Today's report from Web Editor Susan Rush

• MidStream tackles legacy VOD networks

• Cabler embraces remote access service

• Subs grow at Cox, EarthLink

• Tut snaps up VideoTele.com

• SeaChange software targets DVD-on-Demand

• AM scores engineering contract

• Fritzley joins Microsoft TV

• Analysts not sure of Cablevision's visions of satellite

• Write-down by Qwest grows to $40.8 billion

• Broadband briefs

Midstream tackles legacy VOD networks

Jeff Baumgartner, CED

In what could be considered a shot across the bow at incumbent video server vendors, video-on-demand start-up Midstream Technologies said it has successfully integrated its IP2160 server into a functioning legacy VOD network.

Midstream didn’t disclose the location of that network or the incumbent video server provider, but the company did note that it used Time Warner Cable’s Interactive Services Architecture (ISA) to achieve a multiple-vendor VOD environment.

ISA, which allows for the integration of multiple streaming server providers in the same network, is the MSO’s back office specification designed for VOD and other new interactive applications and services.

“Now that we’ve achieved ISA compliance, the market is wide open for Midstream to help cable systems expand and deploy reliable and economical VOD solutions,” Midstream President and CEO Ed Huguez said, in a press release.

Midstream’s two RU-high server features native dual Gigabit Ethernet ports and enough capacity to support roughly 425 to 480 simultaneous, unique streams of content at 3.75 megabits per second. The Bellevue, Wash.-based startup does have trial commitments in place with cable operators, but has yet to disclose specifics.

Midstream is among a new breed of video server vendors that hopes to win business in greenfield VOD markets and areas served by incumbent providers such as Concurrent Computer Corp, nCUBE Corp and SeaChange International. Others companies that have shown similar aspirations include Broadbus, Silicon Graphics Inc. and Sun Microsystems.

Related stories:
VOD startup Midstream raises $26M, 8/19/02
Midstream, Harmonic blend technologies, 5/8/02

Cabler embraces remote access service

Following in the footsteps of its competitors, Cablevision Systems Corp. is unleashing a remote access service that will enable its cable modem customers to stay connected via dial-up anywhere in the United States.

Cablevision has introduced Optimum Traveler to enable its Optimum Online high-speed Internet subscribers to have access to the Internet and e-mail via a dial-up connection when they are on the road.

For $9.95, subscribers will receive 600 minutes of local dial-up access -- if local access in unavailable, 100 minutes of toll free access will be substituted. Minutes are good for six months within the year purchased, according to Cablevision.

Remote access is become somewhat of a trend in the broadband sector. AT&T Broadband, RCN Corp. and Earthlink, for example, have rolled out a dial-up remote access service as a companion to their high-speed Internet access services.

AT&T Broadband cable modem subscribers pay a one-time registration fee of $10 for two hours of dial-up access each month. Additional time is available for a fee. RCN subscribers, on the other hand, pay an additional $9.95 a month for a remote access service.

Related stories:
AT&T Broadband throws dial-up into the mix, 9/27/02
RCN gives cable modem subs a dial-up option, 9/25/02

Subs up at Cox, EarthLink

Quarterly sales at both Cox Communications Inc. and EarthLink Inc. got a boost by a gain in high-speed subscribers.

Cox posted third-quarter revenue of $1.28 billion, an 18 percent increase over the $1.08 billion posted a year ago. During the quarter, the company added 157,300 high-speed Internet customers, 71,900 digital cable  subscribers and 73,000 cable telephony users.

"We added more than 12,000 new Internet subscribers per week during the third quarter of 2002 and now have nearly 1.3 million high-speed Internet customers," said Cox's Chief Executive and President Jim Robbins in a prepared statement.

Despite the bump in revenue and subscribers, Cox recorded a net loss of $73.1 million, or 12 cents a share, compared to net income of $143 million, or 23 cents a share in the comparable quarter a year earlier.

As of 11:58 a.m. EST, Cox shares were losing 6 percent of their value, trading at $28.25.

Separately, EarthLink narrowed its third-quarter loss and increased its revenue. The ISP recorded revenue of $340.7 million, up 6.8 percent from a year ago. Revenue from the ISP's broadband sector increased 47.5 percent compared with the prior quarter. The sector posted revenue of $66.6 million, which represents 19.5 percent of EarthLink's total revenue.

Its net loss narrowed from $84.4 million, or 62 cents a share in Q3 2001 to $30.1 million, or 20 cents a share.

An increase in broadband subscribers offset a decline in dial-up customers. During the quarter, EarthLink added 77,000 broadband customers. Its narrowband subscriber base decreased by 5.2 percent to roughly 4 million.

Looking ahead, EarthLink expects to meet Wall Street's full-year expectations. The company is forecasting revenue in the range of $1.35 billion to $1.37 billion. Analysts on average are calling for 2002 revenue of $1.36 billion, according to Thomson First Call.

Related stories:
Cox sees brighter days in 2003, 9/11/02
EarthLink tops broadband add estimates, 7/30/02

Tut snaps up VideoTele.com

Looking to strengthen its presence in the digital video market, Tut Systems Inc. has made a play for Tektronix subsidiary VideoTele.com.

The combined company will offer telecom service providers digital headend and high-capacity digital video switching products. "By partnering together, Tut and VideoTele.com have recognized that our products and technology remove key barriers to the rapid deployment of video services by public carriers," said Tut President and CEO Sal D'Auria. "This acquisition positions us well to focus efforts on the delivery of video from the headend to the access network," he said. D'Auria will retain his position as president and CEO after the merger is complete.

Tut has agreed to fork over 19.9 percent of its common stock and a five-year note to acquire VideoTele.com. The deal is valued at $7 million.

The combined company will focus on delivery products for the government, education and private campus markets. The Tut and Tektronix boards have already approved the merger, which is slated to close next month.

Separately, Tut posted a $2 million year-over-year drop in revenue. Revenue dipped from $4 million in the third quarter 2001 to $2 million for the just-ended third quarter.

The company's net loss narrowed from $49.8 million, or $3.05 a share, to $5.9 million, or 36 cents a share. In August Tut announced plans to cut 39 percent of its workforce and shut its Bridgewater, N.J. design center.

Related stories:
Nokia, Digex, Tut downsize, 8/7/02
Tut Systems announces VDSL rebranding deals, 4/25/02

SeaChange software targets DVD-on-Demand

Jeff Baumgartner, CED

SeaChange International has introduced a new software application that aims to add DVD functionality to everyday digital cable set-tops.

The patent-pending application, part of SeaChange's VODlink software suite, was developed and built by Digital Video Arts, a SeaChange software developer division that provides client integration and integration with other applications such as interactive program guides. SeaChange acquired DVA in Jan. 2000.

In addition to DVD-on-Demand, other VODlink applications include channel overlays that allow programmers to provide their own look and feel to on-screen VOD interfaces, and a “portal” capability that allows cable operators to organize VOD content into specific categories and create special promotions tied to on-demand titles.

The DVD-on-Demand application, designed to work with legacy digital boxes such as the widely deployed Motorola DCT-2000, delivers DVDs in exactly their original formats, including the streams, extra content and the other audio and graphics generally found on original DVDs.

“This is not a re-creation of a DVD with the ability to do chapter selection, but the actual authored DVD as done by the content provider running in this environment,” said DVA President George Breen. “There is no re-authoring involved.”

In addition to first-run movies, the concept could also be applied to local events programming, archived television shows and long-form commercials.

Breen added that the application has been integrated with a spate of interactive program guides such as TV Guide Interactive, Scientific-Atlanta’s SARA, Pioneer’s Passport and TVGateway.

Breen said the application can also work, with minimal changes, with VOD platforms other than SeaChange’s. Presently, SeaChange is in VODlink discussions with Concurrent Computer Corp., he said.

The application “will come out of SeaChange first, but our vision is that it will run with other VOD vendors,” Breen said.

James Kelso, general manager and vice president of marketing of SeaChange’s broadband systems group, stressed that the DVD-on-Demand application will likely apply to content from cable networks and cable advertisers before involving the big Hollywood studios.

Although SeaChange will provide the tools necessary for a DVD-on-Demand service, Kelso added, the company will leave content negotiations to cable operators and traditional on-demand content aggregators such as TVN Entertainment and In Demand.

SeaChange hopes to provide a VODlink toolkit for third parties eventually, but the early plans are to work with directly with content providers and give deployment support to cable operators.

Breen said SeaChange plans to assemble a VODlink programmers association, but noted that Starz Encore Group, Scripps Networks and Discovery Networks are among the early supporters of the platform.

SeaChange said it will make VODlink available to cable operators in January 2003.

AM scores engineering contract

AM Broadband Services Inc. has landed a national engineering contract that will bring in more than $12 million in revenue over the next 2 years, according to the company.

A leading cable operator has tapped AM for nationwide design map digitization and conversion services. Although AM did not reveal the name of its customer, it categorizes the company as "one of the leading" MSOs.

The company attributes the contract win to its experience in electronic mapping and network design. "We believe this latest contract award is a clear indication that we are on track to become the industry's leading provider in this services segment," AM Broadband Services Senior Vice President of Operations and Engineering Scott Lochhead said in a prepared statement.

AM Broadband Services is a wholly owned subsidiary of AM Communications Inc.
 

Fritzley joins Microsoft TV

Tim Fritzley, most recently the president and CEO of CEON Corp., has joined Microsoft TV as the company’s vice president and services.

In his new role, Fritzley will oversee all sales, business development and customer support activities for the Microsoft TV division, and will be a point of contact with network operators. To that end, he will head up sales of several interactive television products such as Microsoft TV’s interactive program guide for “thin-client” digital boxes, which could serve as an entrée for the company’s more advanced set-top software. Microsoft TV unveiled the IPG earlier this year, but has yet to announce any deployments or trials with cable operators.

Fritzley will report to Alan Yates, Microsoft TV’s general manager of marketing.

During his career, Fritzley also has held executive positions at Tellabs Inc. and GTE Corp. (now part of Verizon).
 

Poor reception to new plan;
Analysts not sure of Cablevision's visions of satellite

Copyright 2002 Newsday, Inc.
Newsday (New York, NY)...10/29/2002
From LexisNexis

Harry Berkowitz

A plan for EchoStar Communications Corp. to help Cablevision Systems become a satellite TV provider is unlikely to win over government regulators, according to antitrust lawyers and Wall Street analysts.

In what top executives of EchoStar and DirecTV parent Hughes Electronics see as a last effort to salvage their merger, officials discussed that plan yesterday with the Justice Department.

The executives hope the plan to give satellite TV capacity, cooperation and facilities to help Cablevision will overcome the antitrust concerns of the Justice Department and the Federal Communications Commission.

"Cablevision is the only shot that the merger deal has, but it's not a very good shot because there are so many different economic, business and technology pieces of the puzzle that have to come together very quickly for the antitrust guys to say yes," said Blair Levin, a media analyst at Legg Mason in Washington, D.C., and former FCC chief of staff.

The FCC blocked the merger Oct. 10, saying the plan would replace two existing satellite competitors with one combined satellite monopoly. The commission also said that Cablevision could not become a strong competitor quickly enough to change that assessment.

Under the latest proposal, Cablevision would gain control over 62 satellite TV frequencies, covering all of the United States, instead of just 11 frequencies it already has, which would have trouble reaching the West Coast, a source familiar with the details said.

Even without such a boost from an EchoStar-DirecTV merger, Cablevision plans to launch a satellite service next year.

In FCC filings, Cablevision has said that with expanded capacity, it could reach all 210 major TV markets across the country, rather than just 143. It would include 40 high-definition channels nationwide as well as 320 standard-definition channels, plus local channels in all 210 markets.

Cablevision is spending $300 million on the venture this year and says it could cost up to $2 billion. At the same time, Cablevision is trying to close a financing gap of up to $1 billion in its operating budget, including the possible sale of various assets.

Some critics said the EchoStar-Cablevision plan would especially pose a problem in the parts of the New York City metropolitan area where Cablevision provides cable TV service to 3 million homes. The only rivals providing cable or satellite TV service in those areas would be Cablevision and the new EchoStar-DirecTV, which has more than 18 million customers nationwide.

"This is probably a lost cause," said Stephen Axinn, an attorney in Washington, DC, and former Justice Department antitrust lawyer. "I'm very skeptical that within two or even three years Cablevision would mount a serious competitive threat."

EchoStar, which has until Nov. 22 to present revisions of its merger plan to the FCC and appeal the ruling, is trying to convince legislators that the revised plan at least deserves a chance to be reviewed.

"Clearly this is a different deal than the one considered by the FCC," said Ken Johnson, a spokesman for Rep. W.J. "Billy" Tauzin, the Louisiana Republican who chairs the House Energy and Commerce Committee. "If the proposed new deal results in local channels being offered in every market in America, clearly it changes the equation for regulators."

Marc Lumpkin, an EchoStar spokesman, said, "We have been working very hard with regulatory officials and continue to work with them to propose structural remedies."

Meanwhile, Cablevision said a group that according to published reports is seeking investors for the company's satellite venture has nothing to do with Cablevision.

"We find it very curious that an investment solicitation document we have never seen nor been party to, circulated by an alleged investment group we have never heard of, found its way into media reports regarding the EchoStar-DirecTV merger," said Cablevision spokesman Charles Schueler. "We are moving swiftly to ensure that Skyway Capital Partners, or whoever else may be behind this unauthorized activity, cease and desist immediately."

Related stories:
FCC blocks EchoStar-DirecTV merger, 10/10/02
EchoStar, DirecTV look to save deal, 10/8/02

Write-down by Qwest grows to $40.8 billion

Copyright 2002 Gannett Company, Inc.
USA TODAY...10/29/2002
From LexisNexis

Andrew Backover

Local phone company Qwest Communications International Inc., attempting to cleanse its image and its books, said Monday that it will take a write-down of $40.8 billion and defer $531 million in revenue it booked prematurely in 2000 and 2001.

The charge is much larger than the $20 billion to $30 billion hit that Qwest had forecast. The total has grown in part because the telecom sector has worsened, so Qwest's fiber-optic network and other assets are worth far less. Qwest, which made the announcement after the markets closed, will take the charges in its restated 2002 results.

Qwest has warned investors of pending restatements, but the total keeps growing. It also said it would cut $120 million in wireless services revenue in 2000 and 2001 to recognize the effect of promotional campaigns that gave equipment and minutes to customers.

Qwest shares, which topped $60 a share in 2000, fell nearly 6 percent to $3.26 in after-hours trading on Island ECN. But the company has mostly soothed investor fears of a possible bankruptcy filing under new CEO Dick Notebaert. Qwest has dodged a liquidity crisis by agreeing to sell its directories unit for about $7 billion and renegotiating a line of credit.

Telecom analyst Tom Friedberg at Janco Partners says the restatements don't add any doubt about Qwest's ability to survive. "This is a cleanup of ancient history."

Qwest is one of many telecoms having to re-evaluate the value of their assets -- including networks, customer lists and brand names -- as reduced customer spending and intense competition mean lower profits. WorldCom, which is trying to reorganize under bankruptcy-court protection, expects to take a $50 billion write-down. New accounting rules have prompted a slew of others.

Qwest, the dominant local phone company in 14 Western and Midwestern states, hopes to regain investor confidence. Its accounting practices have spurred ongoing probes by the Securities and Exchange Commission and the Justice Department. Qwest, like WorldCom and Global Crossing, faces congressional probes, too.

Last month, Qwest said it would erase $950 million from improperly booked swaps of network capacity with other carriers.

It also said that $531 million in network sales were questionable because they were booked too soon. Qwest said Monday that the revenue would be deferred.

Related stories:
Qwest ponders asset sale, 9/10/02
Accounting issues pummel Qwest, 7/29/02

Broadband briefs:

• NCTA calls for papers

NCTA has put out a call for technical paper proposals to be presented at the NCTA-The National Show to be held June 8-11, 2003 in Chicago.

Proposals covering any topic that would be of interest to engineering managers in the broadband cable and telecom sectors will be considered.

Previously published text or marketing pieces will receive no consideration, according to NCTA. Proposals, which must be submitted using NCTA's Proposal Submission Form, are due by December 16 and may be sent via e-mail to technicalpapers@ncta.com. More information is available at NCTA.com.

• OmniBus makes appointment, opens office

Omnibus Systems has named Dave Polyard vice president of sales and marketing for its North America operation. Polyard will be responsible for OmniBus's U.S. sales team that works out of the company's newly opened US headquarters in Stamford, Conn.

The Stamford-based US headquarters will provide sales, support and engineering services for Omnibus's customer base in the United States and Canada. The company also has a sales office in Nevada City, Calif.