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DOCSIS Modems May Face Delays

Much-touted standards-based cable modems, expected to be in
stores by the holidays, may face delays into the first quarter of next year.

While leading MSOs have long made it clear that they want
the new modems in time to begin rollouts this fall, many have also raised the bar on the
performance levels that they expect from the gear.

Those expectations led to the development of new iterations
of the cable-data standard and to a split in demand between those that want something now
and those that want something better, later.

The upshot: Many vendors don't see the demand that
they were expecting as they get closer to production.

"I can anticipate that Bay [Networks Inc.] will ship
in excess of 200,000 [proprietary] modems in '99," said Karl May, vice president
and general manager of broadband technology at Bay, a leading supplier of cable modems
that is set to be acquired by Nortel.

But while the company is committed to begin shipping
standards-compliant modems by September in the thousands of units, "It's hard to
figure out where" they'll be shipped, May added.

"From the perspective of industry expectations, demand
is shaping up to be weaker than expected at this point in time," agreed Dick Day,
vice president and general manager of the marketing division within Motorola Inc.'s
multimedia group. "At Motorola, our feeling was and remains that the first quarter
[of 1999] will be the time frame when the transition to DOCSIS begins."

DOCSIS -- for Data Over Cable Service/Interoperability
Specification -- is the new name for the cable-modem standard formerly known as MCNS
(Multimedia Cable Network System).

Indeed, despite what sources described as large-volume
orders in the making from Tele-Communications Inc. and Rogers Cablesystems Inc., the
demand side of the picture is hazy.

Much is at stake over the next few months. Competitively,
the telephone industry is rushing to drive its alternative high-speed-data platform,
asymmetrical digital subscriber line, into retail distribution, with support from the same
computer interests that cable claims as partners.

"If we wait too long and telcos start deploying ADSL
everywhere, we'll be hurting," said Jorge Salinger, senior director for
digital-service networks at Adelphia Cable Communications.

At least one analyst noted that the MSOs' publicly
stated intentions are often "spinnable."

TCI has said that it wants to offer data services to 2.5
million customers by year-end; MediaOne, which is now partnered with Time Warner Cable in
the high-speed Road Runner venture, is reviewing responses to a recently issued request
for proposals in hopes of deploying DOCSIS modems.

But a look behind the surface optimism isn't as rosy.
Data strategists at Time Warner, for example, don't plan to make a move toward
ordering DOCSIS modems until the products are better-defined and tested.

Time Warner -- with more systems offering data services
than anyone -- will jump into the DOCSIS stream when the time is right, and it is not
prepared to say when that will be, said Mario Vecchi, chief technical officer of Road
Runner, in comments relayed by spokeswoman Sandy Colony.

"We're just not ready to talk about our plans in
any detail," Colony added.

The other MSO half of Road Runner said much the same thing.

"We'll have to wait and see until we get through
the RFP process to determine what the timing and other details will be," said Tom
Cullen, vice president of Internet services at MediaOne and chairman of the recently
formed Cable Broadband Forum.

Cullen said MediaOne could begin deploying standardized
modems "by the end of this year." He emphasized, "We at MediaOne are
adamant about moving forward."

The companies that are hungriest to get their hands on the
new modems are those with recently upgraded markets where conditions are ripe for
launching high-speed-data services.

Adelphia, for example, would love to move forward with
DOCSIS-headend deployments this fall, but that doesn't seem likely at this point,
Salinger said.

"The analogy that I use is that we're flying this
plane that's getting more and more weight added onto it as we get ever more systems
to the point where they're ready to launch two-way data services," Salinger
said. "We're at the point where we can't wait any longer."

Right now, it looks like the safe bet for Adelphia is the
proprietary system supplied by Com21 Inc., Salinger said.

"We don't think that MCNS modems will be
available in sufficient quantities and sufficiently tested for mass deployment until
sometime in the first quarter," he said.

While it's likely that some vendors will have product
available this fall -- with most of them using chips from Broadcom Corp. that represent an
early implementation of the DOCSIS standard -- the situation is hard to read. Currently,
no vendors have signaled that they're ready to go through the standards-certification
process at Cable Television Laboratories Inc.

Certification is "in the hands of the vendors,"
said Rouzbeh Yassini, executive consultant to the CableLabs DOCSIS project.

Yassini said vendors hoping to gain certification by late
August have until "noon on July 20" to submit their intentions to the
DOCSIS-certification team. Vendors that don't apply by then will have additional
opportunities every month for the rest of the year.

"To be honest, they're working at it, but the
quality has to be there and the stability has to be there," Yassini said. "If I
had to guess, we're within a 60-day window of people coming" to get certified.

While there should be enough DOCSIS 1.0-version chips from
Broadcom to spur a quick ramp-up to modem production, DOCSIS-complaint headend gear is
another matter.

"We're still waiting for [headend] chip
sets," said Andrew Audet, business director for data products at Motorola, adding
that demand for the company's proprietary system "has gone crazy over the last
couple of months."

Adding to the uncertainties has been "feature
creep." Vendors, eager to satisfy MSO desires, are continually adding features to
their proprietary systems that raise the bar on what the market expects from the DOCSIS
modems. That makes it hard for MSOs to know when to take the plunge.

"I've been concerned when I hear rumors that
several of our customers are pushing off the implementation of [DOCSIS] devices until we
achieve third- or fourth-generation maturation of the specifications," May said.

New uncertainty was injected into the extensions picture
over the past two weeks, when Broadcom told its customers that a planned chip -- the
3220B, which includes techniques to let operators differentiate classes of service -- will
not ship.

The reason why, Broadcom officials said, is because
production schedules for an integrated chip -- the 3300, which includes the features of
the 3220B -- had been accelerated to within one month of the planned ship date for the

Cable-modem vendors took the news from Broadcom as an edict
that clouded the timing question.

Broadcom officials insisted last week that the demise of
the 3220B was "just a suggestion," and that they were "trying to gauge
reaction" from the cable-modem-vendor community.

"We think that what's best for the industry is to
bring the next-generation [integrated] chip out as soon as possible, which will take
significant costs out of the subscriber unit" -- on the order of 25 percent to 30
percent, which could drop the price of a $250 modem to $175 -- Broadcom CEO Henry Nicholas

Operators said the timing is a minor issue because no
matter when they deploy DOCSIS modems, there will be strong consumer demand for them.