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IP Telephony Meets Cable TV Sandy Teger and David Waks System Dynamics Inc. Fall’97 VON September 25, 1997 Copyright © 1997 System Dynamics Inc.
Copyright © 1997 System Dynamics Inc. Sandy Teger and David Waks Slide 2 Overview Cable industry is rolling out high-speed Internet access and services Starting to introduce communications applications Many potential markets and applications for IP telephony over cable Corporate work-at-home is attractive initial opportunity Addition of video is natural migration
Copyright © 1997 System Dynamics Inc. Sandy Teger and David Waks Slide 3 Cable Industry Today Cable passes more than 97% of US TV households Penetration stable at about 65% Systems have been islands, slowly interconnecting –“Clustering” –“Interconnects” Relatively fragmented industry, but consolidating –Top 10 multiple system operators (MSOs) have 75% of subscribers
Copyright © 1997 System Dynamics Inc. Sandy Teger and David Waks Slide 4 Cable Operators See Bright Future... Operators have valuable assets –Deployed physical plant –Bandwidth to the home - “broadband real estate” –Customer relationships New services are promising –Digital television –High speed data services –Telephone services, especially IP telephony Microsoft boosted industry –$1 billion investment in Comcast
Copyright © 1997 System Dynamics Inc. Sandy Teger and David Waks Slide 5... But Challenges to be Overcome Plant Upgrades –Hybrid Fiber-Coax (HFC) architecture, two-way Proactive Network Management –Plant status monitoring and response systems –Data network management –Traffic measurement, capacity planning Culture changes –Plant reliability –Customer care
Copyright © 1997 System Dynamics Inc. Sandy Teger and David Waks Slide 6 High Speed Data Over Cable is Real Major changes in past year Modems maturing Plant preparation moving quickly Rollouts under way in North America –Commitments to aggressive deployment by major MSOs –Cable operators are acting as ISPs Trials and rollouts in many other countries
Copyright © 1997 System Dynamics Inc. Sandy Teger and David Waks Slide 7 “Cable Modems Pass 2M Mark” (Multichannel News 3/17/97)* * Homes passed by data-service ready networks (1.5M in U.S., 0.5 in Canada) ** excludes institutions HSDS Subscribers in North America** Source: Cable World 7/21/97
Copyright © 1997 System Dynamics Inc. Sandy Teger and David Waks Slide 8 High Speed Data Services Over Cable - Some Examples
Copyright © 1997 System Dynamics Inc. Sandy Teger and David Waks Slide 9 HSDS Is Much More Than Faster Dial-up Cable modem technologies have common underlying characteristics Truly high speed connection between cable “headend” and the PC –Downstream (to home): 1 to 27 Mbps –Upstream (to headend): up to 10 Mbps –Bandwidth shared between users –High speed connection to PC Continuous connection Based on Internet Protocol (IP) and Winsock Some technologies include QoS Provides a “fat pipe” for IP applications
Copyright © 1997 System Dynamics Inc. Sandy Teger and David Waks Slide 10 HSDS Value Proposition “Blazingly Fast” — connection and services “Always On” — becomes a utility Doesn’t tie up phone line Turnkey solution –Modem, NIC, software, in-home installation End-to-end system support - one phone call Content –Links to best sites –Becoming specialized for high-speed delivery High quality of service when “on-net”
Copyright © 1997 System Dynamics Inc. Sandy Teger and David Waks Slide 11 HSDS Markets Two distinct markets –Residential (households with PCs) –Business (businesses with PCs) New market for most cable operators –Different needs in each market and segment PC households have distinct segments –Self-employed working at home (full time, part time) –Corporate employee working at home Telecommuter: full-time at home Corporate after hours: part-time at home –Non work at home
Copyright © 1997 System Dynamics Inc. Sandy Teger and David Waks Slide 12 HSDS Applications Multiple applications –Two distinct types: content-based and communications-based –Differing characteristics –All evolve over time Broadband changes the equation Near term –High-speed access to Internet –Web content hosting –Telecommuting/remote LAN access –IP telephony Longer term –Videoconferencing and video telephony –…and many more
Interactive games Download Play WorldWide Web Electronic mail Internet Continuum of Electronic Applications Content Communications Telecommuting Broadcast radio and TV Video telephony and teleconferencing Information on products and services Transactions and support Electronic Commerce Telephony Subscription video services Commercial on-line services (AOL, CompuServe, Prodigy) Proprietary content , chat, forums Copyright © 1997 System Dynamics Inc. Remote LAN access
Copyright © 1997 System Dynamics Inc. Sandy Teger and David Waks Slide 14 IP Telephony Attractive to Some MSOs Diminished enthusiasm for primary telephony –Varies by MSO — some still enthusiastic –Requires major infrastructure and culture changes –Regulatory uncertainties –Key issues: powering, standards, pricing CableLabs actively promoting IP telephony –Natural application for HSDS –Proactive testing and vendor interactions –Encouraging interconnection of major MSO backbones (Time Warner, Media Several MSOs intrigued by revenue potential of IP telephony
Copyright © 1997 System Dynamics Inc. Sandy Teger and David Waks Slide 15 Multiple Motivations for IP Telephony “Do it cheaper” –Strong motivator, but expect to decrease over time “Meet people” –Basic human needs and emotions “Do it better” –“Value added” applications –Early opportunities in business segments
Copyright © 1997 System Dynamics Inc. Sandy Teger and David Waks Slide 16 Cable Applications for IP Telephony Many applications -- residential and business –Second line telephone service –Corporate work-at-home –Corporate intranets –Customer sales and support / Call centers Broadband enables logical extension from point-to-point voice to –Data collaboration –Video –Multipoint
Copyright © 1997 System Dynamics Inc. Sandy Teger and David Waks Slide 17 Corporate Work-at-home Opportunity Segments –Telecommuter –After hours User needs: Transparency “Virtually There” –Remote access to information and systems –All PBX functions –Robust access to co-workers –Easy to install, easy to use Company needs –Demonstrable cost/benefit –Consistent (avoid multiple solutions, multiple vendors) –Secure –Controllable –Minimum “hassle value”
Copyright © 1997 System Dynamics Inc. Sandy Teger and David Waks Slide 18 The Vision - Location Transparency Worker at Home 1 has the ability to –Access data and applications at corporate offices –Operate as an extension off the corporate PBX –Collaborate with other workers, whether in offices or homes Home 1 Home 2 Home 3 Local Corporate Office Remote Corporate Office
Copyright © 1997 System Dynamics Inc. Sandy Teger and David Waks Slide 19 Broadband Access and IP Telephony are Key Enablers for the Vision
Copyright © 1997 System Dynamics Inc. Sandy Teger and David Waks Slide 20 Video Is a Natural Migration Some IP telephony vendors already supporting –VocalTec, Microsoft Broadband access removes a major limitation on video quality Natural enhancement for some applications –Collaborative work from home –Call centers Inhibitors remain –Home is likely to be ready for video before the office –High complexity in equipping home PC for IP video –QoS not widely deployed in early cable modem rollouts Broadband access will accelerate use of video when appropriate to “do it better”
Copyright © 1997 System Dynamics Inc. Sandy Teger and David Waks Slide 21 IP Telephony and Cable - Natural Partners
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