CableLabs, the industry's research group, issued a final set of hardware specifications for the next generation of advanced set-top boxes. Development of the plans marks an important milestone for getting the boxes into retail stores by the government-mandated deadline of July 2000.
Cable operators typically buy equipment from just one vendor because copyright protection technology differs between manufacturers. As a result, most cable boxes work only with one cable operator.
The new specifications standardize how these devices will connect to digital video systems, allowing cable companies and consumers to choose from a variety of manufacturers regardless of who provides their cable service.
Cable operators have been anxious to get the specifications completed so manufacturers such as General Instrument and Scientific Atlanta can make set-tops that run interactive applications such as video on demand, email, high-speed Internet access and new electronic program guides (EPGs).
"With the purchase of such a [standards-based set-top], the consumer will be able to use their set-top box or integrated television in compatible cable systems," said Lisa Lee, who heads the standards effort known as OpenCable for CableLabs.
"This also will provide a very competitive environment for new applications to be developed and deployed. Televisions as we know them today will be a thing of the past," she said in a statement.
Cable companies such as AT&T's Broadband and Internet Services division (formerly known as TCI) and Time-Warner Cable are interested in the billions of dollars in new revenue these applications could provide.
A new report from Forrester Research estimates that interactive TV services will generate $11 billion in advertising, $7 billion in commerce, and $2 billion in subscription revenues by 2004. Electronic program guides alone, which will function like portals to TV content, are expected reach into 55 million homes and create $3.2 billion in advertising revenues in the next five years.
Cable companies will derive another benefit: Consumers will purchase the set-tops rather than lease them from the cable operator.
Software still an issue
"What's left to do is actual implementation. Once these are deployed, then people will be able to find out what gremlins are in the ground," said Cynthia Brumfield, president of the consulting firm Broadband Intelligence.
The specifications for the various software components have not been formalized yet, she noted, but those are not as critical a step as setting the hardware specifications.
Eager to enter the market, AT&T has created an organization to oversee a strategy for rolling out interactive services and to handle technical work such as designing interfaces. Called the Interactive Offerings Group, it will also consider making strategic investments.
Brumfield said more cable operators will start similar operations because interactive content "is so different in nature that unless they have a coordinated, focused effort, I can't see cable operators knowing what to do."
Cable operators may wind up waiting, in either case. A middle layer of software that is needed to interpret data that is passing from a server to the set-top's operating system has not yet been defined by OpenCable, and Sun Microsystems, Microsoft, and Liberate Technologies (formerly NCI) are still vying for that critical piece of software, according to Leslie Ellis, cable industry analyst with research firm Paul Kagan & Associates.
For cable operators, this is software layer is needed so that applications they have written, such as the EPG and video-on-demand programs, can control what the box displays on the TV, no matter what brand it is. For consumers, that means the box they paid for will have access to the same features, no matter where they use it.
The only other option is to actually download a new operating system into the box, which is sometimes a difficult task.
Cable operators are aiming for the former scenario. Analysts say it's technically possible, but actually hammering out the details--especially given the animosities between Sun and Microsoft--could be difficult.
"Everybody wants their software in that box," Ellis said.
It remains to be seen who the cable companies will let in.