Cable companies tune to the Internet

ANAHEIM, Calif. -- They don't fear Microsoft, and they aren't worried about AT&T.

ANAHEIM, Calif. -- They don't fear Microsoft, and they aren't worried about AT&T. In fact, cable companies at the Western Cable Show this week were downright giddy about their prospects as providers of next-generation entertainment -- despite computer companies trying to muscle in on their territory.

In kicking off the show, media mogul Ted Turner drew a line in the sand during a panel discussion with industry bigwigs. "This (cable) industry is very aware of (Bill Gates)," he said, "and we will not let him take over." Among other things, Turner is the vice chairman of Time Warner Cable.

That said, the industry was quick to point out that computer companies had at least one thing right. "The world of the future is the world of the network computer," said Leo J. Hindery Jr., CEO and president of cable giant Tele-Communications Inc.

As hawked by Sun Microsystems Inc., Oracle Corp., and others, the NC is an inexpensive computer or TV set-top box that pulls down data from a network.

"We asked Silicon Valley for a set-top solution that was multipurpose, cheaper, and faster, and they gave it to us," said Hindery.

Set-top boxes posing as network computers were all over the show. Products from Scientific Atlanta and OpenTV included a cable modem, and provided Internet access and other necessary TV functions such as electronic programming guides. Scientific Atlanta plans to use software from Network Computer Inc., while OpenTV will use a Java-based system from Sun.

And Worldgate Communications Inc. has proposed a model for bringing the Internet to the TV with very little or no cost to the home user. All processing would be done on a server at the "head end," or network hub, of the local cable node.

"It's kind of like having the monitor in your living room and the computer out at the cable company," said Gerard Kunkel, vice president of strategic programs for Worldgate.

The system uses the current crop of cable boxes and a server at every node to offer 14K-bps upstream rates on analog systems and 256K-bps upstream rates on digital systems. However, since the bandwidth is divided among 100 to 5,000 users, uploading files is out of the question. (Downstream rates to the user are much faster.)

The benefit of the system is that customers don't need expensive hardware in their homes. "Next year, 8 million new subscribers will be added on to the cable industry," said Kunkel. "That's 8 million people that can access our service."

Internet-over-cable also seemed to be gaining wide acceptance at the show. Internet cable services @Home Network, Road Runner and MediaOne Express all had news during the show. US West Media Group, owner of Media One, and Time Warner Cable, owner of Road Runner, announced that the two subsidiaries would be merged. This would form a company larger than Tele-Communications Inc.'s @Home Network.

Still, with a rumored $1.25 billion deal with AT&T in the offing, @Home may get the finances it needs to grow. Some analysts speculated that TCI may not reinvest in another round of financing, reducing its overall share in the Internet-over-cable company.

In short, everyone was talking about interactive TV as the way of the future. And cable companies -- as opposed to digital broadcast satellite companies -- are uniquely suited to it.

The reason? Cable companies are local networks, serving anywhere from 100 to 5,000 people per node. This lends itself well to the interactive model -- and lets cable companies regionalize their content. Digital broadcast satellite is global and very hard to develop into a bidirectional system.

In fact, if the rumors of an AT&T-@Home deal are true, AT&T may also have seen the writing on the wall. Until last week, the company -- whose WorldNet service has garnered 1 million subscribers -- was going to ink a deal with DBS company DirecTV. Instead, the large telecommunications firm has bet on a different horse -- cable.


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