After years of hope that DOCSIS 2.0 would be its ticket to CMTS success, Terayon Communication Systems has opted to cease investment in its cable modem termination system.

The decision marks the first bold move by the company since CEO Jerry Chase joined Terayon in early September. The timing of that decision also comes as somewhat of a surprise, considering Terayon announced two CMTS software upgrades just this fall.

Terayon said it will instead focus on its digital video and subscriber-side gear, and push product development into the direction of converged voice, video and data services.

The decision to exit the CMTS business calls into question the survivability of S-CDMA, one of two advanced physical layer schemes that are today part of DOCSIS 2.0, the upstream-dilating CableLabs spec for cable modems and CMTSs. DOCSIS 2.0 also supports A-TDMA. Operators deploy DOCSIS 2.0 in either A-TDMA or S-CDMA mode.

Terayon developed S-CDMA internally and, under company co-founders Zaki and Shlomo Rakib, fought hard to have it become part of the DOCSIS 2.0 spec. The company was the first CMTS vendor to obtain DOCSIS 2.0 qualification, but that distinction did not result in anticipated big orders from cable operators.

"Despite Terayon's undisputed technology leadership in the DOCSIS 2.0 CMTS market, we have been unable to successfully translate that into a profitable CMTS market leadership position," Chase said, in a release.

In the third quarter, Terayon's CMTS business generated revenues of $6.6 million, down from $16.8 million a year ago. Terayon will continue to support its existing CMTS customers.

Terayon's CMTS departure further contracts an already shrinking field of next-gen CMTS players. The field of major players now consists of ARRIS, Cisco Systems, Motorola Broadband and BigBand Networks, which entered the mix after purchasing the CMTS assets of ADC. Fringe CMTS players such as C9 Networks continue to sell to small- and mid-sized MSOs, but aren't expected to play a role with larger operators.

Terayon's exit also shrinks the number of CMTS silicon companies. With Terayon out of the picture, Broadcom Corp. will easily retain its commanding market share in the CMTS chipset sector, though time will tell if Texas Instruments makes a stronger run at the market as it has done with cable modem silicon.