A New Chapter For Cable
JANUARY 31, 2002
PREVIOUS NEWS ANALYSIS
At the end of February, Excite@Home (Nasdaq: ATHM - message board) will pull the plug on its remaining customers, closing a chapter of Internet history -- and opening another one for the American cable industry.
The new chapter is seeing cable operators rolling out their own state-of-the-art router backbones, rather than relying on Excite@Home to provide Internet connectivity, and that promises to be exciting from three points of view:
First, it's happening as cable operators develop the tools enabling them to start competing much more seriously with telecom operators, by offering services with higher levels of quality and security.
Second, it promises to generate a bonanza of orders for equipment manufacturers, particularly router vendors.
Third, it's triggering a flurry of startup acquisitions, as heavyweight system vendors try to improve their product portfolios targeting the cable industry.
All of these developments were happening anyhow, but the implosion of Excite@Home has accelerated the pace considerably -- much to the delight of equipment manufacturers.
In order to understand what’s going on, a little history is necessary. When operators started rolling out cable modems, they struck deals with Excite@Home to handle their requirements for Internet backbones. To begin with, it made a lot of sense because they were just getting started. But over time, things changed. Traffic volumes soared, and the potential for offering advanced services to a wider range of customers became clearer. Also, operators realized they had developed the expertise to take Excite@Home's job in house -- saving them a lot of money.
To cater to these developments, the cable operators started roping together previously isolated islands of infrastructure to create regional networks. These are based on fiber rings linking a master head-end to subsidiary head-ends, called hubs (see Cable Networks: A Primer).
At the same time, improvements were being made to cable modem technology, enabling operators to offer better quality, more secure telecom services over their existing infrastructures. This is embodied in the Data Over Cable Service Interface Specification (DOCSIS) 1.1, a standard from Cable Television Laboratories (CableLabs).
Equipment implementing the DOCSIS 1.1 standard -- cable modems for customer sites and cable modem termination systems (CMTSs, the cable equivalent of DSL access multiplexers) for operator sites -- has started arriving.
So far, two CMTSs have passed DOCSIS 1.1 compliance tests. The C4 from Cadant, now part of Arris Network Technologies (Nasdaq: ARRS - message board), was first (Pssst! Wanna see the C5?). The elegantly-named uBR7246VXR from Cisco Systems Inc. (Nasdaq: CSCO - message board), the CMTS market leader, was second (see Cisco Claims Cable First ).
The rollout of DOCSIS 1.1 gear means that cable operators need to be able to support equivalent levels of quality-of-service on their Internet backbones. This was another factor weighing in favor of them building their own router networks.
“Before, they didn’t have the level of control, because they outsourced the Internet backbone to Excite@Home,” says Kevin Mitchell, directing analyst of service provider networks for Infonetics Research Inc. “Now they are building those networks and want that control.”
Router vendors are already making hay. Riverstone Networks Inc. (Nasdaq: RSTN - message board), Celox Networks, Avici Systems Inc. (Nasdaq: AVCI - message board; Frankfurt: BVC7), and Cisco are all selling routers that aggregate local CMTS output and/or drive backbones.
However, another bunch of equipment manufacturer are taking things a stage further and developing hub-based combined CMTS/routers.
Cisco has done this under its own steam, but four other vendors have got a leg up by acquiring CMTS startups:
ADC Telecommunications Inc. (Nasdaq: ADCT - message board) bought Broadband Access Systems in October 2000, in a deal worth $2.25 billion (see ADC to Buy Broadband Access Systems ).
Motorola Inc. (NYSE: MOT - message board) bought RiverDelta for $300 million in October 2001 (see Motorola Deals for RiverDelta )
Juniper Networks Inc. (Nasdaq: JNPR - message board) bought Pacific Broadband Networks for $200 million last December (see Juniper Buys Pacific Broadband ).
Arris bought Cadant earlier this month (January 2002).
Table 1: Acquisitions
Vendor Newly Acquired Partner Product Docsis 1.1 Certified?
ADC Broadband Access Systems Cuda 12000 IP Access Switch No
Arris Technologies Cadant C4 CMTS Yes
Juniper Networks Pacific Broadband G10 CMTS No
Motorola RiverDelta Broadband Services Router (BSR) 64000 No
The next few months will be the calm before the storm. Deals are beginning to happen -- Riverstone won a metro ring router contract with Cox Communications Inc. (NYSE: COX - message board) in November (see Riverstone Edges Out Cisco at Cox ), for instance -- and a lot of routing gear is said to be in cable operator labs.
The real action will start when CableLabs begins widespread certification of the Docsis 1.1 CMTSs. One certification wave just ended, and others are planned to start in April, July, and October.
— Carl Weinschenk, special to Light Reading
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