KYA27 and thread,
A timely report (issued 06/15/99) by Prudential on this topic and its impact on LU, MOT and CSCO:
NATIONAL CABLE SHOW-HIGH SPEED DATA & TELEPHONY ARE JUST AROUND THE CORNER
Analyst: Luke T. Szymczak
* Motorola and Lucent announced yesterday a relationship that results in an end-to-end IP telephony solution. While this announcement is significant, it is not an exclusive relationship for either party.
* Despite the concerns raised by the recent court ruling regarding open cable access in Portland, Oregon, cable operators are continuing with their plans for telephony services. This should keep pressure on RBOCs to deploy DSL services.
The last year has produced dramatic changes in the cable TV industry. This was evident yesterday at the opening of the National Cable Show. Motorola and Lucent announced a relationship that results in an end-to-end IP telephony solution. This solution offers each party near-term opportunity as trial systems are promised for later this year and deployment in the first half of 2000. In the longer term, we predict each company is likely to work with other partners. Given the tightening relationship between Motorola and Cisco in the wireless area, Motorola's announcement with Lucent came as a surprise. We believe the fit between Motorola and Lucent in cable data/telephony is much more complementary in the near term than the fit between Motorola and Cisco.
Motorola needs voice capabilities--switching, call processing, and application expertise--to leverage its growing installed base of cable modems. Lucent brings these capabilities to the relationship, whereas Cisco is still developing these capabilities. Likewise, Lucent lacks a presence in the cable infrastructure market, and Motorola's installed base gives Lucent an opportunity to break into the network.
Motorola and Lucent are focused on providing smooth interoperability between Motorola's cable modems and Lucent's switching and routing products. Specifically, Motorola's CMTS (Cable Modem Terminating System) will feed its traffic into Lucent's PacketStar Access switching platform. Motorola's CMTS is the cable router used in the headend to aggregate traffic from the cable modems and feed it into Lucent's PacketStar Access platform.
The PacketStar Access platform then splits the IP voice traffic from the pure data, and provides the full range of call processing capabilities typically available on today's central office switches. The companies are currently running tests in each others' labs with trials planned for later this year, with the eventual goal of commercial service availability for the first half of next year. Over time, we expect additional steps from either vendor. This is positive for each vendor in the near term. However there is nothing in the Lucent/Motorola relationship that would preclude Motorola from working with Cisco, or any other vendor who can provide the voice and data service in the network.
Likewise, we would not be surprised to see Lucent over the next year or two expand the number of cable modem partners it works with, and it could very likely embed the CMTS (the cable modem aggregation functionality) into its PacketStar platform. Speculation over the last few days that Lucent would make an acquisition in cable infrastructure could still come to pass in the future, although we do not think it is necessary for Lucent to participate in the cable opportunity.
Cisco is showing early versions of cable modems based on its reference design. Cisco is not planning to offer its own cable modems. However, for higher end applications, Cisco offers its own small-office router with integrated cable modem and phone connections. Samsung is among the vendors with a cable modem based on the Cisco reference design. We understand that one of Cisco's lead customers in the cable space, Videotron, is moving along with tests of its network, including a recent demonstration of SS7 capability. This is one of the earliest customers for the Telecordia (Bellcore) call agent software that Cisco is using to provide voice switching capability on data networks.
Other datapoints we gathered at the show suggest cable operators remain committed to data and voice trials. Highlights include:
* AT&T does not plan to suspend its foray into cable or its deployment of telephony services while it challenges the Portland decision. If Portland is upheld, or other municipalities choose to force the open access issue, AT&T will exclude these systems from its upgrade plans.
* AT&T continues to view 1999 as a pilot year for cable telephony. In 2000, the plan is for a gradual scaling of telephony capability (to hundreds of thousands of subscribers) so that by year-end 2000 or early 2001, mass deployments are feasible. These events are independent from the deployment of IP telephony, which AT&T is viewing as a technology decision. IP telephony will be phased in (rather than circuit switching) when the technology (and costs) justify it. Thus, a delay in IP telephony would likely be positive for Nortel, which is one of the vendors supplying the capability to AT&T.
* The Portland decision has put the question of equal access to cable systems on the table. Cable operators appear willing to open their lines to other services at some point in the future, as long as they are able to make a profit and still have control over who is using their networks. For the time being it does not appear likely to slow deployments of telephony.
* Echoing a theme that came out of Supercomm, Time Warner cited rapid and inexpensive service development as being critical. This was the greatest impediment that confronted its Full Service Network trial of the mid-1990s (in Orlando). The focus by Cisco, Lucent, and others on developing services quickly is critical in avoiding this issue in the future.
* Although cable systems today are delivering about 2 Mbps service, operators are focused on moving to higher speeds going forward. Comcast cited the option of using 20 to 30 channels of capacity, which could, in theory, provide 1 terabit per second of throughput. Even if this option proves optimistic, the cable companies believe they can provide higher performance, when economically justified, through allocation of additional channels to data, or decreasing node sizes.
* Powering continues to be an issue. The two solutions under consideration now are: 1) for a backup power supply in the home (a rechargeable battery), or 2) central powering at the node. Although the latter is a more capital intensive option, it is projected to have lower operating costs over time. There is no question that this issue continues to be one of the most challenging operational hurdles for cable telephony.
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Ibexx |
