When enough is too much

As digital set-top box makers and cable operators seek middle ground between what they can offer and what customers can handle, they have discovered consumer appetites for technology are satiable. As a result, the industry's growth is tethered to technologies consumers understand, and the increasing popularity of video-on-demand (VOD) and personal video recorder functions represent the current limit. Anything beyond that is overkill, said set-top makers and analysts.

According to McKinsey & Co., VOD and personal video recorder services that provide customers with more control over entertainment will generate $1 billion by 2004. Kagan World Media predicts VOD market penetration will grow from 2% at the end of 2000 to 95% over the next decade, with 68 million cable VOD households devouring pay-per-view movies, events and adult programming.

With these projections in mind, AT&T Broadband decided last month to scale back deployment of the Motorola-built advanced DCT-5000 set-top box to concentrate efforts across a wide range of lower-end technologies. The move reflects AT&T Broadband's acknowledgement of what the rest of the industry evidently already knew: There's no rush to provide what consumers don't want.

AT&T's original game plan was to replicate PC functionality for TV. But after months of testing that uncovered consumer cries for less technology, the company was forced to rethink its network architecture and software and instead offer a blend of TV and Internet services. The idea now is to enhance — rather than transform — the TV viewing experience, said Greg Braden, executive vice president of broadband services and chief technology officer for AT&T Broadband.

“What we've discovered is that consumers really are not that interested in doing on their TV everything they can do with a PC,” Braden said at Internet World Chicago in July. “They like having convergence of the Internet and TV, but they're a long way from being convinced they want to do home banking on their television screen.”

While technical savvy is crucial to remaining competitive, set-top consumers can digest technology in small doses, said Mike Paxton, senior analyst at Cahners In-Stat Group. Rather than force-feed customers advanced technologies, manufacturers are smart to roll out their systems gradually.

“The technologies are ahead of the knowledge base of the subscribers because they don't understand it all,” Paxton said. Technology “doesn't have to be leap years ahead of what the competition is doing as long as it matches or is very close to what is being offered by other manufacturers.”

As the set-top industry evolves, consumers will differentiate TV and PC uses by identifying either a “lean back” or “lean forward” environment, said Dwight Sakuma, director of new market development for Motorola's Broadband DigiCable business. Entertainment-based functionality will migrate toward the TV, while work-related uses will remain PC-centric.

“Before there was a very distinct separation of usage between a TV and a PC, but now the lines are getting a little bit blurred,” Sakuma said. “It's easier for a family to watch a streaming media clip on the TV rather than huddle around a PC.”

Although set-top manufacturers haven't gone overboard on deploying new technologies, they are forward looking in development rather than waiting for demand to catch up with technology, Sakuma added. Readiness and time to market are key drivers for companies pushing technical advancements.

“If you're not looking at new technologies, your time-to-market opportunity may pass you by,” he said.

Set-top makers were careful from the beginning to produce scalable boxes that support next-generation technologies. Manufacturers such as Motorola and Scientific-Atlanta said that regardless of new technologies that are introduced, new box purchases are not necessary.

“The biggest mistake you can make is to put in a network that won't allow you to migrate to the next box,” said Ken Klaer, vice president and general manager of marketing and business development for Scientific-Atlanta.