Competition from DBS, AOL TV Helps Ops Bridge Technical Gaps

Cable's need to resolve internal differences over
interactive-TV-platform strategies, especially between the top two MSOs, has taken on new
urgency amid wide recognition that an all-out advanced-services push represents the
industry's best line of defense against a red-hot direct-broadcast satellite offensive.

The urgency and its impact on the OpenCable
standards-setting process was vividly displayed in a discussion between senior engineers
of AT&T Broadband & Internet Services and Time Warner Cable at the recent Society
of Cable Telecommunications Engineers' 2000 Conference on Emerging Technologies in
Anaheim, Calif.

"Every time somebody walks into Best Buy, it seems
like they're being sold a DBS box," said Jim Wood, vice president for advanced
technology at AT&T Broadband. "We've got to do something to stop the

Wood and Time Warner vice president of interactive services
John Callahan stressed their commitments to getting past their divisions on the OpenCable
framework, which helped to push commercial implementation of the vital software
architectural components in retail-distributed set-top terminals into the Christmas 2001
time frame. "We don't want to bifurcate the industry," Callahan said.

Time Warner has been promoting its "Pegasus"
digital set-top architecture as a foundation for OpenCable.

AT&T Broadband, meanwhile, is promoting a set of
application-program interfaces for client (set-top) software and "middleware"
linking clients and server platforms in the headend, which assumes a much higher level of
functionality in the set-top.

But Time Warner recognizes that the operating system
supplied by PowerTV Inc. for Pegasus "is not the right approach" for OpenCable,
and that the OS ultimately chosen "must integrate many of the things Jim has been
talking about," Callahan said.

"We as an industry have been extremely successful in
deploying millions of digital set-top boxes and in promoting standardization through MPEG
[Moving Picture Expert Group] and the DOCSIS [Data Over Cable Service Interface
Specification] process," Wood said.

"However, we don't have a clear view on the
client-side or the service-side architectures that are essential to delivering more
advanced services through those set-tops," he added.

Resolving those differences is crucial, Wood said, adding,
"We absolutely need to take the fight into consumer homes, where we can use our
interactive platform to capture customers with services they can't get from our

Cable's problem with the current generation of thin-client
boxes -- including the Motorola Inc. (formerly General Instrument Corp.)
"DCT-2000" and Pegasus set-tops from various vendors -- is that they are too
thin to accommodate software upgrades for new types of services, Wood said.

"We've been striving to design a platform that you can
deploy once and continue using as the services evolve," he noted.

Praising the Motorola "DCT-5000" set-top as a
"wonderful hardware platform" that meets this requirement, Wood described the
"middleware" architecture AT&T Broadband is promoting for OpenCable as a
means of providing a uniform industry approach to incorporating new servers into the
"client-side" platform.

"I'd appreciate feedback [from engineers] on whether
we've got the right approach," he added.

The broad outlines of the middleware architecture have been
a part of OpenCable almost from the outset of the Cable Television Laboratories Inc.
standards-setting process. But defining the APIs that will link specific service functions
with functions in the headend and in the set-top has proved daunting.

In AT&T Broadband's case, the middleware components

The broadcast-service layer, which supports the
ability of applications to "get hold" of TV channels or other applications in
the box without relying on a click of the remote, whether in the electronic programming
guide, the vertical blanking interval or some "out-of-band" location;

The HTML (HyperText Markup Language) engine, an
"absolutely critical" component that provides for navigation across different
applications or services and, in AT&T Broadband's case, which involves a specialized
version of Microsoft Corp.'s "Internet Explorer" navigator, but which can also
involve implementation of navigators in the "Java Virtual Machine" environment;

The foundation layer, or set of APIs for all
services, which provides access to support capabilities, such as the
graphics/video-composition engine, the service-policy aggregator and provider, the
event/usage logging process and other core functions;

The common-content interface, which allows multiple
Web sites to have access to the different resources in the set-top;

The EPG support module, which allows new EPGs to be
loaded into the set-top; and

The "navshell" application, or master
application, which runs on the set-top to manage such functions as providing user
graphical interfaces for various service categories, controlling the combined graphical
user experience and displaying enhanced-TV content.

Time Warner, which has been debating the question of
"to middleware or not to middleware," is leaning toward a middleware approach
where "some kind of virtual-machine environment is the most likely candidate,"
Callahan said.

Such an environment invites the kind of flexibility and
processing power in the set-top box that AT&T Broadband envisions.

But executives acknowledged that even with closer agreement
between the two companies on OpenCable, a retail presence for the standardized approach to
interactive, Web-capable set-top terminals will come too late to deal with the bleeding
state of affairs occasioned by the surge in DBS sales.

As a result, Callahan said, "There will be bilateral
agreements between individual cable companies and retail outlets in their markets to
support distribution of our set-tops without waiting for OpenCable."

The cable industry is also wrestling with the threat from
America Online Inc.'s "AOL TV," in which cable competitors using digital
subscriber lines and satellite links can deliver a full range of entertainment-oriented
Web content, as well as specialized content, to the TV.

In cable, there are strategic and practical reasons for
limiting Web access, which could dilute the appeal of cable's Web-to-the-TV offerings
against those of AOL and other competitors.

AOL officials have said that the company will stick with
the AOL TV strategy of using noncable facilities even after it completes its merger with
Time Warner Inc.

"We want to do deals that give content providers
special opportunities to control the resources in the box," Wood said. "With
regard to Internet-content providers in general, I don't trust them enough to give them
open access to those resources, so I'll put them off in a sandbox."

Such concerns would be mitigated if MSOs deployed
headend-centric systems that handle Web access for low-power and high-power set-tops. But
the industry has only begun experimenting with such systems.

Callahan said Time Warner is considering a headend-centric
model as a way to provide a low-cost personalized digital recording service that would
compete with the hard-disk-drive systems being marketed by DBS providers, AOL and others
through affiliations with TiVo Inc. and Replay Networks Inc.

"Of course, any of our planning in this area is
subject to the strategies we work out with AOL once the merger is completed,"
Callahan noted.

Wood said AT&T Broadband is exploring set-top-oriented
and headend-centric options to supply personalized recording, and it hopes to begin
offering set-tops with hard-disk drives to support such services as early as this year.

"We've been communicating with the retail
manufacturing sector on this, and we have an RFI [request for information] out on
it," he added.