Smart Move: Comcast Remakes Itself with Cond'l Access, Set-Top Pact

Yes, Comcast inked its largest set-top purchase (a $1bln multi-yr commitment to Motorola), but the real news is Philly once again orchestrated a complex joint venture that strengthens the MSO immensely (a la GuideWorks, its shared IPG jv with Gemstar). — A crucial part of the deal has Moto and Comcast forming 2 jvs. The 1st will focus primarily on development of a next-gen conditional access system, using Moto’s MediaCipher technology as a foundation. Conditional access enables cable providers to ensure customers receive only the video services they’ve subscribed to. Comcast and Motorola will jointly manage the group. The 2nd jv will focus on licensing conditional access and other cable technologies to US cable ops and 3rd party providers. Significantly, this jv will be managed by Comcast. While there has been talk (and some action) by Moto, S-A and Sony about licensing conditional access tech to 3rd parties, there haven’t been significant developments, partly due to costs. This deal could change things. "Should Comcast license MediaCipher at no or low cost, which we believe is its intention, it might finally break the bottleneck and legitimately permit other vendors to enter the market," Bank of America’s Doug Shapiro says. "That could theoretically lower costs, increase the range of functions on the set-top and perhaps make retail distribution more feasible over a shorter time frame than [the Next-Gen Network Architecture] would allow." — Motorola evp Dan Moloney wouldn’t provide detail as to what additional cable tech could come from the venture, but there’s "a lot of dialogue." As for conditional access, the 2 will focus on opportunities for a downloadable conditional access environment. Right now, the only way to update security on a product is to physically remove it and replace it with another product. — The deal is another example of Comcast investing in itself and "trying to get more influence over a critical part of our business," Comcast svp, digital services Mark Hess says. That’s exactly how Shapiro sees it, too. "Comcast is systematically eliminating obstacles and this could be the most important one," he said in a note to clients, pointing to the Gemstar deal, the MGM/Sony pact and its purchase of Liberate’s middleware.