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January 2001 Issue

Telephony: Where is Cable Telephony Pointed?
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It’s timely to consider how cable’s reorganizations might affect its technology, and in particular, its telephony technology. I believe that cable’s success in driving its new technologies to market depends upon cable’s organizational structure as an industry.

To say big changes occurred in the last quarter of 2000 is an understatement. For openers, AT&T seems to have started the process of undoing its emerging broadband empire. Less obvious is the metamorphosis of cable industry vendors. This month’s column is my personal attempt at guessing our industry’s technology vector.

Notice I said I am trying to determine a vector, not a destination. Even if my guess at direction is accurate, I have no idea if we will get to where we are pointed. Cable keeps having organizational crises that severely impact its ability to reach an endpoint. About once a year, our industry redefines itself, and that has technological implications. If you doubt this, remember what happened to telephony in U.S. cable when John Malone mandated that TCI focus on its "core competencies." Almost overnight, several practical implementations of cable telephony reverted to "trial status," until another reorganization (AT&T’s acquisitions) again changed our focus back to telephony as a genuine revenue-generating application.

Fallout from AT&T reorg

Despite all this volatility, however, there is still value in getting a better sense of where we are pointed. Let’s start this process by looking at the largest operator, AT&T. The company has essentially admitted that it can’t effectively manage a business that tries to serve all segments of telecommunications. The cable company acquisitions are to be spun off (actually "reverse spun off," to avoid tax consequences). That leaves the new AT&T Broadband, essentially a cable business, to decide what to do about cable telephony. An analysis of the new structure might make it seem that Michael Armstrong’s aggressive telephony line growth targets are no longer required, because the independent cable business no longer needs to compensate for declining long distance revenues.

I don’t agree with that argument. Cable telephony is built in steps, the first of which is creating an infrastructure. Two-way capability is part of that infrastructure, as is investment in headend equipment. For the initial wave of cable telephony built upon circuit-switched technology, that headend equipment is a lot of host digital terminals (HDTs), exactly how many is known only by AT&T. However, at least one vendor has indicated that both AT&T and the other operators in our industry have created about 10 times more capacity than actual lines in service.

Reaping investment

The incremental cost of bringing those potential lines into service is relatively small compared to the investment already made in infrastructure. What this tells me is that, although the organizational structure of AT&T has changed, it still makes economic sense for it to remain committed to growing telephony. The old AT&T already has made the initial investment commitment, so why not reap the benefits of a high return on incremental investment?

As for the other operators, it makes sense to ask if any of the industry changes should negatively affect their plans for telephony service. Some schools of thought, for example, argue that operators should wait for Internet protocol (IP) technology before offering telephony. In my opinion, the people who present this argument need to look more closely at the direction of cable’s competition.

Incumbent local telco providers are aggressively looking at ways to penetrate traditional cable markets. Their sunk costs are in copper plant, and digital subscriber line (DSL) technology is their way to leverage that investment. DSL has evolved even more over the past year to the point where it is cost-effective at moving high-speed data at rates comparable to our high-speed data offerings, and is capable of handling several more applications. Video over DSL is still evolving, but the telcos are starting to offer satellite video service. If a cable operator waits until IP can offer carrier-grade voice as well as data and video, the incumbent voice telephony carriers may have captured the data and video markets, while the cable operator gained nothing in voice services.

Vendor commitment strong

Apart from looking at operator organization, competition and market drivers, it’s also interesting to see how vendor organizational changes show commitment to continued growth in cable telephony. Both Lucent and Nortel traditionally have sold end-to-end solutions as one-stop shopping. This has not changed, and has been strengthened over the past year.

Nortel aggressively has continued development of its Call Server IP telephony technology under the Succession product line umbrella, while offering digital multiplex systems (DMS) as a circuit-switched solution for current feature-rich telephony.

In the meantime, Nortel majority-owned Arris has emerged as a new company that includes the former ANTEC. Arris products include the Cornerstone IP Access System, which complements its existing Voice Port and HDT for circuit-switched applications. The system includes a Data Over Cable Service Interface Specification (DOCSIS)-compliant network interface device, and a cable modem termination system (CMTS) for Internet access. In addition, the Arris Converged Host Terminal includes a module that provides a transition strategy from circuit-switched to IP offerings.

On the data network side, previous Nortel acquisitions of Bay Networks and Shasta provided a full complement of high-speed data switches and routers to build the basis of operator IP networks.

Lucent also has strengthened its broadband product line through internal development, acquisitions and alliances, despite its problems in other product arenas. While it does not offer circuit-switched cable telephony access, its PathStar, 5ESS switch, and 7R/E certainly form an infrastructure that supports other vendor’s HDTs and network interface units. With both its own iMerge product, and gateways provided by vendors, such as Nuera, it supports an operator’s transition to IP as existing circuit-switched technology generates current revenue. Allied vendor Motorola offers an IP-access solution, while on the data-switch front, what used to be Ascend complements Bell Laboratories softswitch development.

ADC and Tellabs appear to remain committed to supporting telephony in cable as well. ADC has its existing HomeWorx product line, but has also acquired Broadband Access Systems (BAS), with its high-density cable modem termination system (CMTS)/router. Tellabs purchased Salix, and is looking at ways to merge that company’s high-speed switch technology with its own asynchronous transfer mode (ATM) switch and the CableSpan circuit-switched cable telephony product.

Don’t forget Cisco Systems. In November, that company announced a major expansion to its Universal Broadband Router (uBR) offering. For IP telephony applications, cable operators may now pick from a high density uBR10012, the uBR7200 line, and a single line card uBR7100.

Neither operator nor vendor activity points toward a slowdown in cable telephony.

Justin J. Junkus is president of KnowledgeLink, and applications engineering director for ANTEC. He may be reached at .

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