"We will not produce a branded cable modem product, but we will continue to work on technology to provide to cable modem manufacturers," Intel spokesman Tom Waldrop said. Intel will focus its efforts on developing technology and standards that will lower the cost of modems and make them easier to install, Waldrop added.
Cable modem manufacturer Motorola recently announced a partnership with Sun Microsystems to use its CyberSURFR modems for Internet access at a rate of 10 mbps, about 700 times faster than the speed of most Internet service providers.
Analysts said today that Intel's decision comes as a major relief to other cable modem manufacturers that would have been its competitors, a group that includes Motorola, Hewlett-Packard, AT&T, General Instruments, LANcity, and Zenith Electronics.
"In the modem market you have to compete and you have to adopt standards," said Rob Enderle, analyst at GIGA Information Group, a research firm. "Modem producers would have felt that Intel had an unfair advantage if they set standards and stayed in the business," he added.
Intel is currently working with AT&T, HP, and Hybrid Networks to develop such a cable modem transmissions standard. Cable modems can transmit data from the Internet and other networks many times faster than conventional modems.
"If we don't agree on a standard for the products, it's going to be hard for them to become a mass market," said Waldrop. "And until there are standards and a large volume of production, it's going to be hard to move the cost down for consumers."
Waldrop expects that the three companies will agree on a cable modem hardware by the second quarter. He believes that cable providers will initially buy the modems from vendors and lease them to cable customers, just like today's set-top box, but that eventually they will become a retail product like any other kind of modem.
When that happens, Intel will have spared itself some pretty tough competition, according to Giga's Enderle. "New competitors and existing competitors may have to drop out of the market," he said.
Cable modem technology is already receiving significant attention because of its role in a high-speed online service project between Tele-Communications and @Home in Sunnyvale, California, which uses cable modems made by Motorola.