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In-Home Network Near: S.D. Firm's Chips Open Door for System Over Cable Lines

Posted on: Friday, 13 January 2006, 12:00 CST

By Mike Freeman, The San Diego Union-Tribune

Jan. 13--Just what technology will be used to stream programs you record on the TiVo in your living room to the spare TV in the upstairs bedroom?

Wireless seems to offer the cleanest path for this in-home transport of digital video -- no new wires needed. Technology that allows streaming over the home's electrical system is a possibility -- multiple electrical plugs provide easy access. Phone lines also could be used.

For privately held Entropic Communications, however, the most likely backbone for a home-wide network that links TVs, digital video recorders, computers and game consoles is good old coaxial cable.

Founded in 2001, the San Diego company makes semiconductor chips for consumer electronics and computer devices such as set-top boxes. These chips open the door for creating a home network over cable lines.

Earlier this month, Entropic raised $25 million in a third round of venture capital funding -- led by Palo Alto-based Focus Ventures. In all, Entropic has picked up $78 million since it was founded. Investors include San Diego's Mission Ventures, EchoStar, Comcast, Cisco, Motorola, Panasonic and Time Warner.

Entropic's cable-based technology is one of several sprouting up to provide the infrastructure for home networking -- a centerpiece of the much ballyhooed digital home.

Although touted for years by technology giants from Intel to Microsoft, the digital home has been slow to take root. True, music, photos and video are switching from analog to digital -- making them easier to store on computers, digital video recorders, game consoles and other electronic devices.

But the second big promise of the digital home -- the ability to share all this content throughout the home via a network -- has not been ready for prime time.

Entropic thinks that's about to change. Cable companies, telephone carriers and satellite TV providers are battling for a beachheads in the digital home.

Cable companies are now offering phone and Internet services. Some telephone carriers have responded by offering television service.

All of which has these competitors looking for new services to attract and keep customers, such as home networking.

Facing an avalanche of competition from alternative technologies for creating home networks, including wireless, electrical lines, telephone wires and even other coaxial cable technologies, Entropic's future remains uncertain.

"It's an emerging market," said Deepa Iyer, a research analyst with Parks Associates near Dallas. "It's not clear whether one solution will work better than another."

Entropic, however, thinks cable, telephone and satellite companies will gravitate to its chips, which it claims help stream top quality video throughout the home with little chance of static or other problems.

The number of digital video recording devices, or DVRs, in the United States is expected to quadruple this year, according to analysts. Consumers' desire to be able to watch a show they record on the DVR's hard drive on any TV in the house is expected to finally create some demand for in-home networks.

"In the case of our technology, a majority of the TVs in the U.S. are sitting right next to the coax jack," said Patrick Henry, Entropic's president and chief executive. "In the next 18 months every one of these service providers -- Cox, DirecTV, Verizon, Bell South, SBC -- is going to have an offering that allows whole-house DVR. Whether I win every one of those sockets is a question mark.

But I think I have good chance of winning the bulk of them."

The 55-employee firm declined to disclose revenue. It doesn't expect to generate an operating profit until late 2007. An initial public stock offering could come in 2008.

But Entropic did sign two important deals recently. A Japanese cable company is rolling out broadband services using Panasonic gear that includes Entropic's technology. And Motorola has unveiled network equipment that includes Entropic's system for Verizon to use with its new TV service.

"It's still a risk," said Leo Spiegel of Mission Ventures. "That's the venture business. But the company has two very significant customers" in Verizon and Panasonic.

Entropic also is a founding member of the Multimedia Over Coax Alliance, a group of companies that aims to develop a common standard for cable-based home networking gear. Other members include many of Entropic's investors, as well as Cox Communications, Toshiba, RadioShack and Verizon.

The industry consortium strategy is similar to the one Qualcomm used to establish credibility for its Code Division Multiple Access (CDMA) cell phone technology. Like Qualcomm, Entropic plans to license its chip set intellectual property to other semiconductor companies.

Entropic has its roots in the engineering brain power of San Diego's ComStream, which was sold to Rockwell in 1997 and later became Conex ant.

ComStream veterans Itzhak Gurantz, Ladd Wardani and Anton Monk founded the company with the idea of solving the infrastructure problems related to creating a home network -- particularly for moving high-definition video.

They had no plans to tap cable. Wireless was a possibility. But soon they realized that coax offered a solid skeleton to build a network because it is already installed in roughly 100 million homes in the U.S.

"Coax is a very pristine environment," said Gurantz, Entropic's chief technical officer.

Wireless has two problems, according to Henry. First, it bogs down when moving massive video files -- the kind that go into high-definition television.

Second, wireless operates in an unlicensed spectrum, which means it's less secure and hard to fix if problems arise.

"We have had feedback from some (cable and telecom firms) that they will never put their premium content over an unlicensed spectrum," Henry said.

Early on, the company conducted tests on a few hundred Southern California homes to figure out if they could design a system that worked with the uneven quality of cable wiring and splitters common in households.

"It has to be robust enough so that it works with whatever junk you have in the house," Henry said. "So as long as you can get TV from the coax jack, our stuff works."

Entropic chips tap into a frequency unused by cable companies, so the in-house network doesn't interfere with TV signals. The company's chips are used in set-top boxes, routers and other gear that make up the network.

Entropic claims it can deliver speeds to 270 megabits per second -- easily fast enough to stream high definition TV signals -- with 97 percent reliability.

Patrick Hurley, a telecommunications analyst with Telechoice, said it's difficult to test how competing technologies would work in an actual home. The Home Phoneline Networking Alliance, for example, advocates using telephone wires. HomePlug is a group of companies touting using electrical wires to carry ethernet signals.

Firms with competing coax technologies also are in the market, including Coaxsys of Los Gatos and Pulse Link of Carlsbad.

"Wireless would probably be the ultimate solution if it worked because even coax is not necessarily in every room," Hurley said. "There are a lot of companies trying to make wireless work. But I don't think the telecos are convinced. So they looking at what they can do with existing wires."

Hurley added that home networking is likely to get the attention of telecommunication firms entering the TV business as a way to stand out from cable companies.

"The bottom line is they want get their multi-room DVRs and their other TV signals around the house without having to do extra wiring," he said. "That's a really big issue for the telecos because they just hate to send a truck out to your house."

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Source: The San Diego Union-Tribune

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