Who knew in '93 that the two-way plant would sprout the HSD business?

MIKE LUFTMAN Like a marathon runner’s legs, the FCC has begun to show some stress fractures as a result of its split decision affecting the Bells and their competitors. Of course, the main impact will be on the regional Bells and CLECs, but it’s obvious the impact will be broader than that, and clearly will affect the cable modem business. It’s equally clear that, whatever happens, the prospects for high-speed data over cable are stronger than ever. While some claim cable modems should be in even more homes by now, by anyone’s terms it’s a business of real scale, with a very big future. It’s easy to forget that ten years ago the business didn’t exist, and almost no one even had imagined it. Sure, a few cable companies had used coaxial “super trunks” to move data for businesses. But the idea of moving Internet traffic back and forth to home computers at high speeds wasn’t even a gleam in anybody’s eye. Of course, back in ’93 almost no one had a home computer. And if you asked most folks about the World Wide Web, they’d assume you were talking about a story in the latest issue of Spider-Man. So it’s worth recalling exactly how we got from there to here. By the late ’80s Time Warner Cable had begun to use fiber optic cable to carry television signals one way. Probably the first use was in Hawaii, then in Tampa, to cut out microwave hops that were unreliable in thunder storms. Besides better reliability, the main benefit was simply eliminating amplifier cascades in trunk lines. By 1993, the company’s engineers had invented what now is known as the Hybrid Fiber Coaxial (HFC) architecture, which created a clean return path and transformed the cable plant into a two-way network. The next year TWC announced it would build the “Full Service Network,” the world’s first interactive television system. The much-maligned FSN has until recently been considered an expensive flop. But that conventional wisdom has begun to change as a result of the growing (if belated) success of interactive TV. What’s not fully understood by most people is this: The FSN also was the godfather of the modern cable modem business. The connection isn’t quite as odd as it seems, because the FSN used Internet Protocol for all the signaling inside the network. All it took was engineers with some telephone network savvy to realize what now seems obvious: HFC plant would be an ideal way to connect home computers to the Web. The industry began talking about this possibility shortly thereafter, with the major players in addition to TWC being TCI and Comcast (ironically, now merged into one company). By 1995, the business that became Road Runner was being tested in a small rebuilt cable operation in Elmira, N.Y. Believe it or not, at the time it was known by the clunky name “The Southern Tier On-Line Community.” And in keeping with TWC’s desire to keep the launch low key, the birth of the cable modem business was celebrated at a glitz-free event at a cheesy country club somewhere between Elmira and Corning. Unlike the Orlando FSN launch the year before, almost no press attended. Around the same time, the cable industry began discussions on what became the DOCSIS initiative, which is perhaps the most successful effort by CableLabs so far and which has led to the cable modem business as we know it today. So what are we to take from this little history lesson? Mainly, that cable’s robust HFC architecture is its trump card in the ever-more-competitive future. The bright minds who realized our networks could support a cable modem business have been followed by more bright minds who are inventing other two-way services that will offer customers new choices in information, entertainment and communications. Telephone companies, too, will offer an array of services. Just last month Verizon began advertising a package deal for local, long-distance, DSL and wireless. But no one can match the bandwidth of cable’s HFC plant, and that will give the industry an important competitive advantage. The challenge will be for cable’s technical, business development and marketing experts to create and sell these products…and for its customer service and installation staffs to launch them with the highest quality. We have a pretty good track record of doing that, so there’s no reason to think there aren’t more successful businesses in our future. Mike Luftman is an adviser to Time Warner Cable. He was VP of corporate communications for that company and held similar positions at American Television and Communications and Time Inc., the world’s largest magazine company. He is also a consultant to companies in the cable and communications sectors. He currently resides in Rye, N.Y., and may be reached at [email protected].