Low-priced Motorola set-top box expected to boost digital cable penetration

A new low-cost digital cable set-top box that Motorola Inc. expects to begin marketing this fall has cable operators expecting a quicker rollout of digital offerings. The Motorola DCT700 interactive set-top box will be priced at under US$100, while current digital set-top boxes can run as high as US$300 or US$400. Most cablecos end up subsidizing the cost of digital boxes to secure customers. The Motorola DCT700, which is about the size of a cable modem, includes a MIPS processor capable of supporting interactive services, an MPEG-2 digital video processor, and a real-time return path for services such as video-on-demand (VOD). It is compatible with the Motorola MediaCipher conditional access system, and includes an ITU standard 64/256 QAM. Still, the Motorola DCT700 doesn’t have all the bells and whistles of existing digital boxes, and is intended for use on additional television sets in mixed analog-digital environments, according to Paul Alfieri, account supervisor for Motorola Broadband at Garfield Group Public Relations. "The DCT700 doesn’t support analog channels, and it is very basic interactive services," he tells Canadian Communications Reports. "It’s two-way but there isn’t a lot on the front panel. It’s only controlled by remote. You can’t go up and change the channel on it, and you can’t do much with interactive program guides. It’s just a very basic set-top box." He adds, "It’s only got two lights on the front - one to tell you the power is on and one to tell you the message is on, and it’s got some back panel outputs for your TV. But it’s probably geared more towards secondary rooms in the home on an operator that would have an analog and digital system. It wouldn’t be used as a primary set-top box, because you’d probably want more functionality there. It’s a very simplified box." Alfieri says Motorola came up with the box primarily to aid in the rollout of all-digital cable systems. "It is a simplified set-top box that is designed to work in an all-digital cable environment. If you switch to all-digital, and you have a lot of (analog) subscribers, any subscriber that doesn’t have a digital set-top box is completely locked out of the system," he points out. "So the problem is if a cable operator has a million subscribers and each has two televisions - so you’re talking two million TVs - if an operator goes all-digital, you have to immediately have the capability to support those two million TVs. That’s a huge expense with a set-top box that is advanced that has a lot of features on it. So Motorola simplified the set-top box to accommodate the large-scale deployment of digital." Motorola remains tight-lipped about exactly when the DCT700 will be available commercially and whether it has signed up any buyers for the product. "There has been extreme interest in it, and we should publicly make some statements about it in the next few months," Alfieri says. "Anyone looking to reclaim bandwidth is seriously looking at this." Chris Seymour, Motorola senior product manager, says rather than rebuilding their plants, some smaller cablecos might choose the more economically feasible method of increasing bandwidth by converting to an all-digital lineup without making extensive modifications to the infrastructure. Canadian cableco Persona Communications Inc., which operates primarily in small communities, used this strategy when it converted its Kirkland Lake ON cable system in 2001 to Canada’s only all-digital system (CCR, Sept. 13/01). Seymour tells CCR that production won’t begin on the DCT700 until October. "We haven’t deployed it in any markets. We’ve been taking orders for it, and production begins in October," he says. Cogeco Cable Inc. is one cable operator that sees a lower-priced digital set-top box as having great potential for the deployment of digital. "Clearly this…is a fundamental and important development. It opens up a whole range of avenues to our companies," president and CEO Louis Audet said during the company’s third-quarter conference call with analysts in July. "Clearly, when you’re at that price level, there’s an opportunity to put great numbers of these boxes in consumers’ hands and expand considerably the number of customers who have access to a full digital offering, a partial digital offering,…enlarge the base of people who consume VOD, and enjoy all the bi-directional and interactive features of digital, and on-demand features of digital. So you can see there are many implications with this box." He added that Cogeco was in the early stages of discussions with Motorola for the DCT700. He told analysts that Cogeco could conceivably roll out the box on a market-by-market basis over two years. But the DCT700 offers little hope for small cablecos using Canadian Satellite Communications Inc.’s HITS-QT technology, as it won’t function with that delivery system. Seymour says, "HITS-QT is different. We have different products that work with HITS-QT. HITS-QT relies on satellite for distribution, and this is a cable box." The availability of any kind of digital box, even the more pricey models, has some small cablecos worried. Warren Ritchie, general manager of Kenora ON-based Norcom Telecommunications Ltd., says he’s concerned about the continued availability of the DSR 471, the only digital box that he knows of that functions with HITS-QT. Norcom buys the box for about $450, but sells it to customers for $199. "There doesn’t seem to be a commitment to continue making them. We’ve been out of boxes for a couple of months and we can’t get any more. Motorola has basically said we’re not making them anymore, unless we get a minimum order of 500. No cable operator can come up with that, not even Persona," he tells CCR. "The CCSA (Canadian Cable Systems Alliance) has had to actually bulk order them on our behalf because nobody has enough orders." Alfieri would not comment, saying only that no official announcement has been made with regard to the DSR 471. Talk of a cheap digital set-top box for cablecos has resulted in questions being raised about the price of equipment for telcos’ digital TV services. Cheryl Baker, president and CEO of MTS Communications Inc., a subsidiary of Manitoba Telecom Services Inc., said recently that she expects the price of the Next Level Communications equipment used to deliver its TV service to decline over time. "There is a significant number of telcos in the U.S. - small independents - that are latching onto the technology and starting to roll out TV," she said during a July 24 conference call discussing MTS’ second-quarter financial results. "So the greater the numbers of production for them, obviously the greater the economies of scale and reduced prices. So there is an expectation that price will fall, but I have no idea when or (by) how much."

Low-priced Motorola set-top box expected to boost digital cable penetration

Broadcast | September 4, 2003

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