Set-Top Smarts

The only thing simple about today's set-top–box market is this: Tech-savvy subscribers are demanding tech-savvy set-top boxes. The days of MSOs' deciding between a low-end and a high-end digital set-top are history.

MSOs have a new wealth of features and services to offer subscribers: dual-tuner HD digital video recorder (DVR) capability, improved home networking, even voice control.

"TiVo standalone and satellite did a great job of enlightening consumers about DVRs. Now the demand is overwhelming," says Pace Americas President Mike Pulli. This summer, Pace is introducing the DC551HD standalone HD set-top box and, in first or second quarter 2005, will release an HD DVR. The DVR will be compatible with both Motorola and Scientific-Atlanta (S-A) boxes.

Throw new features from Digeo and Microsoft into the set-top box, and it enables cable to outstrip DirecTV's and EchoStar's TiVo-based DVR receivers. With cable operators feeling the pressure to offer DVR services, manufacturers of set-top boxes see an opportunity.

"Our goal is to make sure we have a full and robust product portfolio," says Bernadette Vernon, director of strategic marketing for Motorola Digital Cable Group. "We don't want to limit the cable operators. If not everyone in their market wants the equivalent of a black Ford, then we'll work in partnership with them."

This year, that partnership has resulted in the Motorola DCT6400 series, a digital lineup that includes HDTV dual-tuner digital video recording, which allows a user to record two programs at once or watch one and record another.

Dual tuning is the must-have feature this year. "Cable operators are going toward advanced set-top boxes because that's where the consumer is going with HD and DVR," Vernon says. "It's the competitive landscape that is driving the technology."

The competitive landscape is also providing an opportunity for companies like Digeo and its Moxi digital media center service.

While the Digeo system is still considered a premium service, both Charter and Comcast have committed to commercial deployments of it. Charter's will be in Rochester, Minn. Comcast hasn't specified where it will place 40,000 units.

"Consumers like the two-tuner DVR and HD support," says Digeo COO Bert Kolde. "Moxi menus have been very popular as an interface to find out what is on and set up recording." Charter will lease the boxes for $9.95 per month with DVR and Moxi. Later this summer, Kolde says, Digeo will test other functions, such as music and photo storage on the box and home networking. Those services will carry an additional charge-another revenue opportunity for MSOs.

Such features will help differentiate cable in its battle against DBS. And they're not the only thing cable will have to brag about. Motorola's voice recognition allows subscribers to tune to channels and programs by telling the remote control the name of the show. Based on AgileTV technology, the remote contains a microphone and understands 100,000 phrases in multiple languages. It's available for the DCT2000 set-top.

Vernon sees it as a weapon against satellite and a revenue-driving opportunity. "It offers operators something that is exclusive to them," she explains, "and will also allow them to get to pay services and VOD more easily."

These new services do have a downside: It's harder for the cable operator to sort through the choices. "From a box supplier's perspective, it's a good time," says Pulli. "But from a cable company's perspective, it's challenging."

Microsoft will introduce Foundation version 1.7 this year, according to TV Group Director of Marketing Ed Gracyzk. Among the new features are HD and dual-tuner recording on the DCT6400 series. Other new features also help differentiate it from Digeo and other electronic program guides.

"One thing it has," says Gracyzk, "is scaled video in a quarter-screen-sized window that the programming guide wraps around. The viewer can see a show while using the guide." It also has "Smart Series" recording for enhanced DVR functions, such as extending the start or end time of program recording and eliminating duplicate recordings.

Motorola and S-A aren't the only manufacturers addressing the hot trend of HD DVR. Pioneer is launching the Voyager 4000 HD DVR. The company bypassed SD DVR development, says Dan Ward, director of marketing for the company's cable and communications division. "It took us longer to get to market, but we think it was worth the wait and a good gamble."

An interesting aspect of the HD market, he says, is that when the DVR boxes replace the regular HD boxes, they aren't returned to the MSO. Instead, they're moved to another HD set in the household. "We're optimistic," Ward adds, "that we won't be cannibalizing sales of our Voyager 3510 HD set-top box with the new DVR unit."

One way to prevent that cannibalization is to improve home-networking functionality. If subscribers find it easy to get content from the DVR set-top to regular set-top boxes in the household, there's a greater chance the boxes don't come home.

"There's a big focus on home networking, and we have some trials that are going well," says Bob Van Orden, vice president, strategy and product planning, for S-A. "We found it easier to install than we thought." Once consumers get a DVR, he says, they want access to it everywhere in their home.

All the manufacturers are working on networking systems. Digeo is offering the Motorola BMC9022, a two-TV, two-tuner networking system. "Unlike some of the other multi-room systems that have been announced, the second unit has full DVR functionality, like pause and rewind," says Kolde. The company is also working on a next-generation system that will network four TVs.

What's on tap for next-generation boxes?

Van Orden says the ability to display content distributed using MPEG-4 Part 10 or Windows Media 9 advanced video compression (AVC) is in the works. "AVC makes a lot of sense," he explains, "because the bandwidth savings are two to three times better [than MPEG-2]." That could be important as consumers demand more HDTV content. "If cable wants to offer 20 to 30 HD channels, then AVC support makes a lot of sense."

Another next-generation offering is the ability to record on a DVD within the set-top box. Says Van Orden, "People want to archive content they record on a PVR or have portability."

The addition of a DVD drive shows just how far the set-top box has come. Gone are the days when it was a device that only a cable operator could love.

With the new functionality and designs, the set-top box is becoming an important part of the consumer's entertainment experience.