Silicon Graphics, Microsoft lead scramble

The cable industry’s approach to introducing digital media to the public is rapidly shifting from a cooperative search for long-term compatibility to a chaotic scramble for near-term revenues.

Three months ago, a take-it-or-leave-it deal on operations and applications interface software appeared to be in the offing from TeleCommunications, Inc. (TCI), Time Warner and Microsoft. Now the situation suggests that for a long time to come, it’s going to be everyone for themselves on the issue of protocol selection.

“We’re still very early into that process,” says Jim Chiddix, senior vice president for engineering and technology at Time Warner Cable. “As usual, the rumor mill [regarding CableSoft] has been far ahead of reality.”

CHANGES IN REGULATIONS PUSH NEED FOR SOFTWARE

Operational compatibility between cable systems would guarantee the widest possible market base for developing multimedia and interactive television services, and this remains the primary goal of a joint venture formed last summer by Time Warner and TCI. Chiddix says the introduction of digital, interactive services will happen “much faster if it’s a single platform, if (suppliers) can count on writing applications that will be deployable in many markets.”

But several factors are contributing to factionalization rather than cooperation, starting with the fact that, unlike the telephone industry, cable is at ground zero in software development. “We’re playing major league catchup in software,” acknowledges Richard Green, president of CableLabs. “There are a lot of issues that need to be resolved all at once.”

To the point of urgency. Until recently, the long-term prospects for multimedia and interactive services — together with a gradual turning to digital compression — seemed to be the primary drivers in the cable industry’s search for digital platform compatibility. Today the software selection process has been accelerated to the point of urgency, leaving little time or incentive for achieving broad consensus as companies react to changing market conditions.

The biggest factor in the shifting software agenda is the Federal Communications Commission’s (FCC) new rate regulations promulgated under the Cable Act of 1992. Because the rules exempt premium services from control, cable systems are converting in droves to so-called à la carte tiering of programming, allowing cable subscribers to select the mix of services they want beyond the bare-bones basic packages that fall under rate regulation.

The rush to à la carte. This rush to à la carte carries with it a need to simplify subscriber access to programming, most obviously via electronic navigation systems that require computerization of the settop boxes and attendant decisions on operating software now rather than later. “If you’re going to 80- or 110-channel analog systems with à la carte pricing, you’re going to need a navigation tool for the subscriber whether you use digital compression or not,” notes Hal Krisberg, president of General Instrument Corp.’s Jerrold Division, a leading manufacturer of settop and other cable gear.

NO SINGLE APPROACH WILL PREVAIL JUST YET

How a cable company goes about setting up the technical wherewithal to permit flexible, individualized packaging and billing of services depends on two things. First is the type of technology already in place. And second is the operator’s assessment of what the most cost-effective approach to implementing the new packaging might be.

Consequently, even within a given system operator’s purview, different cable systems are pursuing a wide variety of approaches offered by the manufacturers of headend and home terminal gear, from off-premises “interdiction” systems to various in-home “addressable” systems, all with distinct software components.

“We’re building a flexible platform that can work with a variety of operating systems, because we don’t see any one software approach prevailing at this point,” says Gary Trimm, president of the subscriber technology division at Scientific Atlanta (S-A), another leading settop supplier. “The best approach is to give the customer what he wants.”

Aggressive alternative to Intel. SA’s next generation settop terminals, slated for delivery starting next summer, will employ Motorola’s Power-PC RISC (reduced instruction set computing) microprocessor and ScriptX multimedia system software developed by Kaleida Labs, the joint venture between Apple and IBM.

PowerPC, the fruit of a two-year joint development project with IBM, Motorola and Apple, operates in the range of 40–90 million instructions per second, representing an aggressive alternative to the souped-up Intel ‘386 processor that the Jerrold Communications division of General Instrument Corp. plans to use in its computerized settops.

But Trimm emphasizes that the choice of Kaleida software is aimed at supporting access to many different multimedia formats, with no intention to make it exclusive to S-A boxes. “These enabling technologies are not exclusive to anyone,” he says.

Time Warner’s Chiddix wants to see compatibility extend to the primary operating systems in settop terminals, but he will settle for less, given the difficulties the two largest cable companies face in finding common ground on technical issues. At minimum, Chiddix says, there needs to be agreement on the interface between the operating system and application programs, often referred to as the applications program interface or API. This echoes the concept outlined by Bob Frankenberg, vice president and general manager of Hewlett-Packard’s Personal Information Products Group, at this year’s Digital World conference (see Vol. 3, No. 1, p. 39).

“It’s possible to foresee a model where there would be a single applications interface,” Chiddix notes, “but below that interface, making that interface work, would be one of, let’s say, two different operating systems, each focused on a different processor. That may not be quite as efficient as having everything optimized around a single processor, but it may be much smarter for the cable industry.”

SGI NAVIGATES WITH ‘FLYING BUTTONS’

Time Warner’s selection of Silicon Graphics as supplier of software and hardware for servers and home terminals in its Orlando full-service network project has drawn the two companies together in the search for broad software solutions. Navigational software is especially important at this point, Chiddix notes.

“One reason we chose Silicon Graphics (in Orlando) for the home terminal platform was for the graphics power that brings to us,” he says. “SGI has a demonstration that’s kind of interesting. It’s software they’ve developed for their workstations, which they call Flying Buttons. You see a screen with nine very attractive three-dimensional-looking buttons. When you click onto one of those buttons, it tumbles out into the foreground with its backside toward you, and on the backside are nine more buttons.”

A computer shield. He adds, “Now that’s really just like going down a list of nine choices, selecting one and then getting nine more. But it’s a heck of a lot more fun. It’s sort of ironic. What we’re trying to do is use a great deal of computing power in order to shield our customers from the fact that there’s a computer there.”

With Time Warner working closely with SGI, TCI and Microsoft have resumed negotiations, following a breakoff several weeks ago attributed by cable insiders to TCI CEO John Malone’s distaste for the negotiating tactics of Microsoft’s chairman Bill Gates. (Gates put a somewhat different spin on the situation, telling reporters at an August briefing that “people like John Malone are very into joint ventures — he owns 20 percent of that and 30 percent of this and 40 percent of that, and so it’s a new thing for us.”)

TCI, MICROSOFT DEAL INCLUDES ENERGY MANAGEMENT

Nonetheless the two parties are (still) reported to be close to an agreement, which along with establishing terminal operating, interface and presentation software, would incorporate a way to add energy management functions to the system processing capabilities. This last issue is a significant driver in the deal, sources say, given the fact that revenues from multimedia and interactive TV appear to be a long way off.

Cable companies have begun taking a hard look at online energy management, owing to mounting support for the concept in utility circles. The concept, as currently tested, calls for remote meter reading, real-time billing to encourage off-peak energy use and automated management of energy consuming systems.

Strategic spending plans skewed toward networking rather than power plant expansion are beginning to show up in proposals at public service commissions in several states, posing both a threat and an opportunity where cable and telephone companies are concerned.

So far, two major power companies — Entergy Corp. and The Southern Co. — have made firm commitments to testing the use of wide-band wire line communications to manage energy conservation. Entergy is the primary power provider for Arkansas and Louisiana, while Southern is parent to five utilities in Alabama, Georgia, Florida and Mississippi. Another utility company is said to be preparing to work with TCI to do the same thing.

Michael Niggli, a senior vice president at Entergy, says company studies suggest a third of its consumer base or some 440,000 households could benefit from online management, leading to reduced capital outlays for expansion of power capacity.

While some observers argue that the scale of potential savings — $500 million or $1,200 per household over 20 years for a company like Entergy, by Niggli’s estimate — could underwrite construction of advanced broadband networks by utilities, the more likely direction is cooperation between utilities and existing network operators. Along with TCI, Cablevision Systems Corp., another large cable system operator, is pursuing discussions with energy companies, and it is likely that other companies are as well.

General Instrument, already contracted with Microsoft for supply of the operating system in next year’s computerized terminals, is one of at least three suppliers of cable gear looking at the possibilities. The utility revenue potential could add significant clout to Microsoft’s efforts to penetrate cable.

Many other new cable revenue streams outside the entertainment mainstream are on tap as well, all of them requiring software support. These include extensions to local area networks over cable, employing Ethernet protocols, proprietary tie-ins to databases of every description, including Internet, and a variety of specialized telecommunications services.

Add all this to the long-term digital media requirements, and it’s hard to envision how the two top cable operators will lead the industry to settle on even two sets, let alone one, of operating protocols. Some people are betting heavily that it won’t happen for at least another two years.

WHOLE LOTTA TESTING GOIN’ ON

Trip Hawkins, on the cusp of watching his company’s first 3DO Multiplayers hit the stores, takes talk of megadeals with software developers with a grain of salt, or so he suggests in his assessment of the possible TCI/Microsoft deal. “I don’t care if TCI and Microsoft do some big deal and get GI or anybody else to supply the boxes,” Hawkins says. “TCI isn’t the type of company that’s going to stack all its chips in one place. There’s a lot of testing to be done before things settle out.”

[As this issue went to press, Hawkins announced 3DO's participation as settop terminal technology provider in a US West-sponsored interactive TV test in Omaha. See story, p. 24]

There is some built-in momentum behind the two-system scenario, however. SGI already has an API agreement with Microsoft, which allows SGI’s high-powered workstations to have wider access to applications software than would otherwise be the case. If well implemented, that bridge could be the girding that holds up an otherwise unlikely joint venture on system protocols between TCI and Time Warner.

“I’d hate to see us going toward a two-system approach, but it can work if there’s agreement on an API,” says a senior cable engineering executive, who is rooting for a one-system solution. Asking not to be named, he comments, “Outside of Microsoft, no one has gone as far as SGI toward addressing our concerns.”

Fred Dawson