MediaOne is expected to kick off cable TV set-top box trials in Jacksonville, Florida, and possibly in one other city in early December that will incorporate technology from hardware maker Divicom and Canal Plus U.S. Technologies, a software provider, according to industry sources.
The move is much more than an isolated test that will impact only MediaOne customers. Rather, the technology being used in the test marks an important step in the cable industry's steady march toward being able to freely mix and match the type of set-top boxes that can be used in their networks.
Currently, cable providers are limited to using identical boxes across their networks. By being able to shop among numerous suppliers, however, the industry hopes to spur competition among box makers that results in lower prices and more features.
For consumers, the result of these product trials, it is hoped, will be a new array of digital services such as fancy electronic programming guides, advanced interactive services such as email, video-on-demand, and Web surfing, at a lower cost than would be otherwise possible. How? Because of increased competition among equipment and software makers, according to analysts.
The Jacksonville trial, in fact, seems to reflect the competition that may occur. MediaOne is expected to use cable TV set-top boxes from Philips in the trial, sources said. Historically, MediaOne has bought its set-top boxes from General Instrument and Scientific Atlanta. So this latest experiment has a decidedly European flair: Philips and Canal Plus are based in Europe while Divicom's technology is based on European standards. Other companies could cross the Atlantic as well, said analysts.
"We announced our intentions last February to deploy these technologies, but have not released any follow-up announcements" according to a spokesperson for MediaOne. Representatives for Divicom and Canal Plus declined to comment. Philips did not return calls by press time.
Motorola could be especially hurt by these sorts of moves, because it is in the process of buying out General Instrument (GI).
Interestingly enough, AT&T, which is in the process of acquiring MediaOne, also has an indirect interest in Motorola and GI. AT&T owns a large chunk of Liberty Media, which is one of the largest stockholders in GI.
Hoping to lower costs
The use of new software and hardware makers is "a shot across the bow," of General Instrument and Scientific-Atlanta, said Cynthia Brumfield, president of the consulting firm Broadband Intelligence. News of the MediaOne deployment was first reported in Brumfield's daily trade newsletter and was independently confirmed by several sources familiar with MediaOne's plans.
GI and Scientific-Atlanta have been banking on their role as primary providers of security technology to maintain their position in the marketplace, she said. Now there is finally evidence that cable operators are making definitive steps to squeeze out better prices on equipment from their vendors.
Cable operators typically buy equipment from just one firm because copyright protection technology--the encryption software used to prevent illegal copying of video signals--differs between manufacturers. As a result, most cable boxes work only with one cable operator. In the U.S. market, those vendors have been General Instrument and Scientific-Atlanta.
Furthermore, a middle layer of software which is used to talk to Java-ready set-tops will be provided by Canal Plus. This software interprets data that is passed from a server to the TV set-top's operating system, meaning that the same EPG and video-on-demand programs can be used to control what the box displays on the TV, no matter what brand it is. Reusing this software will also help lower the cost of services as they get rolled out in more and more cities throughout MediaOne's territories.
Ultimately, this opens the door for not only Philips to come in and supply advanced set-tops, but others such as U.K.-based Pace Micro, Pioneer, and any other number of companies could vie for business with MediaOne against GI and Scientific-Atlanta.
The move to adopt Canal Plus software also means more competition for the software that is needed to enable interactive services. Microsoft has been spending big to ensure its Windows CE and NT operating system software are used by AT&T, which now owns MediaOne.
Meanwhile, MediaOne Ventures, Cox, and Comcast have all invested in Liberate Technologies, which also provides software for this market.
Also, industry sources say OpenTV may be close to signing up its first U.S. cable customer, as well. The company, which like Canal Plus has enjoyed most of its success in Europe to date, is getting ready to deploy its software in set-tops from satellite service provider Echostar by early 2000.