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Cable modems to retail

3Com is expected to announce tomorrow that it has started shipping cable modems destined for the retail channel, presaging a change in how the device is used.

    3Com (COMS) is expected to announce tomorrow that it has started shipping cable modems destined for the retail channel and the complementary equipment to enable a new generation of standards-based cable modems.

    The shipment of cable modems as well as the "head-end" equipment needed at a cable company's main site portends an industry shift toward the "consumerization" of cable modems. 3Com says its modems are expected to appear on a limited number of retail shelves by early next year.

    Instead of having a cable company technician come to one's house and install equipment, consumers will buy a modem from a store, open up their PCs, and install a card. A software program will automatically walk users through the rest of the installation process. However, the modems will initially be available only in areas where cable companies are offering Internet service.

    What will drive the presence of cable modems on retail shelves, according to company officials, is the industry standard referred to as the MCNS specification. A standard guarantees consumers that any one product is interoperable with similar products on the market. MCNS is an abbreviation for Multimedia Cable Network System Partners, the group of four major cable television system operators that manages it.

    "Industry standards are very important...Everybody is hoping for this [MCNS-compliant modems] to go to the retail channel," says Lisa Pelgrim, analyst with market research firm Dataquest.

    The new U.S. Robotics VSP and VSP Plus cable modems connect to existing TV cable lines and allow users to download Internet data at speeds of up to 38 megabits per second, 3Com claims. A built-in dial-up--or so-called telephone-return--modem sends data back out to the Net at the much slower rate of 33.6 kilobits per second.

    This contrasts with cable modems from some vendors which are "full-speed, two-way" cable modems. But these are proprietary modems the cable companies typically rent to consumers.

    3Com says it expects the modems to cost between $200 and $250 when they become available on retail shelves in the first quarter of 1998. Cable companies will be able to purchase the modems now if they want to rent them to consumers with their service.

    3Com won't be alone in rolling out standards-based modems. Cisco Systems recently announced it has developed a product design compliant with the MCNS specification. Hayes Microcomputer Products, Samsung Electronics, and Thomson Consumer Electronics will base their modems on that design too.

    The largest players in the cable modem space, including Bay Networks and 3Com, are expected to develop two-way MCNS cable modems that don't need to send data over the phone line.

    Most cable companies are planning on deploying two-way service, says Michael Harris, president of Kinetic Strategies, a broadband Internet research firm. One reason is that two-way cable modem service offers a compelling advantage over the telephone-return modems--users have an "always on" connection, he says.

    A study by Kinetic Strategies earlier this year predicted that subscriptions to data-over-cable services will grow to 197,000 customers by early next year, 1.6 million in 2000, and 3.2 million in 2002.

    One analyst thinks most of the users will have a different problem: Consumers aren't used to buying cable modems. "At some point, they might be interested in buying modems, but it might be a bit early," said Jay Myers, an director of Takeda Pacific. He adds that people are still getting used to the idea of cable modems and having the cost of the modem built into the service fee.