Bruce Cullen posted this on another thread and I thought it might interest you all...(thanks Bruce!)
Good luck,
Eric
Scientific-Atlanta's Cable Internet
Link:http://www.fool.com/dripport/2000/dripport001207.htm?ref=yhoolnk
George Runkle visited Scientific-Atlanta's headquarters in Lawrenceville, Georgia, and
spoke with its CEO, Mr. James F. McDonald, about the company's market, technology,
and business. The future for cable lies in the interactivity of the medium, and the amount
of bandwidth that digital cable provides. Cable Internet is poised to change your home
entertainment experience.
By George Runkle (TMF Runkle)
December 7, 2000
I recently visited the headquarters of Scientific-Atlanta (NYSE: SFA) in Lawrenceville,
Georgia. The company is a leading communications equipment provider and it has a free
Drip program. I first visited Scientific-Atlanta last year, so the goal this year was to see
where things are going. I met with James F. McDonald, President and CEO; Thomas
Robey, Vice President of Investor Relations; Paul Sims, Director of Public Relations; and
Paul Richards, Vice President of Marketing and Business Development. Most of my
discussion was with the CEO, Mr. McDonald.
We first discussed current product demand. Right now, the industry is beginning to
convert from analog cable to digital cable. There are currently about 100 million
households that have television (per Mr. McDonald, and the National Cable Television
Association). Of those, Mr. McDonald told me that about 14 million have
satellite TV, and eight to nine million are already converted to digital. So, about 80 million
homes still need to be converted to digital service.
Right now in the cable business there are two competitors, Scientific-Atlanta and
Motorola (NYSE: MOT). Motorola, which has come into the business by its acquisition
of General Instruments, chose to move into digital cable by competing with satellite using
broadcast technology to increase their bandwidth. Scientific-Atlanta decided to "build
architecture for the future" using a two-way technology that would allow interactive
applications and ongoing expansion.
I brought up the question of wireless replacing cable. According to Mr. McDonald, this
is not really feasible at this time because of the limited bandwidth of wireless, which is not
good for TV or high-speed data (3G wireless will be about 384 Kbps, which is fast, but
won't handle video). Satellites provide ample speed, but since they broadcast one way,
they don't allow interactivity. Satellites alone don't allow movies on demand, for example,
or other interactive activities. So, while wireless certainly has expansion possibilities, it
won't be replacing cable to the home anytime in the foreseeable future.
We also talked about the difficulties telephone companies are having converting over
broadband. Let me give the example that lead into this discussion. I used to have
BellSouth (NYSE: BLS) for phone, cable, and DSL (digital subscriber line). For phone
there was one technology, then there was the cable coming to the house for the TV, and
then there was DSL for my computer. It's a patchwork of technology that has been put
together to upgrade their system. To their benefit, cable companies don't have this
burden of legacy copper wire systems and switches to work over.
With cable, you can have phone, TV, and high-speed Internet all on the same
connection, which is what I have now. The digital cable allows interactivity, cable phone
service is much less expensive and provides more options, and cable modems are
generally faster than DSL. The main limitation to cable is how many homes attach to the
nodes at the end of the fiber. To increase bandwidth, the cable company has to lessen
the number of homes attached to the nodes. I'd like to add that the DSL software I used
to have was quite reliable in making my computer crash, while my cable modem doesn't
require any software installed on my computer and has caused none of the conflicts of
DSL.
To sum up, there are three services that cable providers deliver: Video, data, and voice.
Satellite TV costs about $58 per subscriber on the average for 150 to 160 channels. This
holds digital cable to that price range, too. So, why would a person go to cable for
television? According to Mr. McDonald, it holds the next technology, which is interactive
on demand. This will allow subscribers to get programs off the servers. No longer will
you have to rush home in time to watch your favorite movie, you can just start it
whenever you want. You'll run it like a VCR, pausing it when the phone rings, or
replaying scenes you missed when your mother-in-law interrupted you.
The most interesting vision that came out of our meeting was the use of the set-top box
as an integrated part of a total system in the house (click for a definition of set-top box).
Computers in the house will be wirelessly networked into the box to access the cable
modem. Other TVs in the house, PDAs, and cell phones will be able to interact with the
box to download content or access the Internet. Many of us are finding it more cost
effective to network our computers in our homes. In my house, my sons share the
Internet connection with me, we use one printer, and we share disk drives for back-up.
It's a much more efficient technology that allows higher-cost equipment to be shared. In
the future, according to Mr. McDonald, we'll be using the set-top box as the server.
(For more information on home servers, check out this article on ZDNet -- Home
Servers: The New Data Butlers. The author predicts that the personal computer will be
the server for your extensive home network, however, a leased set-top box would be
cheaper and could be more easily replaced as the technology advances.)
Our company visit wrapped up with a quick demonstration of a mix of Scientific-Atlanta
set-top boxes, Explorer 2000s and 3000s, which come with a keyboard and allow a
wide range of applications. In addition to TV, the Explorer Set-Top Series allows you to
access on-demand movies, email, and the Web right through your set-top box. The
product's ease of use should help open up a more interactive, personalized Internet and
multimedia experience for users. To discuss this article and the company, visit us on the
Drip Companies board. |
