Meet the Street: The Growing Power of Cable Modems

Cox Communications tapped Riverstone Wednesday for some Internet gear that will help the cable service spread broadband delivery over its network. Riverstone, once a division of Cabletron Systems, is edging out into its own as a router maker and would-be challenger to Cisco on a few fronts.

Suresh Gopalakrishnan, Chief Technology Officer, Riverstone

Recent Meet the Streets

Ethan Allen's Farooq Kathwari

American Stock Exchange's Ravi Apte

Deloitte & Touche's Irwin Cohen

Personal Finance Expert Richard Bloom

Lipper's Andrew Clark

Notably, one of the few areas in tech showing signs not just of life, but of growth, is in cable modem equipment. Suresh Gopalakrishnan, Riverstone's chief technology officer and a former engineer with tech heavyweights Sun Microsystems and Hewlett-Packard, offers his view of cable's spreading influence as a Net access pipe. In particular, we ask him to shed some light on a battle heating up in a little patch of the market known as cable modem termination systems, or CMTS, where Cisco currently reigns.

TheStreet: It seems not too long ago that the CMTS market was a sleepy corner of tech that Cisco dominated. Now we have a relatively big acquisition by Juniper recently, and you folks have been making some noise with your product. What's brewing?

Gopalakrishnan: I think everyone is realizing that cable is the most effective medium for delivering residential voice and data. And we see a lot of cable companies going into the data market these days. That seems to be keeping people's interest in cable.

TheStreet: Is it fair to say that what little spending there is, is shifting much like on the phone networks away from the core and toward the edge?

Gopalakrishnan: Two things are happening: There is definitely an increase in spending toward the edge. Then, on top of that, there're lots of plans to build out more network capacity among cable companies. The current needs have been driven by broadband residential access, and what cable companies want to get into is business services where they can make a lot more money. And when they go into that kind of business, they really have to make sure they have enough capacity on the backbone to serve that need. So there's definitely spending on both sides.

TheStreet: Cisco has 80% share of the CMTS market. Do you think you'll chip into that in 2002?

Gopalakrishnan: Yes. If you look at our products, you'll see there are a significant number of differences. Our product is a card that goes into our router and serves as a single-box solution with cable on one side and any kind of network attachment on the other side. The current Cisco offering is a two-box architecture. But I can't make any predictions on market share.

TheStreet: Is cable modem service gaining what they call critical mass, where the subscriber growth charts move up to the right steeply?

Gopalakrishnan: Given that the cable is already in the house, it gives cable companies the edge over any other medium being proposed. Cable companies are pretty integrated and know how to offer these services. I'm sure there will be strong demand continuing on that front. It's hard to make predictions, but given the trends we see, I think it will grow aggressively over the next few years.

There will also be a lot of factors coming into play, including pricing and the competition from DSL, but we do see cable companies aggressively pursuing this and that means they [must] be able to work on the pricing issues that come along.

TheStreet: We saw a lot of tech wrecks in the access sector between digital subscriber line meltdowns and cable gear misfirings. What suggests that Riverstone won't also succumb?

Gopalakrishnan: Cable is just one of the areas we play in. We are not completely dependent on this market. A lot of the players who made the cable gear were entirely dependent on cable companies selecting them for some portion of their network. We don't have that dependency. We have a diversity of products and also a diverse customer base. Cable is just one piece of the whole thing.