A U.S. Federal Court of Appeals ruled this week that top U.S. cable operator Cablevision Systems, of Bethpage, New York, would not directly infringe the copyrights of program content owners if it allowed its subscribers to use network-based digital video recording (DVR) technology. The ruling reverses a lower court ruling in March 2007 that prevented the cable operator from implementing the network-based DVR technology - called remote storage digital video recorder (RS-DVR) - that would enable customers to record and store TV programs using the cable operator's own network servers across its 4.6-million-home footprint in the greater New York, northern New Jersey and Connecticut service areas.

The ruling lifts an injunction that prevented the MSO from implementing its RS-DVR without obtaining a separate license from content owners. Various network programmers and movie studios, including Time Warner, 20th Century Fox, Universal Studios, Paramount Pictures, Walt Disney, as well as broadcast networks ABC, CBS and NBC, sued Cablevision in May 2006, when the MSO announced its intention to roll out the technology to consumers. The content owners argued that, because the RS-DVR service involved recording and storing of programs at Cablevision's facilities, Cablevision, and not its subscribers, would be making the copies when a consumer recorded a program with RS-DVR, and a consumer's replaying of programs recorded with RS-DVR would be a "public performance." Both of which would require a separate license from the content owners.

This case made for some strange bedfellows. Last year, a number of industry associations and lobbying groups, including the Consumer Electronics Association (CEA), USTelecom (USTA - which represents telephone companies such as AT&T and Verizon, the latter being a key rival to Cablevision with its FiOS Internet and TV service offerings), as well as the Electronic Frontier Foundation, joined together to file a court brief in support of Cablevision's appeal.

The ruling now frees Cablevision to use the network-based hardware and software solutions that will enable cable customers with existing digital set-top boxes (STBs) to time-shift their favorite programs, instead of using more expensive locally based storage solutions. DVRs are highly popular with U.S. pay-TV households of all distribution modalities - satellite, telco/IPTV and cable -and are now increasingly being incorporated into cable advanced digital STBs.

Although this is positive for both consumers and cable operators, the long-term implications may be less positive for set-top box manufacturers such as Motorola, Cisco, Pace, Thomson and others that are shipping large quantities of advanced STBs that incorporate storage capacity for time-shifted TV, and that are also a source of higher margins than generic digital set-top devices. The news could be good for video server vendors, as well as suppliers such as BigBand Networks that provided some of the initial RS-DVR equipment the company used at the time of the proposed trial before it was shut down.

Cablevision's subscriber base of digital customers was almost 90% at the end of 1H08, so the ruling comes at a good time for the MSO because DVRs are an increasingly important competitive service element for pay-TV service providers. Although network DVR is a less costly solution, especially because it enables a whole-home DVR solution in every room, it does nothing to enable a comprehensive solution for "whole-house video" or "networked video," especially one that incorporates video originating from sources other than the operator's network, such as from PCs or other storage devices/home servers.

It is unclear when Cablevision might start rolling out the network-based DVR service, but the path is now cleared for all cable operators to move forward with this technology option for time-shifted television.

(Suggested reading: "Hype Cycle for Network Service Provider Infrastructure 2008")

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With municipal Wi-Fi city initiatives fading (Chicago dropping its plans, EarthLink laying off half of its workforce and other cities reconsidering), how can these initiatives be rekindled?

Chicago officials described the costs and newer emerging technologies like WiMAX as contributing factors to their dropping of Wi-Fi initiatives.

One of the largest operational costs for these initiatives lies in the backhaul transport costs to the Internet, where aggregated traffic may require SONET optical connections at costs ranging from over $10,000/month to almost $100,000/month.

However, backhaul traffic can be provided via Carrier Ethernet, which Sprint's WiMAX Xohm deployment is adopting in some markets with their FiberTower partnership, with Carrier Ethernet GigE (1 Gbps) costs typically less than $10,000/month in dense metropolitan locations (locations where municipal Wi-Fi is likely to occur anyway). Also, WiMAX can occur as a backhaul technique for Wi-Fi traffic.

WiMAX has two flavors: licensed (from operators like Sprint in the U.S.) and unlicensed with spectrum typically in the 5.8GHz arena. Because cities will likely not own spectrum, cities deploying WiMAX will either partner with a carrier owning the spectrum or deploy unlicensed WiMAX instead.

It has been stated that unlicensed WiMAX will suffer from power limitations and congested spectrum interference, so there may be hybrid access methods for consumers that can result (hybrid access with licensed 3G, licensed WiMAX, and unlicensed Wi-Fi/WiMAX where multimode devices will seamlessly switch to preferred networks - while maintaining sessions). CPE device manufacturers should look to provide multimode devices to ensure a decent user experience.

From a core network and backhaul perspective, Carrier Ethernet, WiMAX and legacy (cable, E1/T1, fiber, microwave) approaches will occur as well, where city officials should look to equipment providers that offer a multitransport solution set.

From a user experience, dropped sessions with Wi-Fi is a major reason users go to 3G plans instead, which in turn may have in-building coverage issues unless alternatives like femtocells, distributed antenna systems or seamless roaming with Wi-Fi technologies occur. Here, solutions exist with seamless roaming across diverse networks (Wi-Fi to macro cellular, WiMAX and so on), with session continuity across diverse networks to maintain a good user experience.

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A femtocell is an A5-sized base station box aimed at improving indoor coverage, especially for higher-frequency services such as 3G. Femtocells connect to a customer's broadband connection and use an Internet Protocol (IP) link for backhaul. Vendors suggest that femtocells provide advantages such as physically smaller units, greater network efficiency and lower costs compared with existing microcellular technology. But while femtocells can reduce operational expenditure on backhaul and improve mobile coverage, operators should critically examine their end-to-end cost of ownership, and whether offering fully subsidized customer-premises equipment makes economic sense; users may not yet be ready to pay for this equipment.

In many cases, using femtocells could be as expensive as expanding macro coverage with Node B equipment. Therefore, expanding the macro coverage may actually be the cheaper option, especially on existing sites where backhaul cost reductions are possible. Femtocells may have some incremental value for mobile operators, in terms of reducing churn and maybe offering some new revenue opportunities. But they are unlikely to offer the same savings for coverage and capacity that can be found by using traditional radio network infrastructure, especially if the femtocell is fully subsidized.

The femtocell market could see growth in the coming years as mobile operators seek ways to reduce their costs and the number of additional sites needed for 3G. The operators could potentially increase loyalty and reduce expensive churn by subsidizing femtocells in the residences or offices of their customers. Broadband and cable operators could use femtocells on their existing infrastructure as a disruptive move.

However, the value proposition for femtocells needs to be proved, in both residential and large corporate settings. The technical challenges posed by femtocells, as well as the costs for the operator, may inhibit the growth of this new technology. In addition, there are already a number of emerging alternatives to improving in-building coverage. These include distributed antenna systems, repeaters, Wi-Fi, smart antennas, dual-mode handsets running Unlicensed Mobile Access (UMA) clients and emerging IP Multimedia Subsystem (IMS)-based alternatives. Furthermore, Operators choosing to deploy femtocells within their network will face a significant number of technical and business challenges. They will also have to address any user concerns about health and safety. Some of the main issues include:
• Costs and subsidies
• Standards
• Integration
• Operational impact
• Quality of service
• Customer behavior
• Competing technologies (such as UMA)

In addition, there are ways to reduce costs on the existing radio infrastructure, which may reduce the economic incentive to use femtocells for coverage and capacity (for example, sharing radio access network or using alternative ways to deliver lower-cost wireless backhaul).

Recommended Reading:
"Cool Vendors in Carrier Network Infrastructure, 2007"
"Dataquest Insight: North America Shows Potential for WiMAX Backhaul From Wi-Fi and Cellular Networks"
"Hype Cycle for Wireless Networking Infrastructure, 2007"
"Forecast Summary: Mobile Network Infrastructure, Worldwide, 2004-2011"
"Market Share: Mobile Network Infrastructure, Worldwide, 2006"
"Dataquest Insight: Network Sharing Offers Operators Opportunities to Cut Costs"

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AT&T reported second quarter 2007 results today, and although IPTV video subscriber uptake is improving, new customer numbers were still underwhelming. AT&T's U-verse service gained approximately 38,000 new customers in 2Q07, or about 2,923 per week. The company's goal is to ramp up installations to 10,000 customers per week by YE07.

The total U-verse footprint for the FTTN-based network increased to approximately four million "homes passed," with the company reporting that it was on track to reach its goal of eight million homes passed by year-end 2007. It did not report how many of the four million homes passed by the network were actively being marketed to with the U-verse service, although it did amorphously mention that "portions of 23 markets" now offer U-verse service.

AT&T also markets video services through the two U.S. direct broadcast satellite (DBS) providers - DirecTV and EchoStar's Dish Network - and has video connections totaling 1.846 million. With the addition of its 51,000 U-verse video customers, AT&T had a total of 1.9 million video customers at the end of 2Q07.

Other notable items mentioned during the conference: The carrier will start building out the former BellSouth footprint, now called its Southeast region, for the U-verse IPTV service with a goal to launch at least one market by YE07. It projects that capital costs per household passed in the 13-state serving region is currently $330, and AT&T expects capital costs to be 10% to 15% lower to build in the BellSouth footprint, due to the ability to leverage super hub offices (SHOs) already constructed, as well as infrastructure investments already in billing and customer support systems. Moreover, capital costs will be lower due to deeper fiber deployment already in the footprint in the Southeast region than in AT&T's original 13-state region - but some of this will be offset by lower density of homes per mile.

On the minus side: Installs are averaging about seven hours per new customer. This is due mostly to the high level of new technicians it is bringing on board and the time it takes to get them up to speed to handle the installs. The key variables that determine the time required for each install are the experience level of the technicians and the condition of the inside wiring of the premise. An AT&T executive on the earnings call noted that the more experienced technicians are averaging significantly better new customer installation times of over four hours.

Even though new customer gains were modest, a deeper dive on the new customer profiles was generally positive for AT&T: 80% of its U-verse customers are taking the higher-end packages, and half of all customers are taking high-definition service as well. In terms of broadband, AT&T reported that U-verse customers were taking the highest broadband speed as part of its higher-end packages. In terms of bundled customers, AT&T lags its cable peers, as slightly less than 6% of AT&T's primary consumer phone line customers also had a video solution from AT&T; this number was up from 3.8% year over year. But the two-bundle service of voice and broadband was higher throughout AT&T's regional operations, with 35% of its consumer primary lines also taking broadband service, up from 27.8% year over year.

Verizon, the other major telco in the video business, has reported that its fiberoptics-based FiOS TV - a hybrid RF-IPTV service that uses IP to deliver video on demand and interactive services, and a traditional RF digital cable infrastructure for regular broadcast programming - reached approximately 500,000 FiOS TV customers at the end of the second quarter. Verizon offers broadband connection speeds of 5, 15 and 30 Mbps, and in a few selected markets, 50 Mbps to one million FiOS broadband customers. If Verizon keeps installing new video customers at the current rate, the U.S. carrier is on track to rival and possibly overtake the largest global IPTV players by early 2008, eclipsing PCCW, France Telecom and Fastweb, which have been marketing their IPTV services for a much longer time than Verizon.


"Dataquest Insight: Telecom Service Provider Strategies to Develop Media Market Share"

"Dataquest Insight: Top North American Telecom Service Providers Must Increase Their Share of Growth Markets"

"Market Trends: Consumer Telecommunications and Internet Access, U.S., 2006-2010"

"Forecast: IPTV Subscribers and Service Revenue, Worldwide, 2004-2010"

"Leading IPTV Carriers and Their Technology Vendors"

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The path to upgrading to next-generation cable broadband platforms just got a little easier for service providers and their technology suppliers this week as CableLabs announced a three-tiered program to testing and qualification against the Data-Over-Cable Service Interface Specification (DOCSIS) 3.0 standard. This approach will be for makers of cable modem termination systems (CMTSs), the key network element that enables broadband data service offerings over cable networks.

Makers of DOCSIS 3.0 modems, meanwhile, will be required to pass only one level of certification to be in compliance with the completed DOCSIS modem specification. The industry anticipates the start of compliance testing for its DOCSIS 3.0 CMTSs and cable modems starting in 4Q07, but CableLabs says it will still host a number of interoperability events throughout the year.

This approach acknowledges the vast complexity of the DOCSIS 3.0 standard, while bowing to the necessity for cable operators to get into the marketplace with interim, yet spec-compatible technology that will deliver very high bandwidth capabilities to compete against fiber-to-the-home (FTTH) and advanced fiber-to-the-node (FTTN) services by telcos and other broadband competitors. The urgency for these services is greatest in markets such as Japan, Korea, Europe and pockets of North America where FTTH services are being rolled out (Verizon's FiOS service, for example).

DOCSIS 3.0 standard will enable cable broadband networks to support shared downstream data rates of about 160 Mbps or higher, and eventually, upstream data rates of 120 Mbps or higher, depending on how many "channels" are being bonded together in either direction. The channel-bonding technique links together four or more channels to form a much wider pipe to enable not only ultra-high-speed data connections, but also, with the support of modular CMTS designs, to better and more economically support video streaming, downloading and uploading.

This unique approach to compliance testing (bronze, silver and full) will enable vendors to implement some of the most important core features of the DOCSIS 3.0 standard sooner, and waive testing for some of the more advanced requirements to the standard, especially the more complex ones for upstream channel bonding, which may take longer to implement.

For now, look for vendors to implement channel bonding to achieve triple-digit access speeds; support for Internet Protocol version 6 (IPv6) to expand the pool of Internet addresses that cable operators may use to provide consumers with IP-based services; and advanced encryption/security features.

Flexibility will be key for cable operator success now in the hypercompetitive market, but so will the benefits of conformance to standards in terms of network compatibility and reliability of gear. It looks as if incremental standards compliance will be a necessary tool for efficiency in implementing an important part of the cable industry's next-generation broadband infrastructure.

Additional reading: "DOCSIS 3.0 Lays the Foundation for Cable Industry's Next-Generation IP Network"

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At 3GSM Barcelona, it was reported today by FierceWireless that AT&T-Cingular's CTO will explore GPS technology for cellular E911 location technology.

AT&T-Cingular planned on deploying a technique called Enhanced Observed Time Difference (EOTD), which uses up to four cellular base stations to pinpoint a cell phone's location by measuring the arrival times of the call at various cellular antennas.

The key issue with AT&T's EOTD E911 location technology is it requires more than one cellular base station to work, and with sporadic 3G base station deployments, this technique will not work.

An option is to do what is known as a "directed retry" to the cell phone, whereby the 3G cell phone is told by the cellular network, during the 911 call, to retry the 911 call as a 2G GSM call, and then use the existing 2G GSM EOTD location technology. While this works in principle, it has added complexities (both in the 3G network and in the cellular handset), along with the risk of dropped calls.

GPS and Assisted GPS look like better options, although in-building methods should be explored to address areas where satellite coverage is weak.

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The debate continues to rage in the U.S. over open access to networks, and in the Netherlands last week, the Dutch parliament set in motion a cable network unbundling process - similar in principle to the local-loop unbundling used by alternative operators to access the former incumbent operator's local loop - that would provide alternative operators with access to the CATV infrastructure. The Dutch CATV networks do cover 96% of the population, but not all of this is capable of delivering advanced broadband services. Gartner estimates that cable has about a third of the current Dutch broadband market in terms of connections. More importantly, cable operators have banded together to deliver a common platform for services like voice over IP across most of the country, representing a viable national alternative to incumbent KPN. Even so, the normal European Union arguments for intervention based on significant market power don't hold, because they remain independent companies. Neither does competition law as it relates to cartels, because these providers are no more able to fix prices than any of their many competitors. So a special parliamentary debate was needed in order to decide whether this market warranted particular attention. But a vote in parliament is a long way from being enacted, regulated legislation. Next year, we might have a better view of what this means in practice.

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Australia's biggest telecom operator has created a lot of interest among clients lately with the promise of bringing wireless broadband just about anywhere across this wide, brown land via the novel deployment (like Cingular) of a WCDMA network operating in the 850MHz band. With a bit of encouragement from Telstra's marketing department, Australian CIOs have been excited by the prospect of having multimegabit 3G access nearly everywhere using a standardized, globally deployed technology, starting next year.

True to form, however, things appear to have hit an early speed bump, with reports that all is not well with the network rollout. Currently, it appears to be capable of delivering access speeds of only just a few hundred Kbps, which Telstra can do already using its existing CDMA network.

No surprises there. Seven years ago, Telstra faced the same teething troubles with the replacement of its AMPS analog network. What is surprising is that anyone is surprised by the current state of affairs and expected any better from the aggressive project timelines. In its 30-year history, the modern mobile communications industry has notched up an astonishing record for boasting and broken promises. Beautiful as many consider modern cellular systems to be, why do we persist in expecting them to perform perfectly from Day 1 and according to the promises of the people selling them?

Part of the reason, one suspects, is the human need to surround huge technological undertakings of this kind with a blanket of myth and symbolism. Without the mumbo jumbo, things don't get done, investors don't invest, and risks don't get taken - whether it's a moon shot, the Great Wall of China or a billion-dollar 3G network. Even in today's analysis of what Telstra is doing right or wrong, we resort to symbolism, myth and metaphor: Telstra likens its 3G network to "building a new racing car" and chides critics for speculating on the car's performance "before the wheels have been fitted." Critics have a different type of car in mind, arguing that you can "make an old Morris Minor go at 300 kph — if you drop it from 20,000 feet," but it won't go at that speed under normal road conditions.*

The underlying problem is that the industry is still wedded to the notion of a linear model of technology change, rather than admitting the less palatable truth that you are sinking huge sums of money into a project and working out the problems as you go along. So it is not so much that the mobile industry suffers from a very short collective memory, but rather that some amount of self-deception greases the wheels in the social process of technology adoption.

Consider, for example, if you were advising the mandarin signing off on the construction of the Great Wall of China 2,300 years ago. Would you be telling him to proceed in order to keep out the Mongol hordes or (as Telstra's own broadband advertising would have it) advising him that the Great Wall was needed to keep the rabbits out?

* This is a quote from the Australian Financial Review, 3 August 2006 - the article is available online, but a subscription is required.

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Verizon announced the vendor selection for its planned gigabit passive optical network (GPON) rollout, with Alcatel, Motorola and Tellabs winning the deal. This RFP was jointly issued with AT&T and BellSouth as a next-generation fiber-to-the-home architecture for IPTV service delivery.

Interestingly, Alcatel's 7342 FTTU ISAM (GPON) is the only platform that is ready to be deployed; therefore, Verizon will start its deployments with Alcatel in 2006. According to Alcatel, it is committed to installing the solution in 2006 as well. The GPON solution from Motorola, as well as from Tellabs, is not yet available. Verizon is planning to deploy Motorola's gear next, followed by Tellabs. Verizon did not give any guidance on the distribution of the contract or the value of it.

Gartner asserts that this is another big win for Alcatel, along with last year's fiber-to-the-node/premises deal with AT&T, for two reasons:
1. The company has demonstrated again that it can offer timely, sophisticated technology solutions in a competitive first-to-market environment.
2. The announcement also shows that Alcatel is able to digest the low margins for GPON shipments, which at RFP time were already close to those for broadband PON (BPON).

According to Gartner's broadband access research, Alcatel maintains the market-share leadership it achieved in North America during 2005. Motorola and Tellabs had been discussed as potential winners of this deal, but now have to prove that they can meet their timelines for product availability. For Motorola, this deal is significant for carrying forward its broadband wireline portfolio.

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Verizon Wireless, working with Cisco, Lucent, Nortel, Motorola and Qualcomm, is proposing an overlay standard onto the IP Multi-media Subsystem (IMS) standard, which would allow for the functional elements of the IMS to be bundled so that there are fewer functional elements. The benefits of this plan are that it would be easier for network elements to interoperate from different vendors and that it would allow IMS-based services on a number of fixed and mobile access technologies as well as SIP and non-SIP services in a uniform way. This would allow for the differences in access capabilities. The plan also offers a more comprehensive security scheme. In addition, it deals with various roaming issues via dual anchoring and three-layer peering.

The A-IMS plan is to break the IMS infrastructure into several network elements, including the Bearer Manager, Policy Manager, Application Manager, Security Manager, Services Data Manager and Key Manager. These network elements are identified by Verizon Wireless as its preference for how the functions of the IMS topology should be configured.

Some of the issues that carriers have been dealing with include the following:

• The complexity of integration with the core network of IMS, which forces the carrier to work with a limited number of vendors



• The uniformity of services across various networks



• Integration to existing networks and support of existing service experience



• The reality that SIP-based services are going to be an evolution and that there needs to be a system to control SIP- and non-SIP-based systems



• Differences between the SIP stacks in the access network versus the IMS need to be synchronized



• Lack of IMS end-user clients and devices

This is an effort to provide a more practical structure around IMS so that it can be an effective network tool for Verizon Wireless. However, it does not solve the issue of the OSS/BSS interface with the IMS system, it does not take a clear stance on how Web services and the emerging service delivery platforms would be connected, nor does it account for the reality that applications need to be written to a number of different devices. Verizon will look to have the A-IMS features standardized, and we expect other operators to support this standardization effort.

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Telstra has threatened to put a halt to a previously announced $2.2 billion fiber-to-the-node (FTTN) broadband rollout - unless an appropriate regulatory framework is put in place that will relieve the company of obligations to share the infrastructure with its competitors for free or at regulated, low costs. According to the company's CEO Sol Trujillo, this is not a bluff, and he is quoted in the press as saying, "We will not invest in FTTN unless we achieve regulatory settings that will permit Telstra's 1.6 million shareholders to earn a competitive return that they expect and they deserve."

Building out wireline infrastructure such as FTTx is an expensive undertaking that historically has been undertaken by various types of utility companies with relatively "patient" investment horizons. Never has this type of infrastructure overhaul been conducted by a company with an investment horizon as short as that of today's average incumbent service provider. Maybe the real question related to this and other incumbent FTTx deployment strategies is: Have incumbent service providers forgotten their "utility DNA," and could this result in them losing their precious incumbent position in the wireline market? The Danish market has become an interesting case study for this scenario — for more details, see "Danish Utilities' Grand FTTH Plans Could Set a Trend."

It is also important from the regulatory perspective to consider how to appreciate the macroeconomic benefits associated with a widespread FTTx rollout. Politicians and regulatory authorities need to face up to the fact that wireline infrastructure with FTTx is facing its first basic infrastructure overhaul since the telecom market was deregulated. Finding an appropriate balance between fair competition and innovative incentives will be imperative. For more details on this issue, see "Why Governments Should Care About Fiber-to-the-Home" and "Funding FTTx and Expanding Your Marketplace."

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Sonus Networks announced that Opal Networks, a subsidiary of The Carphone Warehouse, has deployed its softswitch architecture portfolio to deliver VoIP and next-generation services over local-loop unbundling (LLU). Opal will be providing residential and business broadband and voice services over the new next-generation network (NGN) at DSL speeds up to 8 Mbps. Opal expects that, by 1 July, BT CN21 will have handed over approximately 400 exchanges, and it is targeting 1,000 exchanges by May 2007.

Gartner believes that there is a good climate and market environment for alternative operators in the U.K. to utilize LLU for both residential and business services. In fact, Gartner research indicates that, by 2008, 50 percent of all enterprise voice and DSL primary lines will be delivered using LLUs (see "Why Local-Loop Unbundling Matters for European Businesses").

What makes this announcement so compelling is the fact that Opal is building out an NGN infrastructure with multiservice access networks deployed in the network and a softswitch topology that can provide voice services via VoIP without requiring any telephone changes at the subscriber side. In fact, it will be transparent for the subscriber that the call will be routed via VoIP, and its primary line contains and simulates all BT exchanges, including emerging services. This is not a Vonage model, but a network build-out that is efficient because it uses NGN technology together with a business approach that charges for line rental and for the broadband. This includes unlimited calling in the U.K. and to various international destinations, including the U.S. and Australia. As they are using the Sonus platform, Opal will be able to extend via open interfaces to new applications with Sonus partners or third parties. This was a successful introduction for Sonus into the U.K. market.

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Nokia and Siemens have officially announced that they will be combining their telecom carrier businesses into a 50-50 joint venture. The new company will have revenues of about 16 billion euros. But what does this mean to I&O leaders?

Well, let's first end some confusion here. Nokia and Siemens are big companies, with big positions in several telecom sectors. As announced, this new joint venture combines the communications carrier-oriented pieces of those businesses. The principal impact relates to fixed-mobile convergence (FMC) - and combinations like this and Alcatel-Lucent better position these hardware vendors to offer the equipment to carriers for FMC services.

But Nokia is a strong player in the mobile handset business (Siemens sold its handset business to BenQ in Asia last year). In addition, Siemens remains in the business communications space (principally IP telephony switches and contact centers) and has a large IT services business, of which networking is a part.

Bottom line: This is an interesting headline-grabbing event that says the push to FMC will accelerate and that further hardware vendor consolidation is under way. But how you deal with the products you directly obtain from Nokia and Siemens will not change with this deal.

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Nortel reported that the joint venture (JV) it planned to set up with Huawei for a high-speed Internet solution was abandoned. Huawei and ZTE have developed a number of partnerships and JVs with firms that are otherwise their competitors. It seems that this approach, which allowed them to scale while managing risk and to broaden their product base with comparatively limited financial resources, is reaching its limit.

The Huawei-3Com JV that most spectacularly set the trend has never met expectations, while the ZTE-Alcatel JV in CDMA infrastructure is in limbo due to the ongoing merger between Alcatel and Lucent.

Huawei and ZTE will certainly continue to develop partnerships with other vendors, but will reduce their reliance on them. Instead of being core to their development, new partnerships will be opportunistic in nature rather than strategic.

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The four major cable operators - Comcast, Time Warner Cable, Cox Communications and Advance/Newhouse's Bright House Networks - will start trialing a number of converged wireline/wireless services starting some time in the second half of this year. Look for Time Warner Cable, which just completed an IMS trial with Siemens, to introduce the initial suite of products in two markets: Austin, Texas, and Raleigh, North Carolina. Comcast will launch trials in two markets: Portland, Oregon, and an undisclosed New England city. Cox Communications will trial in two markets (also not yet named), and Advanced/Newhouse will trial in one market only.

Sprint-cable joint venture (JV) partners stress that they're looking to integrate all of Sprint's cellular phone, broadband data, mobile video and other capabilities into cable's core products to go beyond just selling mobile service, and that this includes a broad lineup of convergence applications. First up are a number of "cross-platform" applications that they'll phase in over several stages, starting with simple multimedia applications that require no new technology. These include viewing TV program listings and e-mails on mobile handsets, placing free calls between cable home phones and mobile phones, having integrated voice mail from fixed and mobile services, and using mobile handsets to program home digital video recorders (DVRs) remotely. All of these will be trialed and are expected to be the first applications to be offered to cable customers by 2007.

What cablecos don't expect to be doing first thing out of the box is offering a service that enables dual-mode mobile/Wi-Fi phones that operate as a VoIP phone inside the premises and a wireless phone outside the home. This is still a longer-term goal, but a representative from Cox recently indicated that she doesn't see big, immediate consumer demand yet for this capability. Later-stage JV services are expected to include video e-mail, unique mobile video programming, live mobile TV broadcasts, central address book and calendar management, and multiplayer gaming.

Risks and Challenges: One of the biggest tasks for cable engineers is developing the seamless call shifting between cellular/mobile and in-home cable Wi-Fi networks using integrated/dual-mode handsets. IP multimedia subsystem (IMS) solutions are expected to play a key role here. A major challenge will be dealing with five different cableco infrastructures and the ability to develop some type of "template" that might work for all and simplify this implementation across all networks.

Another challenge is the whole concept of a JV: If past activities and behaviors are any predictor of potential future success in JVs, then the odds seem to be stacked against cable. Remember the @Home Network JV for bringing broadband access to the cablecos? Cable was also involved in JV investing in Sprint PCS, as well as Primestar, one of the original direct-to-home satellite providers in the 1990s. The cable industry's checkered history with JVs may not be an indicator of future success, but I heard from an insider that they are still arguing over organizational charts and healthcare plans for the participants (100 or so now dedicated to the effort) and that such issues were preventing them from moving forward more expeditiously. Executives from the JV have even conceded publicly that their goals will be tough to accomplish. During one of the sessions at a recent cable conference, Sprint-cableco JV participants admitted that one of the biggest hurdles in managing the joint venture is making five companies in two different industries with very distinct corporate cultures work together. There is more than money at stake here (although $200 million is being dedicated to the as-yet-unnamed JV organization) - it's about the entire cable industry's ability to raise the level of competition against the growing telco video threat and competitive bundles, as well as a very focused satellite industry that wants to own the next generation of advanced, high-definition video programming services.

For other research, see "Cable Companies Join Sprint Nextel to Shape Mobile Future."

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