STB market to peak in 2012, ABI says

On the cable front, some providers are already moving away from the STB model. CablecCARDs, which make the TV cable ready without an STB, and separable security have changed the cable ecosystem to include the STB as part of the TV itself, Clark said. IPTV could get there, but it’s still lagging behind.

“Those two main initiatives will change the ecosystem to include the STB part of the equation, so there is real opportunity for consumer electronics or flat-screen manufacturers to include for CableCARD and separable security.”

Services like Comcast’s recently launched tru2way already embed the STB in select TV sets. The service will be available on Panasonic, LG, Samsung and Sony TVs by the holiday season and circumvents the STB by connecting the cable service’s coaxial cable to the monitor and installing a conditional access card to verify the user as a paid subscriber. Not everyone believes this model will gain traction, because of the different lifecycles of STBs and TVs, the expected hefty price tag and the CableCARD’s limitations.

Still, the absence of another bulky piece of equipment is compelling to many consumers. This resistance to additional hardware could pose the biggest challenge to OTT video providers like Vudu and Apple TV. These services require not only an STB but typically additional money for the device and the subsequent purchases. OTT video providers’ best option might be to partner with a telco TV provider, and as Vudu executive vice president of strategy and corporate development Edward Lichty told telcos at last week’s TelcoTV conference, this might be the best option for telcos as well.

“There is going to be a demographic of people out there, especially the younger X generation that are purchasing those OTT boxes and watching more and more TV that way in substitute of their cable service to the point where they may pull the plug on their cable service,” Clark said. “Because there is all this industry-wide development and relationships developing where over-the-top providers are working with the legacy service providers to combine their offerings.”