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Universal Standard For Set-Top Boxes Benefits All

As cable and satellite operators fight for dominance in the digital entertainment market, it has become increasingly clear that standardization is critical for the development of next-generation digital set-top boxes (STBs) that can deliver both the bang and the bucks.

At the recent National Cable Television Association Show, manufacturers were pondering various digital STB solutions, such as Nokia and Philips boxes incorporating 100+ hour hard drives for program recording. Motorola contemplates the best method for merging interactive TV (iTV) capabilities into its new DTC 2000 model, and a handful of companies are considering STB solutions that could offer both iTV and digital video recorder (DVR) options.

But the key question for manufacturers and operators alike is: Are DVR and iTV investments — technologies that have proven less than spectacular in other form factors to date — worth the risk?

Meanwhile, satellite system operators are dealing with the question of whether it makes business sense to produce a standardized interoperable STB for DirecTV and EchoStar subscribers.

Like the satellite radio sector, one could argue that early on, manufacturers (or the government) should have agreed upon the deployment of standardized interoperable satellite TV STBs by a specific date.

But that has not happened, and today there remain two separate standards for DirecTV and EchoStar equipment. To merge the two DBS technologies into a single interoperable system might enable the two operators to share transponders for common programming and better focus on differentiating and expanding their content and services.

This would be a great boon for consumers, even if the DirecTV-EchoStar merger never occurs. Nonetheless, the cost of the switchover will be huge, and ultimately borne by the consumer.

For the future, it is particularly important that the industry and government work cooperatively well ahead of time, to develop technology standards for new systems and platforms.

In the cable world, an interesting issue deals with the company Digeo, and its recent acquisition of the new, “super” STB developer, Moxi. Paul Allen’s Digeo is believed by many to have decided to buy Moxi, in part, because it was fed up with the legacy infrastructure and partnerships controlled by Scientific Atlanta and Motorola.

If Paul Allen and his numerous companies (including his cable play, Charter) are able to bring new solutions to the “risk-reward” dilemmas of STB development, the result could prove rewarding to consumers.

Meanwhile, cable STB designers and manufacturers are grappling with the question of whether to place peripheral iTV, DVR and Internet-based functions in the STB or in centralized servers at the cable head-end. From a business standpoint, this involves measuring how, when and where to charge the consumer for these new services, instead of paying a steep price up front for the hardware.

Internet-based STBs are not a “hot” topic, yet. Nonetheless, companies like Pace are developing such applications, especially in Canada.

CE retailers can help solidify some of these new solutions by getting involved in the decision-making process for provider-delivered broadband, iTV and enhanced TV solutions. CE trade groups, cable operators and STB manufacturers must work together to create business models that will grow the STB pie. CE retailers can ensure they maximize their own return on investment in the new marketplace.

New “super” STB marketplace is coming soon, and it’s time for all parties to play a role in shaping that future.