Terayon Communications Systems Inc. announced today it will stop investing in its struggling DOCSIS 2.0 cable modem termination system (CMTS) product line. It is a tough and smart decision by new Terayon CEO Jerry Chase within his first 60 days on the job. While Terayon was the first vendor to earn DOCSIS 2.0 qualification for a CMTS back in December 2002, the company was unable to turn its early victory into meaningful sales against entrenched competitors. Wisely, Chase is refocusing Terayon's resources on its successful digital video and subscriber products businesses. Following Terayon's CMTS decision, only Arris, BigBand, Cisco and Motorola remain as major DOCSIS 2.0 CMTS suppliers. 'We have continued to see erosion in our CMTS business. During the third quarter we experienced declining sales in all geographies and our forward looking sales forecasts show continued declines,' Chase said during Terayon's third-quarter earnings call. 'After considering many scenarios and talking to many of our customers, we have decided that the responsible decision is to cease investment in the CMTS product line and halt development on hardware upgrades.' Four years ago Terayon's co-founders Zaki and Shlomo Rakib, formerly CEO and CTO, bet the company's future on the proprietary S-CDMA cable modem technology they developed. After some legendary maneuvering, they succeeded in having S-CDMA included in the DOCSIS 2.0 specification in 2001 along with A-TDMA. However, to seal the deal, they were forced to agree to make S-CDMA technology available on a royalty-free basis to other vendors.The Rakibs were convinced that through the great S-CDMA giveaway, they would gain an early market advantage in DOCSIS 2.0 that could be parlayed into not only lucrative cable modem and CMTS businesses, but also a silicon venture that would sell DOCSIS 2.0 chips to other vendors. That chip business, called Imedia Semiconductor, crashed and burned, as has Terayon's CMTS product line. 'While we thought being first to market with an end-to-end DOCSIS 2.0 solution would give us an advantageÉ this has not been the case,' Chase acknowledged. With Terayon's exit, one has to wonder if S-CDMA support will truly remain a meaningful requirement for DOCSIS 2.0 CMTS vendors going forward. Despite Terayon's advocacy of S-CDMA's technical benefits, MSOs primarily opted to include the technology in DOCSIS 2.0 for another reason: to enable Terayon as a silicon competitor to Broadcom, putting pricing and development pressure on the market-leader for DOCSIS CMTS and cable modem chips. Now, with Terayon gone, the only way to avoid a Broadcom CMTS silicon monopoly may be to drop S-CDMA as a firm CMTS requirement. Texas Instruments currently supplies 2.0-based CMTS silicon to Cisco Systems, but that chip only supports A-TDMA, and TI has firmly stated it will not incur the cost of spinning a new chip to support S-CDMA. And why bother? Essentially all of the advanced physical layer functionality specified in DOCSIS 2.0 can be delivered with A-TDMA alone. In practice, few MSOs are meaningfully deploying S-CDMA on their networks today, nor have plans to do so. Why not put S-CDMA out to pasture?While Terayon is mothballing its current BW3000 and 3500 CMTS products, it is likely the company will reallocate its development efforts on a new integrated video and data edge platform that more closely aligns with the vision coalescing in DOCSIS 3.0 and the industry's Next-Generation Network Architecture (NGNA) project. Terayon may simply be opting to hit 'cntrl-alt-delete' and reboot its program.Chase hinted at this saying: 'We are leveraging the intellectual property created during the development of our CMTS product line as a foundation for an integrated solution for the delivery of video, voice and data.''We believe integrated services through an integrated network is the future of the technology and the market,' Chase added. Not coincidentally, this is precisely what will be defined by DOCSIS 3.0 and NGNA.