Wave Report

After six months of waiting, the telecommunications industry
today was handed the final results of the FCC's Triennial Review
of its implementation of the Telecommunications Act of 1996. At
576 pages long, it will likely be several days until it can be
determined how closely it matches the initial announcement of
results in February, and what implications are raised by its
language.

The compromise decision the Commission announced last winter was
the result of a last-minute push by Commissioner Kevin Martin,
and was seen as a defeat for Chairman Powell. As announced, the
decision would have ended line sharing by competitive data
providers, and pushed adjudication of unbundling rates to the
state level. In addition, the announcement that future high-
speed fiber deployments will be free of line-sharing requirements
has led to a surge of interest in fiber to the home (FTTH) by
incumbent carriers such as Verizon.

The full impact of the decision is based on the details. As a
result, the wait between February and today has essentially been
six months of uncertainty for the industry. Many rumors have
swirled concerning the continued behind-doors negotiations, and
the fallout from the defeat of Chairman Powell's proprosal. Now
we will get to see which were right and which were wrong.

The Triennial Review document is available as an Adobe PDF
download from the FCC Web site. It can be found, with earlier
announcements, on the Triennial Review home page.

http://www.fcc.gov/wcb/cpd/triennial_review/

***Red Herring Magazine Ceases Publication
By James Sneeringer
(August 18)

The WAVE Report received the sad little postcard at the beginning
of this week--"Red Herring has ceased publication." Started in
1992, Red Herring tracked the development of the commercial
Internet from its early days of text-based browsers. The topics
the magazine covered closely mirrored those of the WAVE Report,
from multimedia, virtual reality in the mid 90's, to the
converged computing and telecommunication infrastructures and
services today, and in fact WAVE editors and a Red Herring writer
occasionally consulted on stories.

Red Herring took the trip from a lean venture-oriented magazine,
to a thick ad-filled success story, and through lay-offs and
downsizing, back to a lean operation. In doing so it mirrored
the industry it covered, and as it ceases publication it
completes it own story. It hung on longer than most, but
unfortunately won't see its tenth year.

The Red Herring Web site has an essay about the magazine's
history.

http://www.redherring.com/columns/2003/monday/editorial030303.html

***DSLHome Receives Support from Major US DSL Providers
(August 19)

Some of North America's leading high-speed digital subscriber
line (DSL) Internet access providers -Bell Canada, BellSouth, SBC
Communications Inc., and Verizon - today announced their support
of DSLHome, a DSL industry initiative to help spur the adoption
of DSL-based home networks to deliver voice, video and data
services.

The DSLHome initiative was created by the DSL Forum, an industry
consortium of DSL providers. The aim of the DSLHome initiative
is to both drive technical innovations in DSL for online families
and teleworkers, and to help Internet users better understand and
more easily establish DSL-based home networks. The DSL Forum is
working to establish an industry accepted networking architecture
that will support full connections to the Web and/or virtual
private networks by multiple users, and to initiate a global
consumer education program.

As part of the DSLHome initiative, Bell Canada, BellSouth, SBC
Communications Inc. and Verizon will work with service providers,
vendors and other organizations to share best practices and
infrastructure requirements to meet the growing consumer need for
home networking solutions. According to a May 2003 report by
Forrester Research, more than 25% of broadband homes in North
America currently have home networks, and by 2008, that number
will grow to 44%.

At the upcoming DSL Forum meeting in Boston (September 2-5, 2003)
the four companies, along with other industry participants, will
present a proposal about a home networking architecture that will
allow providers to offer their customers advanced IP-based voice,
video and data services. In the first quarter of 2004, the
companies also will present a joint contribution defining ADSL
Residential Gateway requirements.

In addition, the providers are contributing to a consumer
education campaign, which conveys the benefits and simplicity of
home networking solutions for people using DSL services. Some of
the educational materials produced in conjunction with the DSL
Forum include three new DSL user guides:
The ABC's of Broadband Powered Home Networks
How to Select and Set Up the Right Home Network Solution
Technical Guide: Installing DSL Powered Home Networks

http://www.dslforum.org
http://www.dsllife.com

0329.2 Story of the Issue

***AlwaysOn 2003
By John Latta
July 15-17

Stanford University
Palo Alto, CA

AlwaysOn is a conference put on by the publication Red Herring
and hosted by the Stanford University Law School. It is also an
insider's conference with many key individuals from technology
companies and VCs in the San Francisco Bay Area. The panels are
populated with CEOs and CTOs. These are also the survivors of the
bust.

One way to consider this event is to ask the question - Where do
we go from here? The conference organizers might view this is
overly harsh. What is being sought is to validate the impact that
AlwaysOn will have. As a result, the conference probed many
issues from wireless to security to home networking. The panel
discussions were unstructured and the insights frequently
haphazard. There was an audience poll on two key issues per panel
and an on-going web cast. This is all great use of Internet
technology, but in the end the value to those who paid the bucks
to come were the insights gained from being there and contacts.
This was a networking event between individuals, many of whom are
the who's who in technology in the Bay Area.

AOL Shows AOL 9 with Wireless Support

Jonathan Miller, Chairman and CEO, AOL spoke for the first time
about the impact of the restructuring it has been going through.
One element of this is built-in wireless support in AOL 9, which
he showed for the first time at this conference. The details of
the wireless support were not fully announced but included the
Wi-Fi hot spot companies of AT&T and T-Mobil and implied support
for Wi-Fi. At the same time AOL 9 shows how the company is
seeking to be a one stop subscription services company. Broadband
plays a central role in this but it remained unclear how AOL will
provide the connectivity.

This was the first public airing of the AOL strategy after the
hail storm of reorganization and turmoil. Jonathan Miller seemed
less than comfortable with the presentation but it came off with
insights on company directions. He was clearly seeking to fit
within the theme of the conference of AlwaysOn. AOL has been
doing extensive consumer research to set this direction and
Jonathan used much of this to pepper his talk:

- We recently completed research with 25,000 customers. We
found that there are substantial different use patterns of
connected households with extensive online experience. We
call these the "highly tenured" users. Typically these have
4 years or more of experience.

-- This group spends 2X more time online per day;
--- 88% more e-mail sessions and
--- 40% higher IM usage.

-- 1/2 use broadband radio or music.

-- 55% watch video or movie clips.

-- They spend 65% more time than non-tenured broadband
users.

-- This group is 3X more likely to buy a book online,
7X more likely to buy a game and 5X more likely to buy
online.

- The #1 concern of parents is parental control but 97% do
not use what is available.

- We need to clean up the neighborhood that has been created
by the Internet. This has many forms from parental control,
to spam to virus.

- At AOL we block from 1.5 to 2.5B spam messages a day.

- Our new user interface will be made available to users in
a few weeks is AOL 9. Some of its features include - an
example session was shown.

-- We seek to significantly ease the user access to
features and content of interest to each user. Much of
this will be made available with either one click or
zero click - the latter being menus or information
which surface as the mouse hovers in an area of
interest.

-- We have computed the value of the free content and
services in the AOL subscription of $14.95 is $130 if
purchased independently and this is exclusive of e-mail
and IM.

-- We believe strongly that content drives
functionality. That is, that content will drive the
value of the user experience. One important element of
this is peer to peer.

-- The theme of AOL 9 was:
--- Always in Control
--- Always Protected
--- Always Engaged and
--- Always with You.

-- As part of Always in Control was SFO - Search, Find
and Obtain.

-- Always with You encompasses Home Networks but little
was said on what and how AOL will support this. Another
component is via Wireless and Voice - it is assumed
that this implies a WiFi connection including hotspots.

-- Significant improvements to parental controls were
shown that allowed parents to remotely control access
that their children have to the Internet.

-- We have relationships with the major wireless
providers and this includes AT&T and T-Mobil and this
is reflected in AOL 9.

- One of the fastest selling add-on products we have is
virus protection for the home PC.

- We seek to make AOL for life.

- AlwaysOn - we are betting the company on this.

- Our business model is that of subscriptions to services
purchased by consumers.

Palm Looks to the Future

Eric Benhamou, Chairman, Palm and 3Com, laid out his view of the
future of handheld devices. His list of factors and technologies
included:
- Flexible displays including electrophoretic (e-ink);
- Software configurable hardware
- Software defined radios
- Power conserving OS and
- Power supplies

Eric was particularly bullish on the potential and technical
advancements in displays. We believe that Palm is likely to be
the first company with an e-ink product. An example was shown of
Palm Tablet which includes a stylist. A role for the remote
control was indicated when Eric stated that there were 500m
remote controls shipped in 2002 - more than the number of cell
phones. With 30m handheld computers having shipped the exciting
market has yet to arrive. It is here that pricing will play a key
role. Eric stated that, as he has seen before, the $100 price
point is where the market will explode. This is on the horizon at
Palm.

Eric ended his talk with the impacts of the recent M&A activities
on the industry. Palm, when combined with handspring, will become
the Palm Solutions Group, and Palmsource, the independent OS
company. This company will be free to pursue many applications
for the OS, independent of the hardware. Eric provided broad
categories of: ultra-mobil, communications, information,
lifestyle, industrial and education.

Panels

Communities

It was interesting that on this panel was both eBay and
Match.com, a dating service. Some of the eBay comments
were the most interesting.

- Major corporations are now using eBay as a soft
launch medium. They could not identify any
products that were pulled due to poor response
from such market testing.

- BuyItNow happened due to user demand and now 30%
of the sales are done with this.

- eBay began as a collectable site but now 60% of
the merchandise sold is what they call
" practicals."

- Some of the experiments with wireless for eBay
bidding have gone very well, in particular in the
UK and Germany where bidding is done on SMS. The
US does NOT get wireless.

Wireless

This panel struggled with the debate: Wi-Fi vs. 3G.
Qualcomm held on to its position that 3G is the future,
but acknowledged that Wi-Fi has a place. One of the
more interesting points centered on the struggle: what
is the role of fixed, all-you-can-use pricing? T-Mobil
has unlimited usage of Wi-Fi at $19.95 and GPRS at
$29.95. Many on the panel felt that $50 is the market
breakthrough level. That is, at $50 or less the
wireless data market will expand rapidly. Sky Dayton,
CEO of Boingo Wireless, compared this to his experience
at EarthLink - when the ISP pricing dropped to $19.95,
Internet access exploded.

Home Networking Panel

This was lead by Kristine Stewart, the President of the
Internet Home Alliance. On the panel were Invensys,
Sears, Whirlpool and Microsoft.

Sears made the case for remotely monitored appliances.
They have 13,000 service technicians who make 12m
service calls a year. 12% of those require a second
visit - mostly due to the need to get a part. There is
a huge economic incentive on Sears' part to understand
what the problem is before going to the home.

Invensys Home Control Systems made the point that there
could well be enough value from home networking, such
as power management, that the value from the home
networking change would not require any consumer
investment.

***WAVE Comments

We spent two days with the best minds in the business of
PC/IT/Networking and related areas. One word sums it up -
incoherent: The areas of discussion included
- Wireless;
- Home Networking;
- Communities
- DRM;
- Real Time organizations;
- Security;
- Handheld devices;
- OpenSource and Linux and
- More.

By definition the companies here are the survivors of the bust.
Yet, there were no fresh insights as everyone struggles. Be it
eBay or Palm they each tune their respective playbooks in the
markets they understand.

It can be rightfully argued that incoherence is the nature of
markets and the future. But we go beyond that. With what have
been 30% growth markets, these have now collapsed to <10% and in
many cases <0% growth. Few are interested in these markets - they
are boring. It remains to be seen if this sector will regain its
glory. If that will happen was not at all clear from AlwaysOn.

The format of free flowing panel discussions has its high and low
points. The high point is that the moderator may be able to
elicit fresh insights, and the low point is that nothing new may
be said. All the sessions were framed in the latter. We believe
that the combination of the unstable industry and format made the
conference interesting but not a blockbuster.

0329.3 Cable Modems

***Infonetics Research: CMTS and Cable Modem Market Data for
Second Quarter
(August 21)

Worldwide CMTS revenue reached $120.5 million in 2Q03, a 41%
increase from 1Q03, while worldwide cable modem units grew 7%
from 1Q03 to 2Q03 and revenue increased 6% to $235.8 million,
according to Infonetics Research's Cable Aggregation Hardware and
Cable CPE quarterly worldwide market share and forecast reports.

2Q03 CMTS Market Highlights

* After a down quarter in 1Q03, worldwide CMTS revenue grew 41%
from 1Q03 to 2Q03, to $120.5 million
* Cisco leads the CMTS market, with 41% worldwide port market
share and 43% revenue market share, followed by Arris and
Motorola
* Upstream CMTS port shipments grew 38% and downstream CMTS port
shipments grew 40% from 1Q03; 84% of CMTS ports were upstream,
and 16% were downstream
* 57% of 2Q03 CMTS revenue was from North America (up from 1Q03),
28% from EMEA (down from 1Q03), 13% from Asia Pacific, and 2%
from CALA
* Infonetics Research forecasts revenue growth in the double-
digit percentages for the CMTS market in CY04 through CY06, when
it will reach $643.7 million.

2Q03 Cable CPE Market Highlights

* Worldwide cable modem units grew 7% from 1Q03 to 2Q03, and
revenue increased 6%
* Worldwide cable modem and router units with 802.11 grew 166%
from 1Q03 to 2Q03, and revenue grew 147%.
* Motorola leads cable CPE revenue market share, with 35%;
followed by Thomson, Toshiba, Terayon, and Scientific Atlanta,
each with between 9% and 14% revenue market share
* 67% of 2Q03 cable CPE revenue was from North America, 18% from
EMEA, 11% from Asia Pacific, and 4% from CALA

The Cable Aggregation Hardware and Cable CPE reports track CMTS,
cable modems and routers, modems and routers with 802.11, and
IADs. Forecasts and regional market share are updated quarterly
and cover all regions (worldwide, North America, EMEA, Asia
Pacific, CALA).

Companies tracked in this service include ADC, Arris Interactive,
Cisco, COM21, Linksys, Motorola, NETGEAR, Samsung, Scientific
Atlanta, Terayon, Thomson Multimedia, Toshiba, US Robotics, ZyXel
and others.

Infonetics Research is an international market research and
consulting firm covering the data networking and
telecommunications industries in North America, Europe, and Asia.

http://www.infonetics.com

0329.4 WLAN

***Airgo Launches MIMO WLAN Chipset
(August 18)

Airgo Networks, a developer of wireless technology and products,
today announced that its AGN100 Wi-Fi chipset is available for
sampling. By using their multiple antenna system, Airgo stated
that the AGN100 extends existing Wi-Fi rates to 108 Mbps per
channel, while remaining compatible with common Wi-Fi standards.
In head-to-head testing, according to Airgo, the AGN100
demonstrated range that was two to six times that of competing
WLAN chipsets.

Airgo's chipset is intended to increase the throughput, range,
and reliability of Wi-Fi devices by utilizing Airgo's
breakthrough multi-antenna transmission and reception technology.
The chipset is one of the first mass-market products to
incorporate Multiple-Input-Multiple-Output (MIMO) technology, a
high-end class of smart antenna signal processing. The AGN100 is
based on the multi-antenna signal processing research that Airgo
founders began at Stanford University in 1995.

Airgo has also re-thought their entire network solution,
designing features into the chipset to support security, quality
of service for video and music or voice over IP, roaming, and
other networking features. The chipset also supports the same
standards-based network security technology used in many
enterprise Ethernet networks.

The AGN100 is an integrated two-chip set that includes a
Baseband/MAC chip (AGN100BB) and an RF chip (AGN100RF). The
chipset is built with a scalable architecture designed to allow
manufacturers to implement single antenna systems using just one
RF chip or increase performance by adding additional RF chips.

Airgo stated that the chipset supports all 802.11 a, b, and g
modes and also extends rates to 108 Mbps. It incorporates the
latest standards from the IEEE 802.11 working group including
(draft) TGi security and TGe quality of service features. Airgo
has worked with its manufacturing partners to create designs for
Access Points as well as Cardbus, MiniPCI, and PCI clients.
Sample products utilizing the AGN100 wireless chipset are now
available from Airgo's manufacturing partners, to qualified
network equipment manufacturers and other original equipment
manufacturers (OEMs). Airgo is also developing software for
wireless network solutions that take advantage of the features
that are built into the hardware products.

http://www.airgonetworks.com

0329.5 DSL

***FCC Grandfathers Covad Line-Sharing Customers
(August 22)

The Federal Communications Commission (FCC) Triennial Review
order released yesterday includes a grandfathering provision for
Covad Communications line-sharing customers that was not
disclosed in the February announcement. While the order phases
out line sharing for new customers, it preserves line splitting,
which allows Covad to provide DSL broadband service on the same
line a competitive voice provider uses to provide local phone
service. The Commission also preserved Covad's access to full DSL
loops and interoffice transport, and strengthened its rules
regarding T-1 loops.

All Covad line-shared customers obtained as of the effective date
of the order will be grandfathered indefinitely at current rates,
terms and conditions. Covad will also be able to obtain new line-
sharing customers for one year after the effective date of the
order. After the first anniversary of the order, Covad expects to
continue adding new line-sharing customers in areas where
reasonable rates can be negotiated with the local phone company.
However there will not be any regulatory compulsion for the local
phone companies after this date.

New line-shared loops added in the first year after the order's
effective date will be subject to a price ceiling of 25 percent
of the stand alone loop rate in the jurisdiction in which the
customer is located. After one year, that price rises to 50
percent of the full loop rate. After two years, the price rises
to 75 percent of the full loop rate. After three years, the local
phone company is no longer required to provide line-sharing for
these customers. Covad plans to transition these customers to
alternative arrangements, most likely line-sharing agreements
negotiated with the phone companies.

The ruling expressly preserves line splitting in its entirety,
including line splitting in conjunction with the unbundled
network element platform (UNE-P). UNE-P enables voice service
competition by allowing other providers access to the local phone
company's voice switches and transmission facilities. Line
splitting is conceptually similar to line sharing with the key
difference being that under line splitting, access to the
residential line is "split" between Covad and a competitive voice
provider rather than being "shared" with the local phone company.
Today, approximately 10 million UNE-P lines are in service and
that number is expected to double by 2005.

The FCC also addressed uncertainty over the February 2002
broadband Notice of Proposed Rulemaking (NPRM) by clarifying that
Covad's access to DSL-capable loops is not contingent upon the
types of services offered by the incumbent phone companies over
those loops.

Covad believes portions of the FCC's order concerning broadband
competition, including the phasing out of line sharing, are not
supported by law or the record before the Commission. The
company, therefore, intends to appeal those parts of the
decision.

http://www.covad.com

0329.6 3D

***Superscape and Sony Pictures Mobile to Co-Publish New S.W.A.T
Mobile Game
(August 18)

Superscape Group plc, developers of Swerve i3D JSR 184 compliant
technology for mobile phones, announced today that it will co-
publish with Sony Pictures Mobile, a business unit of Sony
Pictures Digital Networks, a new 3D game for mobile phones based
on the recent motion picture "S.W.A.T." The film debuted in
theatres last week in the US and opens in the UK and Europe in
November.

Under the terms of the agreement, Superscape and Sony Pictures
Digital Networks will work together to license and distribute the
game to mobile phone manufacturers and network operators. The
game will be available for download 'over the air' (OTA) as well
as being embedded into selected mobile phones.

Utilising the company's Swerve i3D technology, Superscape is
developing two versions of the game: one written in Brew and the
other in Java. The game will be available to mobile consumers on
a global basis later this year.

The game takes elements of the film to produce a first person
shooter game, with visual effects and sounds, interspersed with
sequences of animated full motion video. Players are able to
choose from seven different missions, which they can download
'over the air'. Players can select from one of three different
play modes (easy, normal and call 911 - the most challenging).
Interactive 3D objects are included in the game that will 'react'
when shot by the player, including vehicles, buildings and
machinery. The animated full motion video sequences are used in
the game to establish scenes and plots, and to brief players on
the objectives of the different missions.

http://www.superscape.com

0329.7 Displays

***Philips Introduces LTPS System Module for Mobile Phones
(August 19)

Royal Philips Electronics of the Netherlands, a developer of mobile
display technology, today introduced the latest addition to its line up
of active matrix liquid crystal displays(AMLCDs) -- an integrated, low
temperature polysilicon (LTPS) system module for mobile phone
applications. This active matrix solution features an architecture with a
DC/DC converter embedded on the actual glass.

The majority of AMLCDs produced today, including those
manufactured by Philips, utilize amorphous silicon (a-Si). However,
Philips' latest solution leverages LTPS (known for improving transistor
performance), allowing for the integration of many of the circuitry
functions onto the actual glass substrate, according to Philips. The
company stated that this functional integration capability results in
lower integrated circuit (IC) costs, a reduced number of components
and tighter display margins.

Specifically with Philips' new LTPS LCD module, the majority of the
DC/DC converter is directly embedded onto the actual glass, thereby
requiring only a single supply voltage. The interfacing requirements are
standard so that OEMs can employ this module within their respective
mobile phone applications in a "plug & play" fashion. Philips reports that
its LTPS active-matrix solution will be available for production by the
end of Q4 2003.

Other features of this new module include:
-- 18-bit data, 262k colors, normally white;
-- DC/DC and gate driver on LTPS panel;
-- Resolution: 176xRGBx220;
-- Contrast ratio: 100:1 (transmissive); 10:1 (reflective); and
-- Brightness: 150 cd/m(2)

Today's announcement follows another Philips' announcement in the
display industry. The company recently introduced a transmissive, a-Si
thin film transistor (TFT)-LCD color solution for the telecommunications
market, and specifically for 'clamshell-style' mobile phones. Both of these
recent breakthroughs compliment the company's AMLCD portfolio, which
also includes reflective and transflective technologies.

Royal Philips Electronics of the Netherlands is Europe's largest electronic
company, with sales of EUR 31.8 billion in 2002.

http://www.philips.com/

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