Last hope for retail set-top boxes?

The Federal Communications Commission tries once again to dismantle proprietary set-top-box market.

By Tam Harbert, Contributing editor -- EDN, July 20, 2010

For 14 years, the US Federal Communications Commission (FCC) has tried and failed to establish a retail market for STB (set-top boxes). Now, it's trying again. Some say the FCC has a better chance of succeeding this time, while others maintain that the same cable operators who many believe defeated the FCC's previous efforts will successfully stall this one, as well.

Regardless of the eventual outcome, the FCC's latest proposal highlights some significant technology changes that will likely impact the market for chips used in TVs, STBs, gateways and a variety of consumer electronics devices.

In the Telecommunications Act of 1996, Congress directed the FCC "to adopt regulations to ensure the commercial availability of navigation devices used by consumers to access services from multichannel video programming distributors," according to the FCC. After several years of rule-making procedures by the FCC and lobbying by industry, the FCC required cable operators to comply with its CableCard mandate. The CableCard was a device that contained the proprietary technology to allow connection to a video provider's service. It could be plugged into a retail STB or TV. But for a variety of reasons the effort failed to create a strong retail market for STBs. Consumer electronics makers say it's because the cable companies did the barest minimum to comply with the regulation and never fully supported CableCard. Cable companies say it's because there was no market demand, that consumers preferred to least their STBs from their service provider. Indeed, the cable industry maintains that is as true today as it was to say that many consumers prefer to lease their STB from their service provider.

In its National Broadband Plan, published earlier this year, the FCC declared that it would redouble its efforts to open up the STB market. In April, it published a Notice of Inquiry in which it proposed an "AllVid adapter" that would establish a standard way for video devices in the home to connect to a paid-TV service. AllVid would consolidate all the proprietary technology specific to the video service provider into one box, which would either be a whole-home gateway or a modular set-back device that could plug into various home equipment. Such proprietary technology could include chips that implement the service providers' conditional access and perform application processing for the middleware. The approach would presumably pave the way for STBs to be sold at retail. It would provide a standard connection to any consumer device on the one side and use proprietary technology for the connection to the specific service provider on the other.

It could also consolidate a lot of the chips that are now duplicated in many devices throughout the home. Today, most consumers have several boxes in their living rooms, all of which contain much of the same technology, said Ken Lowe, vice president of business development and strategic marketing at Sigma Designs. The AllVid concept logically partitions the capabilities so there is less redundancy. So, instead of having four MPEG decoders - one each in the Blu-ray player, the STB, the TV and the game console, for example - you would have just one decoder in the AllVid device.

That would mean decreased sales for some types of chips, including MPEG decoders for pay-TV STBs, according to Stephen Froehlich, a senior analyst for IMS Research's consumer electronics group. Vendors of such chips include Broadcom, STMicroelectronics, Trident Microsystems, and Sigma Designs. It could also increase sales of other types of chips, particularly MOCA (Multimedia over Coaxial Cable) and Wi-Fi. Among those suppliers are Broadcom, Entropic Communications, Sigma Designs, and Atheros Communications. 

Sigma Designs is one company that could lose sales in one area while gaining in another. The company obviously would like to sell as many chips as possible, but also recognizes the benefits that could come from a more open market, said Lowe. "Instead of selling a piece of equipment that can only go through one source -  the STB through the service provider - you have an alternative to sell into the open consumer market where they may replace that [box] every couple of years as the feature-creep occurs," he said. "[AllVid could] level the playing field across categories and enable anybody to launch a product that's a better mousetrap at any time and sell it retail."

Consumer electronics OEMs would be the clear winners if AllVid is approved. "This is our last and brightest hope," said Julie Kearney, vice president of regulatory affairs for the Consumer Electronics Association. The CEA believes AllVid could stimulate lots of innovation in a variety of consumer electronics devices.

Some of the video service providers also see opportunities. The telco companies that provide Internet Protocol TV services, a prime market for Sigma Design chips, like the idea of a strong retail STB market, said Lowe.

But other segments of the industry - particularly dominant cable TV providers - are less enthusiastic. After all, if the plan is successful in fostering a retail market, it loosens the hold these providers have on consumers. "If you're trying to maintain a monopoly in the home, you don't want the encroachment," said Lowe. It could also mean decreased STB sales by Motorola and Cisco to the cable TV providers.

In AllVid, the FCC is trying to build upon a group of industry standards that service providers, STB makers and consumer electronics OEMs are already starting to use. These include100-BASE-TX Ethernet as the physical layer technology, MOCA for transmission between the AllVid adapter and retail navigation devices, IP as the communications protocol, DTCP-IP (digital transmission content protection over Internet protocol) for content protection, and uPnP (Universal Plug and Play) protocols for service discovery. Because it's based on industry standards, AllVid may be more readily accepted by industry. Unlike CableCard, which was not based on standards and thus increased costs, AllVid is riding technology trends that are already disrupting the market, said Froehlich. If the FCC writes the rules carefully, AllVid could decrease costs for both providers and consumers, he said.

But standards are also why some say the FCC mandate is not needed. All of the big cable operators are already experimenting with some type of IP video delivery, said Mike Paxton, analyst at In-Stat. And most of the service providers have also adopted MOCA as the underlying network to move video around the home as they all race to deploy multi-room DVR, said Tom Lookabaugh, chief technology officer of Entropic, which makes MOCA chips. Overall, the industry is already moving to the type of gateway-client architecture outlined in AllVid, he said, so he sees little need for a mandate. "We don't need a silver platter of FCC regulation to make our business," he said. "There should be MOCA in most living rooms in the United States within a few years."

"This is already happening in the market," said Jason Friedrich, director of broadband policy for Motorola. "So what's the role of government regulation if these things are already happening in the market?" While it's too early to predict what effect AllVid might have if the FCC ultimately mandates it, he said, Motorola prefers that the FCC simply encourage the market rather than dictate what standards to use. "Some tech companies, us included, become nervous about that because tech mandates essentially freeze innovation."

There's also the question of whether consumers even want a retail STB market. Paxton, for one, sees no evidence that consumers are clamoring for a retail market. "That's going to be a pretty important club that those people in opposition to AllVid can use to beat over the head of the FCC and ultimately the Congress," he added.

The National Broadband Plan called for the FCC to require service providers to offer an AllVid device to subscribers by Dec. 31, 2012. But even if the FCC meets that deadline, the issue is likely to end up in the courts, said Gary Arlen, president of Arlen Communications, a strategic research and consulting firm specializing in telecommunications and media. "Typically decisions like this are fought in the courts for years," he said. "And this one pits some real big players against each other."

"I think two years from now you'll see some type of AllVid box, but it won't replace the existing proprietary STBs used in the cable, the IPTV, or even the satellite industry," said Paxton. "There are too many entrenched interests and players in the pay-TV food chain that are against this idea."

 
For more, see:

FCC's Notice of Inquiry on AllVid


FCC's Further Notice of Proposed Rulemaking on successor to CableCard


FCC National Broadband Plan