Broadcom Bolsters Voice Plans

Broadcom Corp. announced that it is acquiring HotHaus
Technologies Inc., viewing the Canadian company's packet-network software as a key to its
own plans for the voice-over-Internet protocol (VoIP) market.

Broadcom, the leading maker of standards-based chips for
cable modems, said the $280 million stock deal brings a proven software solution that will
enable it to produce VoIP-network gateways for cable-modem and other networks at
significantly lower costs than current equipment by using fixed digital-signal processors,
instead of programmable DSPs.

"Although programmable DSPs are adequate to do the
job, they are not necessarily cost-effective or power-effective for driving consumer
applications," Broadcom vice president of marketing Tim Lindenfelser said. "Our
goal with this acquisition is to find that optimal combination of hardware and software
for delivery of voice over a broadband-packet network."

Five-year-old HotHaus, based in Vancouver, British
Columbia, already works with such Broadcom cable-modem customers as AT&T Broadband
& Internet Services, Nortel Networks and Com21 Inc.

Its "HausWare xChange" software essentially
packetizes circuit-switched data for voice, fax or data calls over IP, frame-relay and
asynchronous-transfer-mode networks.

The solution envisioned by Broadcom would have HotHaus'
software embedded in its own "system-on-a-chip," incorporated into a
customer-premise gateway linked to a broadband network. The gateway might be a cable or
digital-subscriber-line modem, a set-top box, or even a network-interface unit sitting
outside of a house.

Inside the home, the device links personal computers, IP
telephones, digital set-top boxes and other appliances at speeds of up to 10 megabits per
second over existing phone lines using the chip technology developed by Epigram Inc.,
which Broadcom recently bought.

Multipurpose programmable DSPs such as those produced by
Texas Instruments Inc. are integral parts of network or enterprise-oriented VoIP hardware.
But Broadcom believes that as the market focus for the technology increasingly turns to
the consumer side, solutions that require multiple processors will be too expensive to
support mass deployment.

Embedding the HotHaus software on a fixed DSP such as those
made by Broadcom would help to reduce the total bill of materials for a gateway to the
point where it might sell for $300 at retail. A programmable DSP-powered version could be
three times that much, Broadcom claimed.

"Our reference designs have HotHaus running on TI
DSPs," Lindenfelser said, "but longer term, this market is going to be dominated
by embedded DSPs, not programmable DSPs."

He added that cost would increasingly be a crucial element
for operators such as AT&T Broadband that shift the packet-switched component of their
voice networks closer to the end-user. This will require customer-premise gateways that
are cheap enough to support mass deployment.

AT&T Broadband could begin migrating from
circuit-switched to packet-switched networks by late next year, and Broadcom has already
submitted VoIP reference designs using HotHaus' software, Lindenfelser said.

"The idea is for them to have the overall solution,
which is both hardware and software," said Jay Srivasta, a silicon analyst for
Dataquest Inc. "It almost seemed like a natural acquisition by which Broadcom is
making sure their competitors don't have the ability to use HotHaus software on their

HotHaus director of marketing Garry Shearer said his
company spotted the benefits of hardwiring its software onto fixed DSPs during its
cable-modem work with Com21.

"We realized that general-purpose DSPs were not going
to be cost-effective, and they created artificial boundaries between hardware and software
that limited the performance of VoIP," Shearer added.

A shift away from programmable DSPs may represent a
competitive stab at TI, the world's dominant chip maker and recent buyer of Broadcom rival
Libit Signal Processing Ltd.

TI believes programmable DSPs will remain a crucial element
in consumer broadband access, especially in the dynamic environment of IP-data streams.

"I think we can be pretty cost-competitive with a
programmable-DSP solution, where the flexibility far outweighs the cost savings you'd
achieve," TI manager of DSP strategic marketing Leon Adams said. "Our
perspective is that the programmable DSP is an excellent fit for voice processing. That's
why it's been such a popular device in that area."

TI reported last week that its second-quarter DSP revenue
overall jumped 23 percent from a year earlier, powered partly by demand from the digital
wireless-phone industry.

The company has also been moving aggressively to expand its
IP-telephony portfolio, acquiring VoIP software developer Telogy Networks Inc. weeks
before snapping up Libit.

"Our plan is to incorporate programmable DSPs based
over both our current DSL capabilities and the cable capabilities we acquired with
Libit," Adams said.