Broadband Week Direct

Today's report from Web Editor Susan Rush

• Gemstar takes it on the chin

• Comcast picks three embedded MTAs
for upcoming VoIP deployment

• Sonera puts off 3G network launch

• AT&T Broadband faces suit

• Analyst: Software problems riddled
Cablevision’s Sony roll-out

• BellSouth lowers 2002 forecast again

• Fellows slated for CTO slot at AT&T Comcast

• NCTA: Broadband cable grows in second quarter

• OpenCable adds HD to the mix

• Broadband briefs

Editor's Note: BroadbandWeek Direct will not publish on Monday, Sept. 2, in observance of the Labor Day holiday. Breaking news will return on Tuesday, Sept. 3.

Gemstar takes it on the chin

The U.S. International Trade Commission dealt Gemstar-TV Guide International Inc. another blow yesterday, denying the interactive programming guide developer's request to review an earlier decision.

In June, an ITC judge ruled that Gemstar competitors did not engage in unfair trade practices with regards to Gemstar's patented IPGs. Gemstar had alleged that EchoStar Communications Corp., Pioneer Corp. and Scientific-Atlanta Inc. were illegally importing set-top boxes that infringed on its patents.

In the June ruling, the ITC also said that one of the three patents in question is unenforceable for failure to name a co-inventor. Gemstar immediately sought a review of the decision, but that request was denied yesterday.

EchoStar said it has been "vindicated" by the decision. "Although the ITC found it unnecessary to take a position on the patent misuse issues, we are also pleased they chose not to overturn Judge Luckern's ruling which found Gemstar guilty of patent misuse," said David Moskowitz, senior vice president and general counsel of EchoStar. The satellite provider said plans to continue to defend itself against Gemstar's patent infringement claims.

Gemstar plans to take its appeal of the ITC's decision to the U.S. Court of Appeals for the Federal Circuit. The company has lawsuits pending regarding the three patents in question as well as other patents in an Atlanta court. EchoStar, Pioneer and Scientific-Atlanta are among the parties named in the proceedings.

Earlier this week, the Nasdaq put Gemstar on notice for failing to file its Form 10-Q reflecting its second quarter results in a timely fashion. Gemstar's stock faces a possible delisting from the Nasdaq National Stock Market. The company has said it needs more time to review the impact of recent patent infringement decisions on its Q2 numbers. It also plans to restate its full-year 2001 results to reverse the recognition of roughly $20 million in revenue related to its TV Guide subsidiary.

Gemstar shares were down 11 cents to $4.11 as of 12:15 p.m. EDT.

Comcast picks three embedded MTAs
for upcoming VoIP deployment

Comcast Corp. will spread the wealth among embedded multimedia terminal adapter (eMTA) vendors for its planned primary Voice-over IP deployment n Philadelphia next year, as the company announced supply agreements with Arris, Motorola Broadband and Terayon Communication Systems.

More specifically, Comcast said it will use Arris’ Touchstone Telephony Modem, Motorola Broadband’s new SURFboard SBV4200 model, and Terayon’s TA 102 eMTA.

That equipment will join a host of other components Comcast has already selected for its initial Philadelphia VoIP offering, which is expected to launch in mid-2003. The MSO has already announced it will use Arris’ cable modem termination system, Syndeo’s call management server, IP Unity’s media server, Lucent’s provisioning software, BayPackets’ record keeping server, Convergys’ billing system, Nuera’s media gateway and Sigma Systems’ (soon to be Liberate Technologies’) operational support system.

Comcast is already using Motorola Broadband cable modems for a VoIP trial the MSO is conducting in Detroit, Mich. In that trial, Comcast is not testing an all-IP arrangement, but is leveraging an existing Class 5 switch and using IP in the access network via a GR-303 interface. Comcast is also offering traditional circuit switched telephony service in Detroit, a system the MSO acquired via a swap with AT&T Broadband, and in Alexandria, Va., a former Jones Intercable system.

- Jeff Baumgartner, CED

Related story:
Comcast dials into IP telephony in Philly, 6/27/02

Sonera puts off 3G network launch

3G deployment has hit another bump in the road. The latest: Sonera Corp. is delaying the commercial launch of its third-generation wireless network until next year.

The operator says it still plans to launch 3G services in Finland on Sept. 26, but instead of rolling them out on its new 3G network, the company will use its existing network. Sonera blames delays in UMTS technology developments for the postponement. The company now plans to unveil its 3G network in a "limited commercial pilot" in the first quarter of 2003.

European operators have shelled out billions of dollars to win 3G licenses, but telecom's economic slump is causing reality to set in. Sonera has said it is one of the frontrunners in the 3G race, and yet it has suffered several setbacks. Last month, Sonera and Spain's Telefonica decided to put their 3G network plans in Germany on hold. In August 2001 Group 3G, a start-up operator owned by Telefonica and Sonera, was announced, said it planned to spend $5.4 billion on a 3G network over the next 10 years. Group 3G had signed an interconnection agreement with DT so that its customers can make and receive calls from other fixed and wireless sources. It also had a roaming agreement with Germany's third largest wireless operator, E-Plus, which is owned by Dutch provider KPN and BellSouth Corp. KPN Telecom has said despite Sonera's and Telefonica's pullout, it still expects to launch 3G services next year.

In March, Sonera announced plans to merge with Sweden's Telia. Under the terms of the deal, Telia's shareholders will own roughly 64 percent of the combined company, while Sonera shareholders would get 34 percent.

AT&T Broadband faces suit

AT&T Broadband will be defending itself in a Florida court, where a lawsuit was filed alleging the company limited its high-speed Internet access in minority and poor neighborhoods, a practice known as redlining. AT&T Broadband rejects the charges.

The class-action suit, filed in a U.S. District Court for the Southern District of Florida, claims AT&T Broadband engaged in "electronic redlining" to focus its service rollouts in more affluent areas to give the appearance of inflated profitability -- a move that would make the unit more attractive to Comcast Corp. The suit also contends that the company overcharged for services, charged for services not rendered and failed to meet consumer service requirements of its franchise contracts.

The lead attorney on the case, Christopher Larmoyeux, said the suit seeks to block the pending merger between the defendant and Comcast Corp., by blocking the transfer of AT&T Broadband franchises. The suit also is seeking monetary damages.

AT&T Broadband is examining the lawsuit and will respond in due course, said AT&T Broadband's Senior Vice President and General Counsel Rick Bailey in a prepared statement. "However, AT&T Broadband completely rejects any claim of redlining, and we will vigorously oppose this lawsuit," Bailey said.

Bailey said the lawsuit will have no affect on the close of its merger with Comcast Corp, which is expected to be completed by the end of the year.

A hearing is scheduled for Sept. 5.

Related story:
Shareholders green light AT&T Broadband-Comcast merger, 7/10/02

Analyst: Software problems riddled
Cablevision’s Sony roll-out

Cablevision Systems Corp. inked a deal to deploy Scientific-Atlanta Inc. digital set-tops and headend equipment partly because the existing Sony Corp. platform was plagued with software problems, according to one analysis.

That conclusion came from Anton Wahlman of Needham & Company Inc., who issued a report on the subject just ahead of Thursday’s announcement from Cablevision that it had tapped S-A as a second source for digital gear.

The report also speculated that Cablevision picked S-A over rival vendor Motorola Broadband because S-A represents “a low-risk solution from a software integration standpoint.”

Cablevision’s Sony rollout is believed to be riddled with software problems. S-A, not coincidentally, happens to operate PowerTV Inc., an in-house developer of set-top operating systems, middleware and applications.

Motorola, meanwhile, has had to integrate its hardware with third-party software vendors such as Microsoft Corp. Software integration problems severely hindered the development and eventual deployment of Motorola’s original DCT-5000 set-top box. AT&T Broadband, as the prime example, purchased about 250,000 units, but has yet to do much of anything with them. Charter Communications Inc. has also tested the DCT-5000 in the field, but has since plotted plans to deploy a more advanced media center hardware/software combo with Motorola and Charter corporate cousin, Digeo Inc.

It’s still unknown whether Cablevision plans to run parallel Sony and S-A digital networks in some areas. A source familiar with the Sony system said it’s most likely that Cablevision will run parallel networks for a time, and then migrate everything to the much more stable S-A platform.

Although the Explorer 4200 won’t be ready to go until later this year, Wahlman indicated that he believes Cablevision is starting to install S-A digital gear in areas such as The Bronx and Brooklyn.

- Jeff Baumgartner, CED

Related story:
Cablevision taps S-A for digital boxes and headends, 8/29/02

BellSouth lowers 2002 forecast again

Citing an overall weakness in the wireless sector, BellSouth Corp. has cut its full-year 2002 forecast for the second time.

The Baby Bell is expecting earnings per share of between $2.06 and $2.13, a 7-cent reduction in an already lowered forecast. In July, the company said it was expecting to earn between $2.13 and $2.20 a share in 2002, down from an earlier forecast of $2.43 a share.

"Continued softness in wireless revenues, a recently announced restructuring charge for Cingular Wireless, and continued weakening of economic indicators in BellSouth's domestic business caused the change in outlook," the company said in a statement. Cingular, which is a joint venture between BellSouth and SBC Communications Inc., announced plans to cut roughly 7 percent of its work force earlier this month.

The slashed forecast sent BellSouth shares down. As of 12:14 p.m. EDT, the company's shares were shedding $1.44, trading at $22.81. During the same time period, SBC's shares were down 94 cents to $24.86.

Related stories:
BellSouth targets small business sector, 6/27/02
BellSouth goes GigE in North Carolina, Florida, 4/24/02

Fellows slated for CTO slot at AT&T Comcast

Ending weeks of speculation, Comcast Corp. said Thursday that David Fellows will become the CTO of AT&T Comcast, effective upon the completion of the pending merger of Comcast and AT&T Broadband. The merger is expected to close in the fourth quarter of this year.

Fellows, the current CTO of AT&T Broadband, will succeed Brad Dusto, who will become president of the merged company’s Mountain Division, which will serve 3.3 million subs in Dallas, Denver, Portland, Salt Lake City, Seattle, Arizona and New Mexico. Dusto, who will move to the Denver area, will assume that position after Comcast initially announced in July that AT&T Broadband exec Trey Smith would head up the combined company’s Mountain Division.

Once the merger is complete, the following executives will report to Dusto:

- Charlotte Field, currently AT&T Broadband’s current senior vice president of technical and network operations, will become senior vice president, network and technology.

- Cathy Kilstrom, presently AT&T Broadband’s senior vice president of customer care, will become the Mountain Division’s senior vice president of customer service.

- Rick Germano, Comcast’s Eastern Division regional vice president, will become the division’s vice president of operations.

- Fred Graffam, vice president and general manager of Comcast’s Prince George’s County property, will become vice president of finance.

Comcast said it will announce more appointments for AT&T Comcast as the closing approaches. Current AT&T Broadband President and CEO Bill Schleyer and Chief Operating Officer Ron Cooper are not expected to join the combined company.

- Jeff Baumgartner, CED

Related stories:
AOL, AT&T unwind TWE venture, 8/21/02
AT&T, Comcast propose potential debt swap, 8/13/02
Burke tapped to lead combined AT&T Comcast, 7/25/02

NCTA: Broadband cable grows in second quarter

Cable-based broadband services marched on in the second quarter, with advanced voice, data and video services leading the way, the National Cable & Telecommunications Association (NCTA) said Friday.

More specifically, NCTA said the cable industry ended the second quarter with 16.8 million digital cable subs, 9.2 million high-speed data customers and 2.1 million residential cable telephony customers.

Versus the previous quarter, cable added more than 912,000 new cable modem subs, and grew its total base by roughly 67 percent versus the same year period. On the digital cable front, operators added about 890,000 new customers during the quarter, a 37 percent jump versus the second quarter of 2001. Nearly 25 percent of U.S. cable customer now subscribe to digital cable services, NCTA said. Meanwhile, cable added 190,000 residential telephony customers in the quarter, giving it an aggregate 53 percent increase since the second quarter of 2001.

The numbers were extrapolated via an NCTA survey conducted by the association’s research staff and data compiled from other publicly-traded broadband service providers.

NCTA added that cable operators have invested more than $65 billion since 1996 to upgrade their networks for new broadband services.

- Jeff Baumgartner, CED

OpenCable adds HD to the mix

CableLabs said it has issued a new OpenCable specification designed to channel high-definition television programming through advanced digital set-tops and other OpenCable-based devices or “hosts.”

OpenCable is a CableLabs initiative that aims to create the technical pieces necessary to lend “portability” to digital cable set-tops and, consequently, to foster a retail market for the equipment.

The advanced host specification describes requirements for retail products that are compatible with OCAP (OpenCable Application Platform) 2.0, a middleware specification, and with DOCSIS set-top Gateway specifications, which CableLabs issues earlier this year.

CableLabs said the new High Definition STB Host specification “describes requirements for retail set-top boxes that decode all formats of high definition signals used on digital cable plants.”

CableLabs said it has incorporated DVI (Digital Video Interface) and HDCP (High Bandwidth Digital Content Protection) in the new specification, marking “a major step in fulfilling the cable industry’s support for this digital connector,” said CableLabs Vice President of Advanced Platforms and Services Don Dulchinos, in a press release.

Support for DVI was reached in July 2001 between U.S. cable and DBS operators and a number of movie studios, CableLabs noted.

The new spec also defines a number of alternative interfaces, including IEEE-1394 with Digital Transmission Content Protection, and the high definition analog component interface (EIA/CEA-770.3-C), CableLabs said.

CableLabs has posted the new host specifications at www.opencable.com.

- Jeff Baumgartner, CED

Broadband briefs:

• Telecast makes appointments

Telecast Fiber Systems has named Joseph Commarce as its vice president of operations and Gideon Uys as its vice president of sales and marketing.

Commarce will oversee product development and the company's manufacturing operations.

Uys will be responsible for heading up all sales and marketing activities at the company.

• SONICblue offers monthly service package

SONICblue Inc. has introduced a monthly service option for all new ReplayTV digital video recorder purchases. The $9.95 per month service fee may be chosen in lieu of the existing one-time $250 service fee when activating a new ReplayTV unit.