is only expected to grow at 6 percent CAGR.

The Ethernet Ready to Upset Professional Video-Over-IP Vertical Markets report found that the migration to IP services will make video conferencing calls more affordable, and in turn more accessible to the mass market. Last year, the hourly rate for a typical video conferencing call was $45, but by 2006, that rate will drop to roughly $35, according to InStat/MDR.

"Low entry-level cost points for Ethernet solutions for distributing video will impact the existing manufacturers, who currently provide 'big ticket' video equipment," said Gerry Kaufhold, a principal analyst at InStat/MDR. "Large local and long-distance telephone players will need to be on their toes to move with these changes, or face further erosion in the total available market for voice and video services," he said.

The report provides a five-year forecast, by region, of video-over-IP conferencing services.

Component testing reaching 40 Gbps speeds

At one point in the evolution of fiber optic transport networks, the race seemingly was on to reach the 40 Gbps speed threshold. However today, operators have slowed that evolutionary pace, opting to build up 10G transport technologies and integrating DWDM gear to further optimize systems technologies already in place.

But while the race to 40G has been slowed to a crawl, components and testing technologies in the 40G realm are continuing on their evolutionary path. Tektronix, for one, has introduced a new line of sampling modules for its second generation Communications Signal Analyzer (CSA8000B) aimed at the emerging market for 40 Gbps components and network elements. If transport networks are to ever get to the promised land of OC-768 and STM-256 network development, integrated optical reference receivers that push both optical and electrical bandwidth higher will be critical to that development.

But before we get to that 40G threshold point, many of the transport issues outside the long haul portion of the network must be resolved, according to PJ Kleffner, a regional marketing manager for Tektronix's optical product line.. "We are getting more and more high speed connections in our homes, and all of that is hitting a bottleneck in the metro area networks and in the edge networks," Kleffner says. "Looking ahead, we need the 10 Gigabit capacity there before we can multiplex all of that together and really put more of a demand on the long haul, where the 40G will go."

The first new 40G module from Tektronix, the 80C10 Optical Sampling Module, offers 65 GHz optical bandwidth capability, which adds needed measurement headroom when working with 40 Gbps data streams. Because it has the capabilities of a 40 Gbps optical reference receiver, it can support the ITU forward error correction standard (which pushes 43 Gbps) and the standard for OC-768 and STM-256.

The second new Tektronix module, the 80E06 Electrical Sampling Module claims 70+ GHz electrical bandwidth, allowing for better characterization of high-speed 40Gbps components, as well as unmatched signal fidelity in a high-bandwidth module.

These latest modules for Tektronix's CSA8000B platform follow on the January release of the 80C08 module, for support of 10G Ethernet. Now, Tektronix is also releasing a newer version of that module as well, the 80C08B, which adds support for 10G Fibre Channel, a data transport format predominantly found in new storage area networks today.

- Duffy Hayes

Concurrent hits VOD milestone

Concurrent Computer Corp. generated more than $17 million in revenue from video-on-demand deployments in the fourth quarter, tipping its VOD-enabled digital subscriber base to more than 3 million.

The company's MediaHawk Broadband VOD system has been deployed in 39 North American markets by Time Warner Cable, Cox Communications Inc., Comcast Corp., Charter Communications Inc., Mediacom Communications Corp., Blue Ridge and Cogeco.

Last week, Concurrent's fourth quarter results beat analysts' consensus estimates by four cents a share. The company earned $5 million, or 8 cents a share, during the fourth quarter, up from a year-ago loss of $800,000, or a penny per share. Analysts' on average were expecting earnings of 4 cents a share, according to Thomson Financial/First Call.

Related stories:
Charter, Harmonic team on GigE-based VOD, 8/26/02
Financials: TiVo up, Concurrent down, 8/23/02

Acrowave taps Conexant

Acrowave Systems Co. has integrated Conexant Systems Inc.'s AccessRunner ADSL system with its ADSL-wireless access points/routers.

The integrated AAP-3100AR router will be used as wireless access points as part of Korea Telecom's broadband wireless ADSL-802.11b service. To date, Korea leads the world in ADSL installations, according to industry research.

The router, which includes built-in plug-in-play USB functionality, enables the sharing of ADSL service among LAN clients on a connected Ethernet network and 802.11b wireless LANs.

The AAP-31000AR routers began shipping to Korea Telecom this month. Financial terms were not disclosed.

Acrowave is a provider of wireless LAN equipment in Korea.

Earlier this year, Conexant's AccessRunner ADSL system was used to power Grupo Vitelcom's Epsilon USB ADSL modem. The modem will enable Telefonica to gear up for mass deployment of ADSL services in Spain.

Related stories:
Conexant buys MPEG biz, 6/25/02
Conexant technology hits Spain, 5/13/02

BWA forms new working committees

The broadband wireless industry is still in its infancy, and the sector needs a bigger presence on Capitol Hill, says the Broadband Wireless Alliance. The association has established 17 new broadband wireless working committees in large part to accomplish this goal.

Among the new committees created, the WISP Frequency Coordination Committee will be tasked with working with wireless ISPs to establish a set of guidelines that would enable multiple operators to operate in the same metroplex without interference.

The FCC and Regulatory Committee will attempt to set a formal mode of communication between the wireless ISPs and the FCC.

The BWA was founded last year as a resource for engineering expertise, business planning services and financial funding for existing and start-up wireless operators looking to operate broadband wireless networks.

A full list of the BWA's committees can be access via the association's Web site at www.bbwexchange.com/bwa.asp.

XO can close on Forstmann

Johnathan Berke

Bankrupt XO Communications Inc. will have three weeks to close the $ 800 million buyout offer made by a reluctant Forstmann Little & Co.-led investment group or else face the possibility of Carl Icahn controlling the broadband company.

Judge Arthur Gonzalez of the U.S. Bankruptcy Court for the Southern District of New York in Manhattan confirmed XO's plan Monday, Aug. 26, after a two-hour hearing. Reston, Va.-based XO has until Sept. 15 to complete all the conditions in the Forstmann deal, though the deadline could be extended under certain circumstances.

If the deal doesn't close, XO would then pursue a plan in which its bank group would gain a majority stake in the company.

If that happens, Icahn would be XO's controlling shareholder, since he has purchased a majority of the company's bank debt.

Is such a scenario possible?

Considering that the Forstmann group has wanted out of its offer for the past three months, it wouldn't be a surprise if the $800 million deal fell through.

Still, XO and its advisers have said repeatedly that they can close the offer by the deadline. Also, the Forstmann group had a material adverse conditions clause in the January deal it cut with XO before the company went bankrupt, yet it hasn't invoked it or taken the matter to court.

A Forstmann spokesman had no comment, while XO could not be reached for comment.

In that January agreement, Forstmann and Telefonos de Mexico SA de CV committed $ 400 million each toward buying a majority stake in XO.

Just before XO's filing for bankruptcy, however, Forstmann's legal counsel sent XO a letter June 6 stating that it didn't think the company could satisfy all the conditions of the deal.

Among Forstmann's concerns was the decline in the broadband sector, which has led to scores of bankruptcies besides XO's. In fact, bankruptcy auctions for broadband assets have deteriorated into fire sales. The most noteworthy include e.spire Communications Inc. being sold to private equity-backed Xspedius Management Corp. for $ 68 million in June and Winstar Communications Corp., which was sold to the Newark, N.J.-based IDT Corp. for $ 42.5 million in December 2001.

XO believes it can avoid such a fate since its fiber networks are concentrated in major urban markets.

"We have local fiber networks that compete with the Baby Bells," an XO press official said.

"There are not a lot of people in the sector who have that."

XO's unsecured creditors also believe the company can close the deal.

"The unsecured creditors fully support XO's efforts to close the Forstmann deal," said one of the unsecured's lawyers, David Botter of Akin Gump Strauss Hauer & Feld LLP.

Icahn could not be reached for comment. But if the Forstmann plan is completed, XO's bank debt will be rolled over to the post-bankruptcy entity. He will share in the $ 200 million cash and 20 percent equity stake that unsecureds would get in XO, since he also holds unsecured debt.

Related stories:
Bankruptcy descends on XO, 6/17/02
Fortsmann looks to back out of XO, 6/10/02

Broadband briefs:

• Speakeasy launches DSL promotion in Boston

Broadband service provider Speakeasy is rolling out its "Best Service-Best Price" promotion in Boston.

Speakeasy is offering two plans to entice new subscribers to sign up. For $19.95 a month customers receive one IP address and one Speakeasy e-mail address. If customers are looking for a little more, for $29.95 a month, customers receive two e-mail addresses, 10 MB of Web space and unlimited 56K dial-up. Both packages offer connection speeds of 1.5/128 ADSL. After the first three months, subscribers will pay $59.95 a month and $69.95 a month respectively.

The company has already launched the promotion, which ends Sept. 30, in Philadelphia and Chicago.

• Eagle Broadband opens online store

Eagle Broadband Inc. is trying to spread a little broadband magic by bringing its line of advanced set-tops to the retail sector via an online retail store.

The company has launched broadbandmagic.com to offer its complete line of set-tops, web cameras, digital monitors and video conferencing and video e-mail software to its retail customers.

Eagle Broadband's products are typically designed and sold for commercial deployment, but the online store will expand its marketing scope to its retail customers, the company said.

• C-COM joins HNS alliance

C-COM Satellite Systems Inc. has joined Hughes Network Systems Inc.'s Hughes Broadband Alliance. The program is designed to enable participating companies to develop new two-way, high-speed Internet applications using SPACEWAY, the next-generation satellite network for DIRECWAY.

SPACEWAY is slated to launch next year.