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MediaOne to offer cable modems in stores

The cable firm begins selling cable modems in retail stores, in what analysts say is the nation's first deployment of standards-compliant cable modems.

MediaOne Group will begin selling cable modems in retail stores tomorrow, in what analysts say is the nation's first deployment of standards-compliant cable modems.

MediaOne will offer cable modems in Circuit City retail outlets in Richmond, Virginia, where the Road Runner high-speed Net-over-cable service will be rolled out this weekend.

MediaOne will initially offer 3Com modems, which have been certified as compliant with the Data Over Cable Service Interface Specification (DOCSIS) by the industry's research organization CableLabs. The company plans to later offer modems from other makers, according to a spokeswoman.

The retail sale of standards-based modems has been touted as key to expanding subscriber numbers for broadband data services, especially for cable Net services like Road Runner or AT&T's Excite@Home.

AT&T is waiting for regulatory approval for its proposed purchase of MediaOne, announced in May.

The new modems will allow users to buy direct from a store, rather than leasing the technology from their cable operator. The modems also are "interoperable," allowing consumers to use the modems on a new cable system if they move to a different region of the country.

Cable operators also are anxious to pass the capital costs of buying thousands of cable modems on to consumers.

"This is just the tip of the iceberg," said Michael Harris, a cable modem analyst at Kinetic Strategies. "Both sides are eager to see how this will work."

As more operators and modem manufacturers offer their products in retail stores, the pricing models and promotions will be perfected, analysts said.

"The cable operators want to see how important the retail channel is to their subscriber numbers and the retailers want to see how much upside there will be in broadband," Harris said.

Pricing models will likely be a contentious issue in the future, analysts have said. Retailers are anxious to get a portion of the recurring revenue from monthly service charges, especially as the price of the modems begins to fall.

MediaOne had offered some cable modems with proprietary technology in retail stores in the Boston area earlier this year. But tomorrow's retail rollout is the first for standards-based modems, according to MediaOne and Kinetic's Harris.

Excite@Home, the nation's largest cable modem service, does not yet offer modems in retail stores.

The company has, however, sold its @Home Cable Internet Pre-installation Kit on shelves in CompUSA stores since last September. The kit retails for $39.95 and includes software, a CD-ROM, an introductory booklet, and coupons for one month of free service.

Road Runner is a joint venture between MediaOne, Time Warner, Microsoft, Compaq Computer, and Advance/Newhouse.

Road Runner had more than 250,000 customers at the end of the first quarter of this year. MediaOne claimed more than 114,000 Road Runner subscribers as of March 31, a spokeswoman said.

AT&T's pending acquisition of MediaOne has raised questions about the future of Road Runner, including the possibility of a combination with Excite@Home. AT&T is the largest shareholder in Excite@Home.

Separately, Merrill Lynch financial analyst Henry Blodget said in a research report today that Excite@Home is "very comfortable with subscriber estimates of 1 million to 1.1 million by year-end."