We have always cited the cable industry as the archetypal vertical or closed content-to-device business model. Ever since the US cable network providers (MSOs) began to offer paid-for services and secure content using set-top boxes, they have steadily increased their hold on the television content and device market. Initially with analogue premium TV boxes, and more recently with digital cable boxes, a growing proportion of US TV viewers use a device provided by their cable operator as the gateway to all their television programming. And as the cable industry has added more advanced features to those boxes, such as DVRs and VOD, these have also been controlled by the set-top box, leaving the “TV set” as essentially a dumb terminal.
The satellite TV industry followed a similar model in both the US and Europe. Cable in Europe, however, has a somewhat different history, since its early development was encouraged by government subsidy in several countries. But the US model has also found its way into several European countries, notably the UK, and as digitisation of cable has accelerated, European cable operators have also moved increasingly towards a set-top box approach.
Manufacturers of TVs have been concerned at these trends for many years, realising that the “intelligence” of their devices was being bypassed and ignored as many viewers used set-top boxes. In spite of many attempts over the years to encourage the integration of various cable or satellite technologies into TVs, such as digital tuners or smart card slots, these have largely failed. The challenges for TV manufacturers have been numerous, not least the additional cost of these features and overcoming the obsolescence argument, that viewers may want to change cable or satellite providers or services without having to change their TV set.
There has also been an argument that it has not been in the strategic interests of cable or satellite providers to allow integration of what are essentially their network technologies into devices that are available in an open, horizontal market. Having fought hard to win new customers, service providers should not be inclined to make it easy for those customers to move to a different supplier, and forcing them to use a proprietary device is one way of discouraging churn.
Recent developments suggest that the cable industry at least is now ready to adopt a much more open stance towards the CE industry. In the US, Sony has signed an important agreement with the five largest cable operators (Comcast, Time Warner Cable, Cox Communications, Charter Communications, Cablevision and Bright House Networks) to use Tru2way technology in its TV sets and other CE devices. This will allow cable customers to use cable services, such as VOD and interactive guides, on these devices without the need for a set-top box. Given the support for Tru2way by other major CE companies, there seems a genuine possibility that it will become widely deployed over the coming years, although the cable operators still have to demonstrate that they are wholeheartedly behind the initiative by actively promoting the technology.
In Europe, meanwhile, some of the cable industry’s largest operators are also moving towards endorsement of a more open system. CE companies Sony, Panasonic, Samsung and Philips have led the initiative to develop a platform known as CI+ (Common Interface Plus). German cable operators, including the largest, Kabel Deutschland, have given their support, and others are expected to follow suit. CI+ will allow users to access premium and advanced cable services without the need for a set-top box. CI+ devices will incorporate a smart card slot which will accept conditional access modules provided by cable operators.
So is this a sign that cable operators are accepting that the world is moving on? Or will both Tru2way and CI+ be sucked into the black hole of promising but failed open cable technology initiatives? My bet is that this time round things may really be changing. And the difference now is that cable recognises that its long-term future lies more in broadband than in the traditional pay television market.
The TV set-top box has been the gateway to content for many years, but as people consumer more content on the web some of that role is increasingly shifting towards other devices such as broadband gateways, home PCs and TV sets. For sure, the set-top box is not going to disappear overnight. It will be some years before both Tru2way and CI+ are widely enough deployed to have a significant impact. And cable companies and content providers may still decide to promote set-top boxes if the new technologies fail to support future services or fail due to content security issues. But one way or another, the cable industry is getting ready for a major transition that will have widespread implications for device manufacturers and content owners alike.
Global Broadband Forecast 2008 - 2012