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TV gets closer to Internet

The cable TV industry and the principal manufacturers of cable modems and digital set-top boxes standardize the devices, clearing a major obstacle to linking television sets to the Internet.

The cable TV industry has agreed with principal manufacturers of cable modems and digital set-top boxes to standardize the devices, eliminating a major obstacle in turning America's television sets into onramps for the Internet.

Research consortium Cable Television Laboratories, which represents most U.S. cable operators including Tele-Communications Incorporated and Time Warner, said the agreement sets out to assure that devices built by different manufacturers work together on the same cable system.

The digital set-top boxes capable of receiving hundreds of channels and the high-speed modems for fast Internet access will allow the industry to bundle these services.

Speed, modulation, frequency of digital traffic over cable, and sound and video standards were decided. The agreement, which comes after five years of talks, may change the composition of the market, which is today dominated by just two manufacturers. As new manufacturers emerge, they are expected to develop new features for the devices to win market share as they become available, Cable Labs said. The Cable Act of 1992 calls for the devices to be sold to consumers in retail stores, but the industry has yet to do so.

However, the two manufacturers in question--General Instrument and Scientific-Atlanta--are still working on royalty-free cross-licensing to deal with encryption, modulation, and error correction technology.

Emily Green, an analyst with Forrester Research, said she does not expect dramatic results from the standards agreement. cable companies must first spend billions of dollars to upgrade their trunk line architecture before new manufacturers will be enticed to produce enough of the set-top devices cheaply enough to interest a broad market, she added.

"I don't think it's going to massively transform the market in the near term. It's going to take many years before the [bevy of] services are widely available."

Yet Don Dulchinos, director of business development at Cable Labs, said the investment may be in place before the end of the century. The country's largest cable operations, including Time Warner and TCI, are scheduled to finish the upgrade to hybrid fiber-coaxial (HFC) trunk lines in the next three or four years. A quarter of America's 63 million cable subscribers already have the new HFC lines that combined with digital set-top boxes offer about 120 video channels. The other 47 million homes have traditional coaxial cable links. While they are not as expandable, the older infrastructure can use the digital boxes as well, he said.

The agreement will have a less significant impact on digital modems, which by their interactive nature place greater demands on cable infrastructure, he added.

Several months of additional negotiations still remain to set cable modem standards, according to Mike Luftman, vice president of corporate communications for Time Warner Cable. Time Warner is conducting Internet trials known as Road Runner using cable modems in Akron and Canton, Ohio.

Luftman said his company is committed to expanding bandwidth to meet demand for Internet access, but that its current focus is on replacing HFC trunk lies. It has already replaced about a third of its architecture and will spend $4 billion to replace the rest of the network by the end of the century, he added. Time Warner is negotiating contracts with digital set-top box manufacturers to make the devices available to customers. But it will take at least another year before the boxes roll off the assembly lines, he said.

While the agreement is expected to quicken the cable industry's bid to offer online services, Gerald Levin, Time Warner's chief operating officer, told investors earlier this week that Time Warner might give up control of its cable systems. According to a report in USA Today, Levin said he is no longer passionate about the information superhighway and uninterested in the telephone business.

Levin may reduce the news, shopping, and video game services currently offered as part of the company's interactive TV venture known as the Full Service Network in Orlando, Florida. Levin's change of heart may have been influenced by Ted Turner, who is about to become Time Warner's vice chairman, and stockholders who are looking for a reduction in the company's debt. It may open the door to resolution of the company's dispute with Baby Bell US West, which owns 25 percent of Time Warner.