Cable set-top deal wide-ranging

NextLevel Systems' agreement with nine cable service operators could secure the company 50 percent of the lucrative next-generation cable set-top box market.

Paul Festa Staff Writer, CNET News.com
Paul Festa
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Paul Festa
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NextLevel Systems today announced a major deal with cable service operators that will secure the company a significant portion of the lucrative next-generation cable set-top box market.

The company also announced a continuation of its corporate restructuring, including the naming of a CEO, continued layoffs and consolidation of operations, and the resumption of the General Instrument (GI) name. (See related story)

The set-top deal means that GI will provide next-generation cable set-top boxes to what it describes as half of the cable service industry. Over the next three to five years, nine cable operators will purchase at least 15 million set-top devices built according to the Open Cable specification in a deal that the company values at at least $4.5 billion.

The list of cable operators includes Tele-Communications. GI would not name the other eight companies.

Analysts praised the deal as a major coup for the set-top box maker, which will have the opportunity to supply cable service operators with the next generation of boxes that will ultimately replace those currently in use, according to IDC, in 67 percent of American homes.

IDC analyst Sean Kaldor described the agreement as "fundamental to the future of GI. This means GI has a firm footing in the replacement cycle, which is a big opportunity."

Current set-top boxes, which do little more than convert cable signals, are overdue for a technological upgrade as the broadcast industry converts from analog to digital technology and expands its idea of what the cable system can transmit to the home. GI expects its next-generation box, which will be available at the end of the coming year, to handle Internet connections and two-way communication.

Such technology could make the cable set-top box, which costs users a few dollars a month, a competitor to low-end WebTV-like systems, which typically cost about $100, according to Kaldor. Top-of-the-line WebTV-like boxes with more features would probably hold their own against Internet-enabled cable boxes, he said.

GI's deal also means that the company holds some cards extremely valuable to computer industry giants Microsoft and Intel. Those companies are interested in supplying the operating system and processors that will power the new cable boxes.

The choice of an operating system and microprocessor will lie in the hands of the cable service operators, according to GI spokesman Dick Badler, who said that the box would be designed to be compatible with various systems.