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A workable two-way, plug-and-play agreement between cable operators, CE manufacturers and a host of related industries is inching forward, albeit with tough issues slowing the process and no hard deadline in place.
Nearly 100 representatives from cable, CE, retail, hardware and software industries are meeting “regularly” to chisel out an agreement that would allow participating companies to seamlessly integrate two-way, plug-and-play technology into TV sets, set-top boxes and other devices using CableCARDS, which would essentially replace set-top boxes and enable consumers to view encrypted digital programming.
“Cable and CE participants are working diligently, openly and cooperatively to attain a mutually desirable result. We have had substantial input from other interested industries which has been factored into the discussions,” says Brian Smith, Chairman of the CEA Cable Working Group.
The inclusion of retailers, software and hardware manufacturers, several industry trade organizations and even broadcasters and movie studios has added depth to the discussions, yet for the two key players — cable and CE — the talks are tedious, with the stakes rising.
“The group really does have a commitment to get this done (a two-way plug and play agreement). But all of the participants have issues that need to be addressed. There's an ebb and flow to the discussions,” says Julie Kearney, senior director of regulatory affairs for CEA.
Cable operators and CE manufacturers have the most to lose or gain from a plug-and-play agreement. For cable operators, a critical issue is control over their on-screen guides, which act as portals to revenue-generating services and are enhanced by a two-way path. Video-On-Demand (VOD), HDTV and network security for the return path to the headend are top issues as well.
“VOD and on-screen program guides are the sticking points. It's very important for operators to have that portal and on-screen presence. A guide leads consumers to services and both cable and CE manufacturers want to own it,” says Adi Kashore, analyst for The Yankee Group.
VOD is a revenue star for cable, with more than 36 million digital cable homes expected to have access to the service by 2008, reports The Yankee Group. A favorable plug and play agreement would help push VOD deeper into the marketplace.
Just how cable interfaces with HDTV is another issue on the table, especially for the CE industry. More than 10 million HDTVs are currently in consumers' homes and by 2009, 45 million HD sets will be in use, reports Leichtman Research Group.
“HD is very important to us and we can't ignore the cable audience (more than 70 million homes). So, two-way capabilities is a major focus for us. There hasn't been a path to build two-way technology and there's no way for us to build bi-directional CableCARDS without an agreement. Two-way is 12-18 months out,” concludes Stephen Goldstein, business development manager for Samsung Electronics.
Samsung recently signed an agreement with CableLabs allowing the company to implement OpenCable Application Platforms (OCAP) middleware on its interactive digital TVs and set-top boxes. OCAP creates a common platform that allows interactive services to be deployed and has added several participating CE companies this year.
CableCARDS have also been installed in DTVs manufactured by LG, Mitsubishi, Panasonic, Sharp, Sony, Thomson and Toshiba.
The two-way discussions are getting a lift from the one-way plug-and-play agreement set down in December of 2002 between cable operators and CE manufacturers.
“The hurdles in the one-way agreement which were overcome have been a lesson for the two-way discussions. There's a better understanding of each other's business and there are several other industries involved. It seems as though everyone is there,” Kearney adds.
By July 1, 2006, Separable Security, or CableCARDS, must be ubiquitous in all new cable equipment. In the meantime, the burgeoning group of participating companies is pondering just what the impact of an agreement will have on their businesses.
“For us, it's a huge value moving away from expensive set-tops, and CableCARDS will remove much of the financial burden,” says Dave Housman, Charter Communications business development and technology VP. “A sub-$100 multi-stream card would cost less than a set-top. The difficult part (of discussions) is how does cable agree with the CE industry on two-way services and on-screen guides, where we have important responsibilities for the navigational experience, interactive services, parental control and more.”
Comcast, the nation's largest cable operator with more than 21 million subscribers, is anxious to get CableCARDS into the market as well.
“We are rolling out one-way CableCARDS and it's going well, but it's not really a great product for us. Two-way is what we want, but it will take awhile to get there,” admits Charlie Kennamer, VP of digital engineering for Comcast.
As of November, 4,200 CableCARDS (one-way) had been deployed, while two-way talks continue.
“The negotiations are between companies since they have to live with the decisions in the field. CE manufacturers and cable operators were at loggerheads during the one-way discussions. Now, both are amicable and all are trying to reach a common goal,” reports Neal Goldberg, general counsel for NCTA, which along with CEA is helping to facilitate the two-way plug and play talks.
For retailers such as Best Buy, however, the two-way discussions remain a work in progress.
Says a Best Buy spokesperson: “There are significant obstacles that will need to be resolved by manufacturers and the cable companies before two-way digital-cable-ready products are made available to the public.”
Nevertheless, talks are on-going and include the top two set-top box manufacturers, Motorola and Scientific-Atlanta, who admittedly stand to lose part of their set-top business once CableCARDS are embedded into TV sets, though each has the capability of building two-way CableCARDS.
“We're waiting for the two-way specs to be approved. If the July 1, 2006, deadline holds, we'll be making a lot of CableCARDS, which are great for home theater-type enthusiasts. For others who want just digital cable, set-tops will work. We'll see a mix of set-tops and CableCARDS, but for now, there's no market for CableCARDS,” says Marty Stein, Motorola's senior marketing director for broadband communications.
Adding digital customers will help the two-way plug-and-play issue, insists Mike Pugh, director of system products for Scientific-Atlanta. “We're implementing a road map using set-tops with CableCARD slots and have two-way capable CableCARDS to meet the separable security mandate. The day is coming for two-way CableCARDS and adding digital customers will float all the boats.”
And the tide is rising for both Motorola and S-A, which have yet to see a negative impact on their set-top businesses. In fact, global shipments of digital set-top boxes were projected to reach nearly 11 million in 2004, an 11 percent increase over 2003, according to an In-Stat/MDR study.
A wild card in the two-way discussions could be Microsoft, which recently signed a $400 million agreement with SBC Communications to provide the company with IPTV software platform services such as notification of caller ID on TV sets and other IP features through its Project Lightspeed.
“We're working with CableLabs and the OCAP specs for Microsoft products that connect with cable. We're a big believer in two-way to open markets, but with the right standards and encompassing more devices than just a set-top. The thorny issue in the two-way discussions is the competing interfaces (IPGs),” says Ed Graczyk, director of marketing for Microsoft TV.
Once the on-screen issue is resolved, many believe a two-way agreement, similar in content to its one-way predecessor, will bloom. In the meantime, discussions are expected to be heated.
Concludes Kashore of The Yankee Group: “There's progress and we see a solution within two years. It depends on who owns the guide. If that's resolved, an agreement will move quickly forward.”
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