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Cable modems set to speed Internet access in 1998
Reuters Story - December 07, 1997 19:29
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By Samuel Perry
PALO ALTO, Calif., Dec 7 (Reuters) - A private startup will
this week introduce computer chips based on a new industry
standard expected to dramatically boost the number of
high-speed Internet connections in 1998.
Broadcom Corp, a six-year old privately held company which
began in a living room near its current headquarters in Irvine,
Calif., said the new cable modem chips will be widely available
in the first quarter of 1998.
The company's products are based on a new North American
cable modem standard and include both the integrated circuits
used in modems used by individuals, and the "head end"
technology used by Internet carriers.
Gerry Kaufhold, an analyst at market research firm In-
Stat, estimates the availability of modems based on the new
standard, dubbed MCNS-DCOSIS, will in itself help spark rapid
deployment of high-speed Web cable access.
Cable modems can be made to be up to 1,000 times faster
than existing standard phone modems, according to Broadcom
executives, but should begin hitting the streets in the same
$120 to $200 range that existing modems cost.
Broadcom claims an initial lead on the market, and has
lined up major equipment makers as customers including 3Com
Corp. , Bay Networks, Inc., , Cisco Systems
, , Motorola , NextLevel Systems and
Scientific-Atlanta .
Cable modems deployed this year have been based on
proprietary standards, but Kaufhold projects the advent of a
standard will help the market take off, with the number of
shipments growing from 133,000 in 1997 to well more than a
million next year and over 3 million in 1999.
Kaufhold wrote in an analysis note Broadcom's role in
defining the industry standard with Cable Labs, a cable
industry laboratory, meant that "Broadcom is in the driver seat
to ride this explosive wave of growth as the Internet finally
becomes accessible at high speed."
To date, only about 110,000 cable modems have been deployed
in North America, many related to ambitious pilot service
offerings by AtHome Corp. and its cable industry
partners around the United States and Canada.
Kinetic Strategies, projects the number of two-way cable
modem subscribers in North America to hit 200,000 in the second
quarter of 1998 and surpass 1 million subscribers by mid-1999,
18 months from now.
"It looks like the time has come to standardize in cable
modems," said Josh Bernhoff, an analyst at Forrester Research
in Cambridge, Mass., who said the advent of standards has
overcome a roadblock to cable access.
Henry Nicholas, co-founder and chief executive officer of
Broadcom, said ahead of the cable industry's trade show in
Anneheim, Calif., the company has provided reference designs
and software in addition to the chips themselves.
The three cable modem chips, will be priced at $20 to $30
each in lots of 10,000 or more, and the terminal chips will
cost $90 to $175 each in lots of 1,000 or more, according to a
price list released by the company.
"We price these so people are compelled (to buy from
Broadcom)," he said of the chip products. The company plans to
integrate all three modem chips onto a signle chip to sell at
one third of the three-chip price by mid-1998.
Forrester projects the number of U.S. households accessing
the Internet using cable modems in th year 2001 will shoot up
to 7 million, more than double the number of Integrated Service
Digital Network users by then, but this will still capture
fewer than one in five Web U.S. users.
Nearly three quarters of users will still be dial-up
accounts in four years, according to the research group.
Broadcom, which employs around 200 people, has been funded
largely internally and by individuals and venture investors.
Intel Corp. and Scientific Atlanta have made
minority investments.
The company will not disclose results, but industry sources
estimate it will post revenues of $35 million to $45 million
for 1997 and investment sources have said they expect it to
issue shares on the public market soon.
"We've been profitable. From a cash flow perspective, we
don't need to go public to maintain ourselves," said Nicholas.
"The reason for going public (would be) it is a logical step in
the growth of the company."
Competitors include Stanford Telecommunications ,
Rockwell International's Rockwell Semiconductor Systems
Inc. and Libit Signal Processing.
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