Set-top shakeup is in the cards
Published: July 1, 2007, 6:00 AM PDT
TalkBackE-mailPrint del.icio.us Digg this
(continued from previous page)
Consumers have been able to get CableCards for the past few years simply by asking their cable operator for one. TV manufacturers have been putting CableCard slots into high-definition TVs for the last few years. But as of March, only 259,000 CableCards have been installed, according to the National Cable & Telecommunications Association.
The cable industry argues that this is an indication that there is little demand for CableCard-enabled devices.
"We're supportive of a retail marketplace," said Brian Dietz, a spokesman for the NCTA. "We've made CableCards available. But so far there seems to be little desire on the side of consumers to enable the technology."
In-Stat's Paxton said it will be difficult to create a consumer market for advanced set-top boxes. For one, American consumers like the device-subscription model.
TiVo, which essentially invented the DVR category, has never gained significant market share through its retail strategy. The company has shifted gears in recent years to license its technology to cable operators like Comcast. Satellite TV providers, which used to require subscribers to purchase their own set-top boxes, are now starting to offer their own leasing plans.
"I'm sure there will be some die-hard tech geeks who might be interested in buying their own set-top box. But will those 5,000 or 10,000 customers be enough to make a difference?"
--Mike Paxton, analyst, In-Stat
"Consumers don't seem to want the competition in the set-top market," Paxton said. "They are perfectly happy to lease a box from their cable provider for $5 or $10 a month."
One of the main reasons for this is that leasing a box offers little risk to the consumer, he said. If the box breaks or an upgrade is available, subscribers can just swap one box for another. And, he added, it's actually cheaper to lease a set-top box over the long term than to buy one.
The situation is no better for TV manufacturers, which have been putting CableCard slots in high-end televisions for several years. While consumers using a CableCard-enabled TV won't need a set-top box, the cost of these televisions is considerably more expensive than TVs that don't use cable cards and connect to a regular set-top box.
The other major issue is that the current version of CableCard technology does not allow for two-way communication between the device and the cable network. This means that interactive services like video-on-demand and pay-per-view can't be enabled through a CableCard slot on a TV or a set-top box bought at a retail store.
This is a major issue for companies like Digeo that want to sell their devices to high-end cable subscribers. Video-on-demand is one of the fastest-growing services that cable operators offer. At the end of the first quarter of 2007, roughly 30 million homes used video-on-demand, according to market research firm SNL Kagan. Operator Comcast said that roughly 75 percent of subscribers that could get VOD used the service.
"Without two-way functionality that works, it negates some of the advancements that new set-top box makers can offer consumers," said Ian Olgeirson, senior analyst at SNL Kagan. "They could deliver over-the-top content via the Internet, but I think that market is still a long way off."
Now on News.com
The iPhone has landed
New GPL reflects software shifts
Putting the 'super' in supercomputer
Extra: IBM 1401 Mainframe, the musical
A new specification called OCAP, or Open Cable Application Platform, should help. Cable operators and consumer electronics companies are working together to develop an acceptable standard. But that has proven difficult, given the fact that cable operators don't want to give up control of the consumer experience.
But companies like Digeo say that allowing cable operators to dictate what type of interface the consumer sees impedes on their ability to innovate and offer a differentiated experience for subscribers.
At the end of the day, industry experts say that the CableCard revolution and a commercial set-top box market have a tough road ahead.
"I'm sure there will be some die-hard tech geeks who might be interested in buying their own set-top box," Paxton said. "But will those 5,000 or 10,000 customers be enough to make a difference? I don't know. But at least this new rule will give companies like Digeo a distribution channel they didn't really have before."
