| Time
to invest in set-top boxes
June/July
2002
Operators
who continue to regard set-top boxes as a basic commodity, to be
bought as cheaply as possible, may miss out on revenue opportunities.
You only need
to talk with a cable network marketing manager for a few minutes
to feel their enthusiasm for new technology. A panoply of rich interactive
media and services awaits the customer, they’ll tell you,
with set-top boxes delivering digital TV and the Internet to your
TV set. Home shopping, banking and digital video recording are all
part of the experience you can receive through cable or satellite.
Yet these facilities are appearing only in a small minority of homes,
with the family PC far more likely to assume the role of the customer’s
interactive conduit, locking operators out of the ability to share
in the boom in online shopping, for example. The barrier between
operators and increased revenues is the very set-top box (STB) they’ve
provided to customers.
STBs provide the bridge between an operator’s network and
the home – or, more specifically, the television set. Their
role is essentially to process and deliver content delivered over
the network.
With video content driving the initial broadband market in Europe,
relatively little was demanded of STBs except a low price tag, as
Rick Chapman, vice president for marketing and sales at SuperH,
points out. ‘Today’s STBs are one-dimensional and are
used just for viewing. In the US, the cable market is more two-dimensional,
with interactive services being more available.’
David Hardy, commercial manager for the UK and Ireland at Nokia
Home Communications, believes that operators’ growing desire
to add interactive services can only be met when they finally embrace
open standards. ‘Operators tend to demand specific and proprietary
solutions that can enable them to maintain a vertical market approach,
where they can control access to consumers. However, as subscriber
levels reach maturity and gaining new ones becomes increasingly
difficult, there is a move to gaining more revenues from the existing
base, and this requires the operators’ services to be available
to other devices and platforms.’
Can’t
spend, won’t spend
Glyn Radcliffe-Brine, commercial director for Media Logic says that,
even then, operators face a stiff challenge in encouraging their
customers to take up next-generation interactive services. ‘At
the moment, consumers are reluctant to spend money on an STB, because
the perception has been that it is something that is free or provided
as part of the service. As virtually all cable companies have already
spent millions on the provision of STBs for free, they cannot upgrade
their boxes until they have recovered at least a proportion of their
investment from subscriptions.
He continues: ‘This means many companies in this marketplace
will not survive long enough to roll out their technology. The situation
is depressingly similar to the early days of PCs, when software
offerings had hardware requirements that were well ahead of what
was available to most users.’
David Hardy agrees. ‘In the short term, there is little real
demand at a consumer level for an expensive STB solution that offers
everything in one box. There is much work to be done on encouraging
digital TV take-up as a first step, and the drive has to be for
budget, basic adaptor solutions.’
Jason Armitage a senior analyst at IDC explains that, so far, an
operator focus on high-end STBs has occurred only in specific circumstances.
‘The industry has hit problems with finding capitalisation
to support high-end STBs, and specifically PVR units, so operators
have to focus on low-cost hardware. We’ve only seen the roll-out
of high-end STBs in fairly small numbers, and typically where there
is strong competition or a requirement to demonstrate technical
leadership, such as operators who also own lots of content.’
‘It’s a question of business models,’ adds Rick
Chapman, ‘both for the hardware on the terminal and who’s
going to pay for it, and for content delivery; for example, BSkyB
subsidises users’ boxes through subscriptions. If they think
that they can get the user to pay for added services, they will
do it. If not, the boxes will be dumb.’
Robert Schneider, CEO of SCM Microsystems, advocates conditional
access as a way round this either-or proposition. ‘At the
low end, the focus will be on a bare bones system. Agreeing an open
standard for set-top boxes will be key to this, as it will enable
additional functionality to be introduced in the form of conditional
access modules. These modules can be inserted into the set-top box
to provide pay TV, and applications such as home shopping and banking
through the digital TV.’
Integrated
digital TV
Ultimately, however, the set-top box is a convenience rather than
a strongly defined device in its own right. While DVD players, for
example, have a purpose other devices cannot easily reproduce –
movies presented at premium quality, in DVD’s case –
STBs play an intermediary role that could readily be taken over
by other components.
‘The basic set-top-box as we know it today will disappear
in about five years’ time,’ predicts Robert Schneider.
‘The tuner technology should and will be incorporated into
the television itself, as it makes sense from a commercial point
of view. It is simply cheaper to do it this way.’
The STB essentially delivers services not yet possible in most televisions;
as more integrated digital sets are sold, demand for STB will shift
to the high end, says Schneider. ‘These boxes will incorporate
conditional access, but may also include technology such as FireWire
and USB, to enable it to be linked up to computers and other devices.
More sophisticated versions may feature personal video recording
and carry dual functionality, which will enable consumers to watch
one programme while recording another, for example.’
Home
servers
Any discussion of the balance between the respective roles of STBs
and TVs inevitably segues into a broader development that affects
three massive markets: computing, telecommunications and electronics.
The duties for delivering digital content into the home are currently
split neatly between the TV and the PC; but this demarcation is
coming to an end, and the search has begun for ways to deliver consistent
content across multiple platforms throughout the home.
One direction would see the set-top box evolve into a new category
of device: a home server that routes many digital formats –
video, audio, Internet and voice – and delivers them to whatever
device is most appropriate. Clients for such a server include the
TV – still the best medium for rich media – as well
as tablet PCs and handheld devices.
‘A rich network supporting home servers can really capitalise
on the convergence taking place in the TV, PC and telecoms industries,’
notes David Hardy, ‘and enable access to information wherever
and whenever the user desires, through many different types of terminal.
IP will increasingly be pivotal in this area, as it’s able
to link various technology areas together to really enable the move
to home servers.’
As well as providing more flexible ways of delivering content, home
server solutions will encourage additional services, he adds; ‘home
automation and security will play a major part in developing the
home server business.’
Outside of early adopter markets, the home server is likely to emerge
in a piecemeal way, with consumers realising the concept’s
potential only after they have experienced home connectivity on
a smaller scale. ‘People will want to adopt a ‘no new
wires’ approach,’ suggest Hardy.
‘They’ll utilise existing telco – mains wiring
perhaps – but crucially call on wireless connectivity to enable
the seamless connectivity between devices inside and outside the
home. Different wireless technologies will each play a part, such
as Bluetooth for local connectivity between devices and WLAN for
extended reach,’ he says.
Significantly, such a kit-building approach also eases the burden
on the network carrier, previously responsible for providing customers
with the means to receive their content. It should be easier to
convince customers to buy PCs or similar devices with STB-like facilities
than persuading them to pay to upgrade a device they expect for
receive for free.
An early test for the theory will come with Motorola’s launch
of the BMC 9000 Media Centre, set to debut in American homes this
autumn via the carrier Charter Communications. The BMC 9000 is able
to deliver digital video, Internet and video telephony to multiple
outlets within the home, with hard disks enabling PVR and music
jukebox facilities. There’s also an optional integrated DVD
player.
‘The roll-out of the Media Centres will be very interesting
to watch, both commercially and technically,’ says Glyn Radcliffe-Brine.
‘If it catches on, it will create a new market that merges
PCs and cable. The BMC 9000 and its successors should be able to
stand pricing more in line with PCs than STBs, and this in turn
will tend to move the model further towards the smart client structure.’
Further information:
• IDC’s report ‘Western Europe
Digital Set-Top Box Forecast and Analysis 2000-2005’, written
by Jason Armitage, is now available; www.idcresearch.com
• Media Logic develops the iSeeTV interactive TV commerce
system; www.iseetv.net
• Nokia Home Communications supplies a range of digital set-top
terminals;
www.nokia.com/multimedia
• SCM Microsystems is a major supplier of cable receiver and
smart card technology; www.scmmicrosystems.com
• SuperH manufactures high-performance embedded processors,
including the SH-4 for set-top boxes; http://semiconductor.hitachi.com/superh.htm
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