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Archives
 November 1999 Issue
News & Opinion
GI, Motorola to Form A More Perfect Union
By Doug Larson
You’ve heard the "who" and the "what:" Semiconductor magnate and No. 2 cell phone manufacturer Motorola has made a bid for No. 1 set-top maker General Instrument in a deal valued at $11 billion.
The "why" has become clearer since rumors of the impending merger hit the streets in early September. In short, much of the deal boils down to brands and customers. Motorola, which has entered the cable market with its CyberSURFR cable modem but has yet to reach CableLabs Certified status, acquires access to GI’s Data Over Cable Service Interface Specification (DOCSIS)-compliant SURFboard 2100 cable modem and supporting technologies. On the customer end, the deal opens doors for Motorola at companies such as AT&T, Time Warner, MediaOne, Comcast, Cox, Adelphia, Shaw, Jones, Charter, Suburban Cable, Intermedia Cable and Bresnan, which have a collective subscriber base of more than 46 million and where GI currently is an approved supplier.
Most significant on the list is the former TCI, which along with its affiliates accounted for 31 percent of GI’s consolidated net sales in 1998 and which serves more than 10,000 subscribers. At press time, The Wall Street Journal had reported a rumor that AT&T Corp. was planning to buy 2 million set-top boxes from GI and an unspecified number of cable modems from Motorola in a deal valued at $1 billion—not a bad way to kick things off.
GI, a veteran vendor to the operator community but lacking a strong retail brand name, gains a partner widely known in the consumer space, a move that will help the box maker as the CableLabs Certified retail effort gathers momentum.
"We think there’s … three centricities in the world. Some people see the world in the home as being a PC (personal computer)-centric world, others see it as a broadband access device on the outside of the home, and others frankly see it as a set-top box centricity," said Dick Day, corporate vice president and general manager of Motorola’s Multimedia Group. "They all can’t be wrong, and now we have bets placed on all of those different centricities."
The merger also could accelerate both companies’ entry into areas where to date they have only dabbled, such as Internet protocol (IP) telephony and home networking.
"My view is we’ve got some areas we’ve probably pioneered a little further than GI, and I think they’ve taken some areas and pushed them pretty nicely as well. The real opportunity we have now is to get the resources synergized and linked together and make all of this just happen faster," said Bruce Stone, senior vice president of Motorola’s Multimedia Group. GI previously had consolidated its high-speed cable modem effort with its nascent IP telephony business, including work on the DCT 5000+, a variant of the SURFboard modem.
Under the new organization, GI will be structured into Motorola’s Communications Enterprise group, with GI Chief Executive Officer Ed Breen heading the new business unit and reporting to Merle Gilmore, president of the Motorola’s CE group. Motorola’s Multimedia Group, which includes Motorola’s cable business, also will fold into the CE group.
Although Scientific-Atlanta Chief Executive Officer James McDonald says his company is prepared to go it alone, the GI/Motorola announcement has led to speculation that suitors for Scientific-Atlanta, the No. 2 set-top box maker, may also be waiting in the wings.
ViaSource Goes On Buying Spree
When ViaSource Communications goes shopping, it apparently doesn't like to come home empty-handed. On a recent trip to the market, ViaSource purchased field service specialist Communications Resources Inc.; RTK Corp., one of the largest independent providers of field services to the telecommunications industry; and Denver-based Telecrafter Services Corp., which offers contract services including installations, system audits, direct sales and collections. The company says the acquisitions were part of an effort to expand its capabilities to offer a national technical service outsourcing platform and open up new sales channels.
From the looks of it, they fared pretty well. The acquisitions now give the wiring conglomerate a client base of 50 of the top 100 cable systems in the United States, including AT&T and Time Warner.
"We've combined the 'best-in-class' in field service and fulfillment to create a company that offers specialized skill sets and high-caliber management nationwide," said Craig Russey, ViaSource president. "We are elevating the standards of service delivery for the communications industry by creating a geographically diverse, client-diverse and product-diverse company that is dedicated to our clients and the customers they serve."
Russey estimates the company's 2,200 employees visit nearly 15,000 homes a day, making customer contact on behalf of its client base the most crucial aspect of ViaSource's delivery function. "We understand that systems are valued by homes passed," said Russey. "Because ViaSource specializes solely in connectivity issues, we are instrumental in maximizing a system's value, both in terms of value to shareholders and value to the users."
CableLabs to Enter E-Commerce?
With the "DotCom" craze in full swing, it will come as no surprise that CableLabs is jumping into the game with the launch of an Internet-based electronic commerce site. CableLabs says its site, dubbed the "service locator" for the cable industry, will assist computer makers and retail partners in selling cable modems and other consumer equipment by making available to them a database of North American cable modem service areas.
"We want to help the consumer make an informed retail purchase," said Carl Vogel, executive vice president and chief operating officer for Field Operations with AT&T B&IS. "If a consumer wants to buy a computer made by Company X, that company’s sales representative could use this database to advise the customer on the availability, to provide that customer with high-speed Internet access in his cable system."
Two-Way or the Highway
Turnkey high-speed access provider ISP Channel says it now will concentrate exclusively on providing service to systems that have upgraded, or are planning to upgrade, to two-way capability. Prior to the decision and the addition of Mediacom systems in July, which brought its footprint to 2.4 million homes passed, fewer than one third of the ISP Channel homes passed met that criteria; that number is now nearly two-thirds.
The broadband Internet service provider (ISP), which targets second-tier independent and multiple systems operators (MSOs), expects the new focus to streamline its business and improve its bottom line.
"Our focus on two-way systems will result in major savings by not having the added telephony return costs or customer service issues associated with one-way," said Garrett Girvan, SoftNet's chief operating officer. Telephony return expenses include the cost of connecting to the public switched telephone network (PSTN), which is necessary to service
dialup customers as well as to provide the upstream link to the ISP Channel's headend equipment from cable modem customers located in one-way systems.
This announcement complements SoftNet's acquisition in February of Intelligent Communications, a provider of two-way satellite Internet access using very small aperture terminal (VSAT) technology, which will lower the costs of providing Internet access to small- and medium-sized independent cable operators located in rural areas. Intellicom's VSAT network provides coverage throughout the lower 48 states as well as in southern Canada, southern Alaska, Puerto Rico, Latin America and the Caribbean.
Although turning its back on a potential customer base, ISP Channel says the move will not affect the total number of ISP Channel marketable homes passed (systems under contract) and will not impede future growth.
"We are seeing penetration numbers that are two to four times higher in our two-way systems vs. those one-way systems, which use a telephone line to return traffic from the customer's computer to the Internet," says Girvan.
A deal with RadioShack whereby the retail outlet chain will demonstrate and sell ISP Channel Internet services likely will boost subscriber growth; RadioShack operates in approximately 80 percent of ISP Channel service areas.
While the specific details of the proposed site have yet to be finalized, CableLabs expects the service to be up and running in the near future.
News Bites
- Time Warner Cable has selected Toshiba America Information Systems to supply its Data Over Cable Service Interface Specification (DOCSIS)-certified cable modems for Time Warner’s new Road Runner broadband Internet services in New York City. Under the terms of the multimillion dollar contract, Toshiba will supply its PCX1000 cable modem to Time Warner’s New York operations, which serve more than 1 million Gotham-area customers in Manhattan, Queens, Staten Island and portions of Brooklyn.
- Broadband Internet service provider (ISP) Excite has bestowed Level 2 approval on General Instrument’s SURFboard SB3100 cable modem, making GI the first vendor to receive Level 2 status for a DOCSIS 1.1 hardware-ready modem. Level 2 approval confirms that the SURFboard modems are interoperable with DOCSIS-based cable modem termination systems (CMTSs) and operation support systems (OSS) equipment.
- In its first major-market deployment by a top-five multiple systems operator (MSO), video-on-demand (VOD) provider DIVA will provide VOD services to MediaOne customers in select locations. The contract calls for the installation of DIVA’s VOD hardware and enabling software, a controlled commercial trial, and subsequent full commercial launch.
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