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Cable Modems’ Role Increases Going Forward

The advent of the cable-modem-equipped TV set-top box and increasing popularity of Internet gateways does not spell the end for the standalone cable modem at retail. However, the popularity of these new devices does signal a shift away from the PC as the future hub for broadband access and home networks.

Cable modem vendors, for one, are upbeat over this turn of events.

“This is a strong sign that the pie is getting bigger for broadband-connected devices and that people want more from their broadband service,” said John Burke, VP/general manager for Motorola’s broadband communications sector.

What consumers want now surpasses simply fast access speed to the Web, Burke said, adding that it opens the door for a raft of new CE and computer products to be sold by retailers along with new services for cable operators to push both on their own and through retailers.

Motorola, which makes not only cable modems but a variety of broadband devices, has developed its Connected Home strategy, not around the PC, but the broadband-powered home network and its focal point, the Internet gateway. Where a basic cable modem can only bring broadband service to a home’s single PC, the gateway combines a cable modem and router. This greatly increases its usability by making it the hub for a variety of home networks that will connect a consumer’s computers to their entertainment systems. And it lessens a desktop computer’s importance.

“Today we need the PC to manage the network, but this will migrate to the gateway over time,” Burke said.

Modem and home network kit maker Linksys, which was purchased earlier this year by Cisco, said the gateway is a more powerful device and it gives the cable and Internet service providers deeper access into consumer home’s, said Matt McRae, Linksys’ director of broadband products.

With an Internet gateway, access is not stopped at the modem or TV set-top box, but can extend to the entertainment components with services such as downloadable music and video and home networking now able to be delivered.

Cable operators, and to a lesser extent Internet Service Providers, will largely be responsible for supplying customers with this equipment. This differs from today’s model that has consumers pick and choose what they want from a retailer and then install it themselves. Burke and McRae agreed that the broadband, gateway and home networking technology is so complex that many consumers will decide to lease the equipment from their cable company, in the exact same fashion that they now rent their cable TV box.

“The service provider can install it and offer tech support for a monthly service fee,” McRae said.

This also places the burden of up-selling the customer on the array of music, video, home networking and other services now becoming available onto the cable company, which historically is not set up to handle this task.

McRae said one of Linksys’ primary tasks is to teach the cable service providers how to properly sell gateway and the services that they can bring into a home. The service providers can make these upsells when a homeowner calls requesting broadband service.

This does not mean retailers will be left out. For the time being most product still will be sold through stores, but down the road Motorola and Linksys believe the cable operators will act in conjunction with retailers, in the much the same fashion as cellphone service providers.

There remains one thing that could upset this apple cart and that is DSL broadband. DSL now lags far behind cable in delivering broadband Internet access to consumers in the United States, but it is the dominant format in the rest of the world.

“From a technology standpoint, it is hard to deploy DSL in the U.S.,” McRae said.

These firms also lag behind the cable industry in integrating their service with CE products, McRae said. However, this is changing, he said, with DSL providers, such as Verizon, having reduced their monthly service fee, while some cable companies have increased their charges.