Using the newly introduced compression format, which supporters say improves fourfold on the industry standard, the companies are developing an enhanced set-top box that combines the movie playback features of a DVD player and the interactivity of the Web.
The endeavor, called e-Box, is backed by National Semiconductor, Sigma Designs, CMC Magnetics, Modern VideoFilm, iVast, Pioneer and Sharp. No. 3 cable provider Comcast Cable agreed to collaborate on the technical specifications and will be the first to test the system when it's released early next year.
The cable industry has long sought to offer high-quality video-on-demand and interactive entertainment services. But the slow adoption of broadband as well as the expense and quality of content delivery have hampered the efforts.
By collaborating, the companies hope to overcome the technical hurdles that have undercut past efforts to build similar devices. For example, AT&T Broadband stopped development of an enhanced set-top box because of technical barriers of the project and exhaustive costs.
The move is similar to efforts in Europe where the European Union mandates that companies build similar technology that is interoperable.
"By pooling their technology, they're building a single solution to address the larger market as opposed to building separate services that fragment the market," said Tom Jacobs, president of the Internet Streaming Media Alliance.
Key to the service is the use of MPEG-4. The technology is marketed as a more efficient means of compression than MPEG-2, the standard for digital set-top boxes, digital satellites and digital cable. By using higher compression rates, cable operators could offer more channels for consumers at the same price.
MPEG-4 also can create an interactive experience via the TV set-top box. An enhanced set-top box would be able to deliver DVD-style films on demand, letting consumers play movies like they would a rental. Streamed content could also come embedded with rich graphics, e-commerce opportunities or navigational tools to additional content.
Though an alluring proposition, cable operators ultimately would have to buy MPEG-4-enhanced set-top boxes, replacing those already installed. That and theto recompress content with a special MPEG-4 encoder may be a deterrent.
"If you're a cable operator, that's a pretty expensive proposition," said Gerry Kaufhold, principal analyst with In-Stat Group MDR. Still, he says, "it's being looked at seriously by the cable industry."
Under the deal, each company provides some piece of the technology or technical expertise to create a full solution for enhanced digital cable. The solution includes creating a "head-end," or a physical center that collects content signals via satellite and distributes them directly to the home via a cable network. It also includes developing the software, a home set-top box enhanced with MPEG-4 and the tools to produce the MPEG content.
Each participating company has a member on e-Box's board of directors. The company does not have any direct employees.
To better sell the new system, e-Box will market itself as a way to upgrade consumers to an enhanced set-top box rather than having to replace older systems. The launch could be incrementally rather than all at once.
Analysts say the alliance could help No. 3 set-top box provider Pioneer and consumer electronics manufacturer Sharp unseat the top two set-top box providers to cable TV. Motorola Broadband (formerly General Instrument) is No. 1, and Scientific-Atlanta is No. 2.
Paul McCormick, senior marketing manager for set-top boxes at National Semiconductor, said the venture will usher in the next generation of TV entertainment. Still, he admits there are some milestones ahead.
"Even though the joint venture is confident that we have the knowledge to overcome the technical challenges, we're pushing the edge on technical innovation here, so this is the first," McCormick said.