A New Chapter For Cable

At the end of February, [email protected] (Nasdaq: ATHM) will pull the plug on its remaining customers, closing a chapter of Internet history -- and opening another one for the American cable industry.

The new chapter is seeing cable operators rolling out their own state-of-the-art router backbones, rather than relying on [email protected] to provide Internet connectivity, and that promises to be exciting from three points of view:

  • First, it's happening as cable operators develop the tools enabling them to start competing much more seriously with telecom operators, by offering services with higher levels of quality and security.

  • Second, it promises to generate a bonanza of orders for equipment manufacturers, particularly router vendors.

  • Third, it's triggering a flurry of startup acquisitions, as heavyweight system vendors try to improve their product portfolios targeting the cable industry.

    All of these developments were happening anyhow, but the implosion of [email protected] has accelerated the pace considerably -- much to the delight of equipment manufacturers.

    In order to understand what’s going on, a little history is necessary. When operators started rolling out cable modems, they struck deals with [email protected] to handle their requirements for Internet backbones. To begin with, it made a lot of sense because they were just getting started. But over time, things changed. Traffic volumes soared, and the potential for offering advanced services to a wider range of customers became clearer. Also, operators realized they had developed the expertise to take [email protected]'s job in house -- saving them a lot of money.

    To cater to these developments, the cable operators started roping together previously isolated islands of infrastructure to create regional networks. These are based on fiber rings linking a master head-end to subsidiary head-ends, called hubs (see Cable Networks: A Primer).

    At the same time, improvements were being made to cable modem technology, enabling operators to offer better quality, more secure telecom services over their existing infrastructures. This is embodied in the Data Over Cable Service Interface Specification (DOCSIS) 1.1, a standard from Cable Television Laboratories (CableLabs).

    Equipment implementing the DOCSIS 1.1 standard -- cable modems for customer sites and cable modem termination systems (CMTSs, the cable equivalent of DSL access multiplexers) for operator sites -- has started arriving.

    So far, two CMTSs have passed DOCSIS 1.1 compliance tests. The C4 from Cadant, now part of Arris Network Technologies (Nasdaq: ARRS), was first (Pssst! Wanna see the C5?). The elegantly-named uBR7246VXR from Cisco Systems Inc. (Nasdaq: CSCO), the CMTS market leader, was second (see Cisco Claims Cable First).

    The rollout of DOCSIS 1.1 gear means that cable operators need to be able to support equivalent levels of quality-of-service on their Internet backbones. This was another factor weighing in favor of them building their own router networks.

    “Before, they didn’t have the level of control, because they outsourced the Internet backbone to [email protected],” says Kevin Mitchell, directing analyst of service provider networks for Infonetics Research Inc. “Now they are building those networks and want that control.”

    Router vendors are already making hay. Riverstone Networks Inc. (Nasdaq: RSTN), Celox Networks, Avici Systems Inc. (Nasdaq: AVCI; Frankfurt: BVC7), and Cisco are all selling routers that aggregate local CMTS output and/or drive backbones.

    However, another bunch of equipment manufacturer are taking things a stage further and developing hub-based combined CMTS/routers.

    Cisco has done this under its own steam, but four other vendors have got a leg up by acquiring CMTS startups:

  • ADC Telecommunications Inc. (Nasdaq: ADCT) bought Broadband Access Systems in October 2000, in a deal worth $2.25 billion (see ADC to Buy Broadband Access Systems).
  • Motorola Inc. (NYSE: MOT) bought RiverDelta for $300 million in October 2001 (see Motorola Deals for RiverDelta )
  • Juniper Networks Inc. (Nasdaq: JNPR) bought Pacific Broadband Networks for $200 million last December (see Juniper Buys Pacific Broadband ).
  • Arris bought Cadant earlier this month (January 2002).

    Table 1: Acquisitions
    Vendor Newly Acquired Partner Product Docsis 1.1 Certified?
    ADC Broadband Access Systems Cuda 12000 IP Access Switch No
    Arris Technologies Cadant C4 CMTS Yes
    Juniper Networks Pacific Broadband G10 CMTS No
    Motorola RiverDelta Broadband Services Router (BSR) 64000 No

    The next few months will be the calm before the storm. Deals are beginning to happen -- Riverstone won a metro ring router contract with Cox Communications Inc. (NYSE: COX) in November (see Riverstone Edges Out Cisco at Cox), for instance -- and a lot of routing gear is said to be in cable operator labs.

    The real action will start when CableLabs begins widespread certification of the Docsis 1.1 CMTSs. One certification wave just ended, and others are planned to start in April, July, and October.

    — Carl Weinschenk, special to Light Reading
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    dishnetwork 12/15/2016 | 11:56:12 AM
    re: A New Chapter For Cable I don't know the new chapter for cable might be the last chapter ever written.
    lighthearted 12/4/2012 | 11:00:21 PM
    re: A New Chapter For Cable Are they, or when will they, be approved?
    mrcasual 12/4/2012 | 11:00:16 PM
    re: A New Chapter For Cable Currently there are more cable DSL subscribers than telco
    DSL subscribers in the US. Does this mean the beginning of the end of
    telco DSL ?

    Do you know what the current delta in actual numbers is? Also are the growth rates significantly different?

    I doubt one will ever completely displace the other, and certainly not in the near term, but I'm curious to see what the delta is since once it gets to be sufficiently large the lower penetration platform will tend to suffer in terms of supported apps and future development.

    Think of Windoze vs. Mac for a good analogy. Let the flame war begin!
    exnortel2 12/4/2012 | 11:00:16 PM
    re: A New Chapter For Cable Interesting article. Any info on the cost benefits of cable internet access vs Telco DSL ? Currently there are more cable DSL subscribers than telco DSL subscribers in the US. Does this mean the beginning of the end of telco DSL ?
    Peter Heywood 12/4/2012 | 11:00:16 PM
    re: A New Chapter For Cable I just wanted to clarify something in view of a private note we got saying that Tellabs has also passed DOCSIS 1.1 compliance testing.

    Several vendors, Tellabs mong them, have had their *CABLE MODEMS* pass DOCSIS 1.1 compliance tests.

    However, only 2 vendors - the ones cited in the article - have had their CMTS equipment (the gear put into operator sites) pass these tests.

    etherguy 12/4/2012 | 11:00:14 PM
    re: A New Chapter For Cable this is a very good article. and very timely.

    when the clec business died, i wondered if the communications industry would recover. besides the obvious consideration that they were quicker to buy and deploy and didn't necessarily require true carrier class reliability and 18 month trials, and spent money freely, they put pressure on the incumbents to innovate to remain competitive--not that they did truly innovate, but at least they spent money.

    the ilec/ixc world is full of dull, stupid people who are living in the past and are acting like deer in headlights over what to do about their dying core businesses in voice services. not all of them but a lot fall into this category. the hot engineers and people who wanted to push the envelope went to smaller, faster moving service providers, joined equipment startups, went into venture capital, etc. and the talent pools in the service provider world dried up fast.

    so, now that the clec world is gone and it's being replaced by the suddenly aggressive and competitively minded cable companies, the ilecs/ixcs are faced with a grim choice: take risks and spend money investing in building up businesses that are growing (data services a la ethernet for example?), or die.

    this battle will be very interesting to watch.

    exnortel2 12/4/2012 | 11:00:13 PM
    re: A New Chapter For Cable Thanks for the info on the bundled service from cable operators. Is the availability dependent on the area (metro vs rural) ?
    diag_eng 12/4/2012 | 11:00:13 PM
    re: A New Chapter For Cable >> . Any info on the cost benefits of cable internet access vs Telco DSL ?

    The Cable companies can bundle Digital Cable TV, Internet access, and Local Telephone as a package price, which in most cases is more attractive than DSL.

    For example, I have bundled services from AT&T Broadband for about $115/month (which includes a CM lease). This is an all inclusive package (TV/Internet/Phone). The Internet service is steady at 1Mbs+, and my phone service has been transparent from the previous RBOC. The only downside is Customer Service sucks, but as long as my connection is up I don't care.
    lr_fan 12/4/2012 | 11:00:12 PM
    re: A New Chapter For Cable Call you local cable co and ask. The availability is massive but there are pockets where it is not available. Just like DSL!
    lr_fan 12/4/2012 | 11:00:12 PM
    re: A New Chapter For Cable Just a small correction on semantics. DSL is a technology that is designed for twisted pair copper. It is not the technology used for cable modems. So don't mix DSL with cable. They compete!
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