With sales of $10.1 billion last year, a third of its total, the home and networks business is among Motorola’s (MOT) largest and most profitable. It also makes Motorola one of the top three set-top box manufacturers in the industry. As such, the division will command a hefty price–roughly $4.5 billion, according to The Journal, which posits private equity firms and other communications gear makers as possible buyers.

No word yet on whether the possibility of selling home and networks emerged after Motorola was unable to spin off its mobile-phone business. The company for its part, insists that such a move is still in the cards.

“Separation into two independent, publicly traded companies (Mobile Devices and Broadband Mobility Solutions, which comprise Enterprise Mobility Solutions and Home and Networks Mobility Solutions) is the publicly stated long-term goal of Motorola,” the company said in a statement. “We remain committed to the separation goal and continue to believe that it is the right strategy to position Motorola for long-term success.”

The deal gives Cisco (CSCO) a foothold in China’s massive cable market, whose 160 million subscribers make it the largest in the world. And with the Chinese government mandating full digitization by 2015, this figure could grow to 200 million in as little as three years.

“That presents for Cisco and other competitors in the market a very, very compelling market opportunity,” Hilton Romanski, VP of corporate development for Cisco, told Reuters. “What we’re trying to get access to is good local expertise that can help us think about how to make this transition, becoming an increasingly local company in China.”

Apple TV 3.0 is largely as rumored: Adding support for Internet radio, Genius Mixes, iTunes LP and iTunes Extras (bonus clips, interviews, etc.). But it boasts another new feature as well: A redesigned user interface.

Whether the debut of Apple TV 3.0 heralds a hardware refresh of the device itself is anyone’s guess. It is worth noting, though, that there’s been quite a bit of speculation recently that Cupertino is working on an overhauled device that will offer DVR capabilities and support iTunes TV show subscriptions.

As Piper Jaffray analyst Gene Munster wrote back in August: “Apple could leverage its deep library of content with many network and cable channel content owners to provide unlimited access to a sub-library of its TV shows for a standard monthly fee ($30 or $40 per month).”

According to Munster, “Such a product would effectively replace a consumer’s monthly cable bill (~$85/month) and offer access to current and older episodes of select shows on select channels. The selection would dictate the value, and several tiers could be offered, but we see this as one way for Apple to leverage its large iTunes content library as well as its unique Apple TV hardware in order to get digital video to the TV for a price significantly less than the average cable or satellite TV bill.”

Sounds sweet, right? And it would be sweeter still if it were to offer App Store support and allow users to control games and other apps via iPhone or iPod touch …

Below, the official Apple (AAPL) release:

Apple Introduces Apple TV 3.0 Software With Redesigned User Interface

Enjoy iTunes Extras, iTunes LP & Genius Mixes on Your HD TV

CUPERTINO, Calif., Oct. 29 — Apple® today introduced new Apple TV® 3.0 software featuring a redesigned main menu that makes navigating your favorite content simpler and faster, and makes enjoying the largest selection of on-demand HD movie rentals and purchases, HD TV shows, music and podcasts from the iTunes® Store even better on your TV. You can now enjoy iTunes Extras and iTunes LP in stunning fullscreen with your Apple TV, as well as listen to Genius Mixes and Internet radio through your home theater system. The new Apple TV software is available immediately free of charge to existing Apple TV owners, and Apple TV with 160GB capacity is available for just $229.

“The new software for Apple TV features a simpler and faster interface that gives you instant access to your favorite content,” said Eddy Cue, Apple’s vice president of Internet Services. “HD movies and HD TV shows from iTunes have been a huge hit with Apple TV customers, and with Apple TV 3.0 they get great new features including iTunes Extras, Genius Mixes and Internet radio.”

The redesigned main menu on Apple TV gives you instant access to your favorite content. Recently rented or purchased movies, as well as other content including TV shows, music, podcasts, photos and YouTube, are accessible directly from the new main menu. The new software also allows Apple TV users to enjoy stunning fullscreen iTunes Extras and iTunes LP, including great new movie titles such as “Star Trek” or classics like “The Wizard of Oz” and albums such as Taylor Swift’s “Fearless (Platinum Edition)” and Jack Johnson’s “En Concert.” iTunes Extras gives movie fans great additional content such as deleted scenes, interviews and interactive galleries. iTunes LP is the next evolution of the music album, delivering a rich, immersive experience for select albums on the iTunes Store by combining beautiful design with expanded visual features like live performance videos, lyrics, artwork, liner notes, interviews, photos, album credits and more.

Now Apple TV users can enjoy Genius Mixes through their home theater system and listen to up to 12 endless mixes of songs that go great together, automatically generated from their iTunes library. Customers can also enjoy Internet radio, allowing them to browse and listen to thousands of Internet radio stations, as well as tag favorite stations to listen to later. Apple TV’s support of HD photos is enhanced with iPhoto Events, which simplifies finding your favorite photos on Apple TV, as well as iPhoto® Faces, which gives access to photos organized by people identified in iPhoto.

Apple TV users have direct access to a catalog of over 8,000 Hollywood films on iTunes including over 2,000 in stunning HD video available for rent or purchase. Users can also choose from a selection of 11 million songs, 10,000 music videos and over 50,000 TV episodes to purchase directly from their Apple TV or browse and enjoy the iTunes Store podcast directory of over 175,000 free video and audio podcasts. Purchases downloaded to Apple TV are automatically synced back to iTunes on the user’s computer for enjoyment on their Mac® or PC or all current generation iPods or iPhones.* iPod touch® or iPhone® users can download the free Remote app from the App Store to control their Apple TV with a simple tap or flick of the finger.

“I think the whole category is still a hobby right now. I don’t think anybody has succeeded at it. And actually the experimentation has slowed down. A lot of the early companies that were trying things have faded away. So I would have to say that given the economic conditions, given the venture capital outlooks and stuff, I continue to believe it will be a hobby in 2009.”

– Apple CEO Steve Jobs, October 2008

“We still consider this a hobby. It is clear that the movie rental business has really helped Apple TV and there are more and more customers that want to try it. And we’re going to continue to invest in it, because we fundamentally believe there is something there for us in the future.”

– Apple COO Tim Cook, January 2009

There’s not much of a business yet in Apple TV, as Apple’s leadership often notes. But there may be soon, with the market for connected TVs evolving as it has been.

In a research note issued this morning, Piper Jaffray analyst Gene Munster says the time is right for Apple to release the next iteration of Apple TV–one that offers DVR capabilities and supports iTunes TV show subscriptions.

“Apple could leverage its deep library of content with many network and cable channel content owners to provide unlimited access to a sub-library of its TV shows for a standard monthly fee ($30 or $40 per month),” Munster writes. “Such a product would effectively replace a consumer’s monthly cable bill (~$85/month) and offer access to current and older episodes of select shows on select channels.”

Further, Munster notes, “The selection would dictate the value, and several tiers could be offered, but we see this as one way for Apple to leverage its large iTunes content library as well as its unique Apple TV hardware in order to get digital video to the TV for a price significantly less than the average cable or satellite TV bill.”

Makes great sense. And if Apple (AAPL) were to launch these services in concert with App Store support, as Munster has suggested in the past, it would be a pretty compelling proposition. And it would set the stage for the next evolution of the platform, the Apple Television, an Internet-connected TV with onboard DVR and media center functionality.

Says Munster:

“Beyond new hardware with DVR or iTunes video subscription features, we believe the 2-5 year roadmap for the Apple TV product lineup is robust. To begin with, Internet-connected TVs with interactive features will likely gain popularity in the next several years. Apple could differentiate itself in this market as a seasoned software developer competing largely with television hardware manufacturers that do not excel in the software arena. The device could also bring iPhone games, a relatively new segment for Apple, to the television.

“While this is unlikely in the near term,” Munster continues, “we believe the iPhone will succeed as a portable gaming platform and Apple may consider bringing higher quality games developed on a similar platform to the TV. The iPhone app developer community is already robust, and Apple could leverage those developers to enter the gaming arena on the TV. In fact, the iPhone or iPod touch could itself operate as a touchscreen gaming control for a game-centric Apple TV.”

Again, this makes great sense, though TV hardware is not an easy business–just ask Sony (SNE). But, as Munster aptly notes, it might be quite a bit less difficult if Apple were to “change the rules of the game,” something it’s done in a number of markets already.

That said, as Media Memo’s Peter Kafka just reminded me, the cable companies are working very closely with Hollywood to make sure it’s difficult for people to replace their cable service. They’d almost certainly attempt to sack an initiative like one Munster describes above.

The reasons for the decline? Seasonality, the econalypse and the maturation of the market. “The second quarter has proven to be traditionally weak for broadband growth, but with the market becoming more mature, broadband adds further waned,” Bruce Leichtman, LRG’s president and principal analyst, said in a statement.

Poor broadband infrastructure and limited access to it in rural areas clearly also played a role. In rural America, just 31 percent of residents have a broadband connection, as opposed to more than two-thirds in the rest of the country, according to the Pew Internet and American Life Project. No wonder America now ranks 15th in the world on broadband access, according to the Organization for Economic Cooperation and Development.

So that $7.2 billion in broadband investments the Obama administration recently pledged stands to do a lot of good–assuming it’s put to use by the right folks. It’s not yet clear that will happen, however, because the large network operators best positioned to roll out access to underserved areas are afraid of taking stimulus money for fear of net-neutrality conditions that might be attached to it, as well as of unwanted government scrutiny.

And as Robert Atkinson, president of the Information Technology and Innovation Foundation, notes, that’s really too bad. “If you want to get broadband out, you have to do it with [those] who brought you to the dance in the first place, and in this case it is the incumbent cable and telephone carriers who have 85 percent of lines in the country,” he told the Washington Post. “This is not basket weaving. This is really complex and intensive technical stuff that takes a fair amount of sophistication and scale to be able to do right and to continue to upgrade.”

[Image Credit: Flickr/alan i am]

The online DVD-rental pioneer said Thursday that its second-quarter profit rose 22 percent on revenue of $408.5 million. It earned $32.4 million, or 54 cents a share, easily surpassing Wall Street’s expectations of 50 cents per share.

Netflix’s (NFLX) subscriber base finished the quarter at 10.6 million, up 26 percent year-over-year and at the high end of the company’s own forecasts.

“We continued to execute very well in the second quarter and are on track to deliver a record 2009,” Netflix CEO Reed Hastings said in a statement. “As our subscriber base and disc shipments continue to expand, and as we offer more opportunities to watch instantly via the Internet, we believe we are striking the right balance between growth, investment and earnings.”

Just as MediaMemo predicted, Walt Disney Co. has finally taken a stake in Hulu, the video-streaming site operated by General Electric’s (GE) NBC Universal, News Corp. (NWS) and Providence Equity Partners. Under the terms of the deal announced today, Disney will sign on as a joint partner in the venture and bring full-length episodes of long-absent programs like “Lost” and “Grey’s Anatomy” to Hulu. Financial terms and the structure of the deal weren’t disclosed, but sources say Disney’s stake in the venture will be close to 30 27 percent.

“From our landmark iTunes deal to our pioneering decision to stream ad supported shows on our ABC.com player, Disney has sought to meet the constantly evolving viewing habits of our consumers, and today’s Hulu announcement is the next important step in that ongoing journey,” Disney CEO Bob Iger bloviated. “Disney and Hulu share a focus on delivering the highest-quality entertainment experience and we look forward to working with Hulu to build value for our consumers, our brands and our shareholders.”

A few points worth noting here before the full press release below. This is mostly a broadcast deal. Aside from a smattering of Disney Channel shows, it includes very little cable programming. There is, for example, nothing from ESPN. Presumably, that’s because Disney doesn’t want to upset the folks who actually pay to watch that stuff.

Disney’s decision to join Hulu shows the company is confident that the site’s audience is distinct enough from audiences served by cable, ABC.com and its other sites that there’s no real risk of cannibalizing them. And that runs contrary to what many networks assume about online.

Disappointingly, there’s no mention in the release of classic animation, whether shorts or features.

As MediaMemo has noted, this is a big deal for Hulu, which has now allied with three of the four big broadcast networks.

CBS (CBS) is now the sole holdout among big program providers. When asked about its position, a spokesman replied with this statement: “CBS has long employed open, non-exclusive content partnerships that allow fans across the internet to engage with our programming in such a way that we control our distribution, sales and profit. We continue to discuss similar arrangements with additional partners as we grow our online audience based on the strength of our content, and the passion of the communities it creates. The Company also believes that controlling our own rights for that content–in all media–preserves its value in a multi-platform business system.”

Disney (DIS) to Join NBC Universal, News Corporation and Providence Equity Partners as an Equity Owner of Hulu

LOS ANGELES–Hulu and The Walt Disney Company today announced that Disney, through a subsidiary of ABC Enterprises Inc., has agreed to join NBC Universal, News Corporation and Providence Equity Partners as a joint venture partner and equity owner of Hulu, a leading online aggregator of video content. Upon closing, the agreement will enhance Hulu’s programming line-up through the expanded online distribution of Disney’s most popular current and library primetime series and library feature films. In particular, full-length episodes of hit current and library programs like Lost, Grey’s Anatomy, Desperate Housewives, Private Practice, Ugly Betty, Scrubs, Greek, Hope and Faith, Less Than Perfect, Wizards of Waverly Place, Phineas and Ferb, Who Wants To Be A Millionaire, General Hospital, The View and The Secret Life of the American Teenager will soon be streamed on Hulu on an ad-supported basis.

“From our landmark iTunes deal to our pioneering decision to stream ad supported shows on our ABC.com player, Disney has sought to meet the constantly evolving viewing habits of our consumers, and today’s Hulu announcement is the next important step in that ongoing journey,” said Robert A. Iger, president and CEO, The Walt Disney Company. “Disney and Hulu share a focus on delivering the highest-quality entertainment experience and we look forward to working with Hulu to build value for our consumers, our brands and our shareholders.”

“We’re honored to welcome the Disney team in our mission to help people find and enjoy the world’s premium content, when, where and how they want it,” said Jason Kilar, CEO of Hulu. “With the addition of shows like Lost, Desperate Housewives, Grey’s Anatomy and many more to Hulu, we continue to aspire to deliver a service that users, advertisers and content owners unabashedly love.”

Following the closing, content available to Hulu users will include:

• Full-length episodes of ABC primetime programs like Lost, Grey’s Anatomy, Desperate Housewives, Ugly Betty, Samantha Who?, Scrubs, Private Practice and popular late night talk show Jimmy Kimmel Live
• Full-length episodes of hit ABC Family series like The Secret Life of the American Teenager and Greek
• Popular series from ABC Daytime and SOAPnet like General Hospital and The View
• Classic series from ABC’s library like Hope and Faith, Less Than Perfect, Commander in Chief, Who Wants To Be A Millionaire and Dancing with the Stars
• Select hit programs from Disney Channel like Wizards of Waverly Place and Phineas and Ferb which can be easily accessed from a new DISNEY location in the Channel section of Hulu.com
• Popular library titles from The Walt Disney Studios
• Short-form content including webisodes, sneak peeks and episode recaps from ABC Entertainment, ABC Family and SOAPnet
“Hulu, quite simply, now has the best premium content on the web,” said Peter Chernin, president and COO, News Corporation. “With three major networks and over 150 leading content providers providing content, combined with the best video user interface anywhere on the web, Hulu offers consumers the finest premium online video experience available today.”

“Hulu has shown that if you make quality content available on the web and combine it with an unbeatable user experience, viewers will come, and so will advertisers,” said Jeff Zucker, president and CEO, NBC Universal. “The addition of some of the best content Disney/ABC has to offer will only enhance Hulu’s standing as a top site for high quality video entertainment.”

Jonathan M. Nelson, CEO of Providence, said “Hulu is creating significant value for users, advertisers and content owners. This balance, together with aggregated professional content and an expanding base of over 200 brand advertisers, is establishing Hulu as a compelling online video monetization platform. Hulu is a bright spot in the new media landscape.”

The transaction is subject to customary closing conditions, including regulatory review. As an equity partner, Disney will have three seats on the Hulu Board that will be held by Mr. Iger; Anne Sweeney, co-chair, Disney Media Networks and president, Disney/ABC Television Group; and Kevin Mayer, executive vice president, Corporate Strategy, Business Development & Technology. All other current directors from News Corp, NBC Universal and Providence will remain on the Hulu board.

BoomTown got the ball rolling by making a visit to Twitter HQ bearing pies. During a video tour of the premises, Biz Stone discussed rock stars and booze, and spilled the secret of the strange green deer. Later, co-founders Stone and Evan Williams were customarily nonspecific in a conversation about their revenue plans, and BoomTown was a little bit horrified to have become one of Ashton Kutcher’s million-plus followers–maybe even the one that put him over the top in his race with CNN to hit the seven-figure mark. Still on the celebrity tip (but off the Twitter one), BoomTown took a moment to appreciate the self-deprecatory stylings of Lindsay Lohan’s eHarmony spoof and to embed the video on AllThingsD.com. Finally, was there anyone this week who missed Susan Boyle’s virtually instant stardom on “Britain’s Got Talent” via Google’s (GOOG) YouTube? BT took a look at the journey the story has taken from television to Internet, back to television and back to Internet again.

Back to Twitter, MediaMemo took a look at its amazing growth as a service and as a phenomenon–the “hockey stick,” as one early investor describes the company’s trajectory so far. MM also looked at a study from the USC neuroscience group that says despite all the hype–or maybe even because of it–the human brain just isn’t built to digest information at Twitter’s pace. In the world of cable this week, just as folks were wondering whether Congress will stop the cable companies from charging by the byte, Time Warner Cable (TWX), one of the key players in the drama, backed away from its plans to do so. MediaMemo followed that story as well.

In this week’s Personal Technology column, Walt Mossberg took a look at the latest version of Apple’s (AAPL) MobileMe, and while he found it to be a big improvement over the product launch from last summer, it’s not without limitations. In Mossberg’s Mailbox, Walt answered questions from readers about displaying emergency contact numbers on a locked cellphone and the security of running Windows software on the Mac. And in Mossberg Solution, Katie Boehret took a look at Gwabbit, a program built to mine emails for contact info.

More next week.

How could a company whose Chief Internet Evangelist, Vint Cerf, once told the Senate Commerce Committee that allowing “broadband carriers to control what people see and do online would fundamentally undermine the principles that have made the Internet such a success,” approach those carriers with a proposal that would seemingly do just that?

There’s a very simple answer to that question: Google is not doing that, and reports suggesting that is are misguided. Yes, Google (GOOG) “has approached major cable and phone companies” with a plan to “place Google servers directly within the network of the service providers.” Yes, this plan would improve content delivery speeds.

And, no, doing so does not violate the concept of network neutrality. If it did, companies like Akamai and Limelight, which also have servers hosted at broadband provider facilities, would long ago have been tarred as anti-Net neutrality villains. Colocating caching servers is a common practice that improves bandwidth usage by bringing data closer to the end user. And while it will certainly make Google’s services faster and more responsive, it won’t do so at the expense of non-Google services. That would be a violation of Net neutrality.

“Some critics have questioned whether improving Web performance through edge caching–temporary storage of frequently accessed data on servers that are located close to end users–violates the concept of network neutrality,” Richard Whitt, Google’s Washington telecom and media counsel explains. “As I said last summer, this myth–which unfortunately underlies a confused story in Monday’s Wall Street Journal–is based on a misunderstanding of the way in which the open Internet works…. All of Google’s colocation agreements with ISPs–which we’ve done through projects called OpenEdge and Google Global Cache–are non-exclusive, meaning any other entity could employ similar arrangements. Also, none of them require (or encourage) that Google traffic be treated with higher priority than other traffic.”

So Google is not negotiating exclusive deals for privileged access. It is not proposing “a fast lane for its own content.” It is not seeking to prioritize its traffic in violation of the Net neutrality principles it espouses. Frankly, this story has little to do with Net neutrality at all. “Network neutrality is about the routing of packets,” Tech Liberation Front’s Tim Lee explained earlier this year when Akamai was accused of violating Net neutrality. “A network is neutral if it faithfully transmits information from one end of the network to the other and doesn’t discriminate among packets based on their contents. Neutrality is, in other words, about the behavior of the routers that move packets around the network. It has nothing to do with the behavior of servers at the edges of the network because they don’t route anyone’s packets.”

We filed this appeal in order to protect our legal rights and to challenge the basis on which the Commission found that Comcast violated federal policy in the absence of pre-existing legally enforceable standards or rules. We continue to recognize that the Commission has jurisdiction over Internet service providers and may regulate them in appropriate circumstances and in accordance with appropriate procedures. However, we are compelled to appeal because we strongly believe that, in this particular case, the Commission’s action was legally inappropriate and its findings were not justified by the record.”

As legally inappropriate and unjustifiable as Comcast (CMCSA) might find it, the cable company will abide by the FCC’s order during the appeal. And it will forge ahead with plans to develop more net neutrality-friendly network management techniques by the end of the year. Said Cohen, “We will follow through on our longstanding commitment to transition to protocol-agnostic network congestion management practices by the end of this year. We also remain committed to bringing our customers a superior Internet experience.”

Superior Internet experience until you hit that 250GB broadband cap, that is.

To date, 27of the 33 have responded, among them Google and Yahoo, whose replies are of particular interest given the proposed advertising deal between them. In response to the Committee’s query, Yahoo admitted it did engage in some form of behavioral targeting, but volunteered that it would henceforth allow users to turn off targeted advertising on its Web sites.

Yahoo claims it had been planning this revision to its policy for months. What a happy coincidence that it was enacted in time to be included in the company’s letter to the Committee.

Google also acknowledged using targeted-advertising technology without explicitly informing customers–hence, its $3.1 billion acquisition of DoubleClick. And it too suddenly offered its users a way to opt out of targeted advertising. Another happy coincidence, I suppose, in the works for months and entirely unrelated to the company’s pact with Yahoo, which would reportedly grant Google control over more than 80 percent of the search market.

Still, it’s good news for consumers–or rather those consumers who actually pay attention to such things. And for those who don’t, a word of advice: It might be time to start. Because Google, which already controls more than 70 percent of the search market in the states, clearly sees quite a bit of behavioral targeting in all our futures. “Though it is not the focus of our business today, we also believe that behavioral advertising can be done in ways that are responsible and protective of consumer privacy and the security of consumers’ information,” Google wrote in its letter to the Committee. “To ensure the continuation and proliferation of responsible behavioral targeting practices, we are supportive of efforts to establish strong self-regulatory principles for online advertising that involves the collection of user data for the purpose of creating behavioral and demographic profiles.”