Cable box deals will come early next year............................
multichannel.com
Cable's $4B Game Plan? (cont.)
Last week, financial analysts and industry observers were also wondering whether TCI's long-rumored deals with AT&T Corp. and Microsoft Corp. might come into focus, given TCI's historical track record of breaking big news at the Western Show. TCI's top two executives -- chairman and CEO John Malone and president and chief operating officer Leo J. Hindery Jr. -- were both scheduled to appear in public forums at the show.
One thing is certain: Dec. 15 -- the Monday after the Western Show -- marks the deadline for vendor responses to a TCI Ventures Inc. digital set-top specification, which was mailed out to about one-dozen manufacturers Dec. 1.
David Beddow, senior vice president of TCI Technology Ventures, described the specification last week as a "boilerplate" document with freshly added language that mirrors the OpenCable mission: open application program interfaces, multiple operating systems and microprocessors.
"It's our specification, but it synchs up with OpenCable," Beddow said, acknowledging that the response deadline is brutally short but adding that "nothing in it should be a surprise to anyone involved in the process so far."
The 140-page specification went to "the usual suspects," including Microsoft, Beddow said. He declined to detail other recipients among the dozen.
Following the vendor responses, TCI Ventures plans to move straight to purchase contracts in early January, Beddow said.
TCI executives, especially Hindery, have indicated recently that they expect the next generation of digital boxes to be ready sooner, rather than later. In mid-November, answering reporters' questions about third-quarter results, Hindery said he expected to be offering next-generation boxes to customers by June -- much sooner than most analysts believe. He said TCI had about 500,000 "traditional" converters left, which would tide the company over until then.
Hindery also famously declared to analysts in October that before the first snowfall, TCI would have put together a corporation-level transaction that would affirm the value of cable's broadband plant. That preceded reports that Microsoft was preparing a big investment in TCI to help bankroll a big set-top order and about possible TCI involvement with AT&T.
Some Wall Street analysts pointed to last week's deal between Microsoft and TCI-controlled @Home as a possible sign of winter. @Home and Microsoft shed two years of tension through an agreement for @Home to use Microsoft's software in its high-speed content mix.
@Home, to date heavily reliant on Netscape Communications Corp. and Sun Microsystems Inc. for the technologies that it uses, said it and Microsoft will develop a customized, @Home-branded version of Microsoft's Internet Explorer 4.0 software.
Also, @Home will include Microsoft's NT servers in its national network, and the @Work division of @Home will work with Microsoft on small-business-support products.
In the latter effort, Microsoft will provide or pay for about 10 software engineers, Jermoluk said. No further equity or funding arrangement between @Home and Microsoft exists beyond that, he said.
"The time had come to do this," Jermoluk said, adding that Microsoft's and @Home's technology and business discussions have long been in the works. "Hopefully, this clears the air of the rumors" that Microsoft and @Home were reluctant to work with each other.
The deal means that @Home's customers now have a choice of browsers. Although Netscape's Navigator browser remains the default in @Home's service, both new and existing customers can change to IE when it becomes available.
Michael Harris, an analyst with Kinetic Strategies, called the move a good one for both companies.
"Beside all of the posturing of Silicon Valley vs. Redmond [Wash., where Microsoft is headquartered], the fact is that @Home needs to support what their customers want to use," Harris said.
Jermoluk said @Home did support Microsoft's IE software previously, but the new, @Home-branded version "is better, because we pick the plug-ins, and the browser points to our proxy [servers]."
Analysts who had not heard of any 25 million-box plans seemed skeptical last week. One noted that orders don't mean much: Telcos have also placed orders for millions of digital set-tops, but not many are in the field. TCI itself spent years waiting for General Instrument Corp. (now NextLevel Systems Inc.) to deliver digital boxes.
Other questions: Where would the money come from to buy the boxes? Analyst James Kedersha, who follows cable-equipment suppliers for Cowen & Co., said box makers have been hurt by a generalized lack of confidence in the cable industry's ability to deliver on digital deployment.
Some stocks have gotten a lift lately from talk of TCI stepping up plant upgrades, he noted, but the suppliers haven't noticed an actual increase in business with TCI yet.
If Microsoft were to play a role in backing up the set-top order, that would be significant, analysts said.
Also next week, TCI.NET will host a "hell week" in Denver for a first tier of cable-modem suppliers. The suppliers will discuss their responses to a request for proposal that TCI.NET issued in August.
Susan Marshall, vice president of engineering for TCI.NET, confirmed the meeting and the selection of two tiers of vendors, saying that the intent is to discern suitable suppliers for a May 1998 round of purchase orders for interoperable cable-modem equipment.
Marshall would not discuss which vendors fall into which tiers, but industry sources familiar with the RFP said 10 suppliers will show up in Denver for the first round of briefings.
The list includes Bay Networks Inc., newcomer Daewoo Electronics, Hayes Microcomputer Products Corp., Harmonic Lightwaves Inc., Motorola Inc., NextLevel, Scientific-Atlanta Inc., Thomson Consumer Electronics Corp., Toshiba America Information Systems Inc. and 3Com Corp.
Notably absent from that list was Cisco Systems Inc., which landed in the second tier of vendors that will meet with TCI.NET and other MCNS (Multimedia Cable Network System) associates in January, sources said.
Cisco's recent moves include interoperability projects with Hayes, Thomson, Sony Electronics Corp., Samsung Electronics America Inc. and Com21. At press time, Cisco executives were unavailable for comment on the development.
Marshall said that once next week's vendor proposals are heard, TCI will "narrow the list further and start business discussions."
"It's way too early to come to a conclusion as to who will have a viable offering right now," she added.
Kent Gibbons contributed to this story.. |
