Bullpen: Dumb Pipe vs. Dumb Monitor

Building the perfect TV experience has long evaded the consumer electronics (CE) industry and providers of video services alike. There always seems to be one piece missing. For video service providers – whether cable, satellite, or telco – the missing piece has centered on the set-top box. Control point A: dumb monitor One objective for providers is to create branded control points within subscribers’ homes. Exerting such control negates many features of expensive TV sets, relegating them to the status of a dumb monitor.

A control point can consist of a set-top box, CableCard, OpenCable unidirectional receiver (OCUR), tru2way software download, or potentially OpenCable bidirectional receiver (OCBR).

CableCards can be inserted into a special PCMCIA slot on supported high-end CE devices. A CableCard has the ability to decrypt broadcast video signals from the video service provider while providing some local control of the viewing experience through the TV set’s factory remote.

The CableCard is a two-way device. But because of the failure to close a cable/CE industry agreement on two-way technology, first-generation CableCard host devices themselves were one-way, thus unable to support interactive services, such as video on demand (VOD), switched digital video (SDV) or guide data. That disjunction created pain points.

Deploying SDV, for instance, has rendered these CableCard 1.0 devices inoperable. The fix is to install a "tuning resolver," a small universal serial bus (USB) adapter that plugs into CE devices equipped with a USB port, along with a CableCard to access content on the switched tier. CE devices without a USB port require a set-top to tune to the switched tier.

The cable industry’s retail initiative OCUR provided similar promise for CE to build a variety of cable-friendly boxes. Several computer manufacturers added a slot to support OCUR. However, OCUR suffers from the same unidirectional fate as the CableCard 1.0 devices.

In all likelihood, OCUR devices will need to be replaced with bidirectional versions such as OCBR.

These CableCard options allow subscribers to operate video equipment plugged into cable service with a factory remote, but that’s about all. The CE equipment can receive and decrypt cable content, but these devices cannot interact with it nor gain access to other high-value content unless local control is surrendered to the programming operator.

Tru2way is the first such offering that permits CE devices to access interactive content. It consists of a software download that takes over the CE device, blocks CE (or potentially over-the-top) applications and essentially turns the TV set into a set-top.

In the near term, tru2way will allow CE devices to gain access to a full guide, VOD and SDV, along with a small set of approved and tested applications. Cable operators hope to encourage third-party vendors to expand the range of applications available to the tru2way platform and find ways to monetize it. Control point B: dumb pipe The objective of CE companies is to sell equipment, as well as to differentiate themselves by catering to consumers’ appetite for quality, price, and features.

Their control over the TV experience is behind the scenes and involves providing reliable, simple-to-use products in all shapes and sizes. In most cases, however, consumers are oblivious of the TV set’s make.

In an effort to drive greater brand awareness as well as stimulate innovation around the TV experience, CE companies seek increased control over the TV viewing experience. If successful, they could increasingly relegate video service providers to becoming a dumb pipe.

A control point could be a TV set, computer or some application – such as "Digital Cable Ready Plus" (DCR+) – running on any of those devices.

Over the years, CE companies have tried to gain some control of the TV experience in various ways. These efforts mostly involved partnering with guide or other content companies and building this functionality into their TV sets.

Lack of access to all available content and reliable guide data has stymied their ability to innovate. And despite some progress, CE companies have had difficulty advancing in the cable set-top market, especially in North America.

The CableCard was the CE industry’s first break. However, it drove costs up, and as mentioned, lack of a two-way agreement on host devices limited its value. Only a few hundred thousand consumers actually requested CableCards.

As the Consumer Electronics Association’s response to tru2way (OCAP), DCR+ requests that the FCC require a modification permitting CE devices to gain access to VOD, SDV, guide data and communications. The proposal appears to have little momentum, but the FCC has yet to rule.

Meanwhile, eight CE companies – and counting – have signed the May 2008 tru2way memorandum of understanding (MOU) that Sony brokered with six cable operators representing some 80 percent of the U.S. market. The MOU sets a target of July 1, 2009, for making headends tru2way-ready.

The motivation for cable to innovate beyond this deployment, however, remains to be seen. One worrisome indicator: First-generation VOD client software that is more than seven years old remains pervasive in this industry.

The CE industry believes there is a lack of competitive pressure on video service providers to improve their TV guides and set-tops and that DCR+ would force them to compete directly with CE at a different pace.

Recent concessions to TiVo notwithstanding, the only premium content most CE companies have been able to manage is broadcast channels (received by an antenna), basic service from cable (analog), expanded basic from cable (analog), and digital tier from cable (via CableCard).

Of these, only the broadcast channels come with some kind of guide data. With no way to access VOD, SDV, reliable guide data or other interactive content, CE has resorted to adding an Ethernet port (RJ-45 socket) on TV sets to be able to view movies, photos, and music on the customer’s home media server using the slowly proliferating Digital Living Network Alliance (DLNA) standard. Either/or? Ultimately, either video service providers will be successful in establishing and maintaining control over CE devices via tru2way and/or OCBR and create dumb monitors, or the CEA will obtain the government help it has requested, which would result in video service providers being forced to innovate with CE or become a dumb pipe.

Is tru2way a fait accompli? The momentum behind the Sony-brokered MOU is strong, but Verizon has let the FCC know that it favors RJ-45-based technology and would furthermore support platform-agnostic efforts under the auspices of the Alliance for Telecommunications Solutions (ATIS). (As reported here in June, Verizon is working via ATIS on downloadable conditional access.)

What the FCC will do remains to be seen. But a ruling in favor of DCR+ wouldn’t necessarily undermine cable.

It would restrict the amount of control any video service operator has over the devices that interface with their service. This loosening would create a form of net neutrality for video programming that could open up opportunities for CE companies, as well as other third parties to innovate within the delivery and management of video programming.

Such a regulatory shift would leave video service providers as incumbent players, but accelerate their innovation cycle. Tru2way already has forced cable operators to become increasingly proficient in software development. In a world of video net neutrality, complexities and market pressures would force them to become even better.

Bruce Bahlmann is an independent research analyst. Reach him at [email protected].