Box to the future

The National Cable & Telecommunications Association celebrated its first national trade show of the 21st century — and the 50th in its history — last week in Chicago with a 20th century focus on set-top boxes.

Despite a recession-resistant business model and enjoying what FCC Chairman Michael Powell called the “most positive regulatory environment in decades,” the industry was buzzing about AT&T Broadband's decision to put an end to its high-end interactive set-top box plans.

“The big news of this show… was the AT&T retrenchment on its advanced set-top agenda… how set-tops are going to evolve and what's the next set of interactive services,” said Cynthia Brumfield, president of Broadband Intelligence.

Although anticipated in most quarters, AT&T's strategy shift walloped Motorola, which builds the boxes, and Microsoft, which had expected to provide the operating system software that would propel interactive services. Instead of the feature-rich DCT-5000, AT&T will focus on the much less costly DCT-2000s.

“We can continue to go with the box we're deploying,” AT&T Chairman and CEO C. Michael Armstrong said, noting the company has already placed 3.1 million of the less intelligent units into subscriber homes. “What people seem to really enjoy is a fuller expression of entertainment” rather than more complex interactive features that come from next-generation Internet-enabled set-tops.

Neither Microsoft nor Motorola was enthralled by AT&T's decision, although both tried to spin positive.

‘We can continue to go with the box we're deploying.’
— C. Michael Armstrong, AT&T

“The thin-client [DCT-2000] model has been very popular in North America,” said David Robinson, president of Motorola's Broadband Communications Sector, noting that DCT-5000s are collecting dust. “The majority of our shipments are into Europe right now. There will be different models in different places throughout the world that will be successful. It's a natural evolution.”

Scientific-Atlanta, Motorola's primary competitor, was vindicated by AT&T's reversal. S-A has consistently promoted a migratory strategy that keeps intelligence in the network and out of the set-top.

“The complexity factor is not the set-top, it's at the other end of the network,” said Chairman, President and CEO Jim McDonald. “The issue is more about what functionality and what services you're going to offer in the future.”

That future could include a new way of running set-tops. The newly formed Linux Alliance proffered Linux as the control source for thick-client set-tops like the DCT-5000. Twenty-four companies, including Motorola, pledged to use Linux as founding members of the organization.

“We see this driving the next generation of set-tops,” said Carl McGrath, vice president and general manager of Motorola's DigiCable.

As opposed to the last “next generation.”

“There's been a change of program recently,” said Jon DeVaan, senior vice president of Microsoft's TV division.

He could have said the same about an industry that is basking in the glory of hard-won gains over wired and wireless competition while it is still unsettled in its interactive future.

“Cable is sitting in the catbird seat reassessing its technological push… and taking things a little bit more slowly,” Brumfield said. “As a consequence, this show lacks the energy that it did in the past couple years where cable was facing a big competitive threat from companies that are now financially troubled or bankrupt or gone.”

Any lack of competition raises caution flags with an industry not far past a time when “hating one's cable company was a national pastime,” Powell said.

A “digital kiss” turned cable from the “toad of the telecommunications sector” into a prince, said the FCC commissioner, but it's imperative for cable to “keep the positives going when it has a clear competitive edge. It's a challenge worthy of a prince.”

Comcast President Brian Roberts accepted the challenge: “We have an opportunity right now to rest on our laurels or keep pushing this technology. Can we invent something new?” he said.

More to the point, Brumfield said: Do operators really want to?

“Video is what cable operators know, and just taking it that one incremental step, doing it on demand, seems to be the next challenge, not advanced Internet interactive services over set-tops or some of the blue-sky hopes that were really characteristic of this show two years ago,” he said.