The last mile is the hardest: moving viewers and operators to HD

High-definition deployment is facing a number of challenges in Canada, from consumer reluctance to the expense and administration of upgrading set-top boxes. At the Canadian Satellite Users Association’s Canadian Digital Broadcasting Summit held in Toronto on January 29 and 30, media advisors and executives from both national and regional cable systems brainstormed new business models that will permit smooth delivery of HD programming to all TV viewers.Currently there are three million high-definition television sets in Canadian homes, but only about 30% of these households have the set-top boxes required to receive HD signals. Rob McCann, president of small- to mid-market system Clearcable Networks, says his company is experiencing single-digit penetration with HD boxes even though the product offered today is available for free or subsidized in bundles."We expect the transition period will be longer than anticipated, but soon people won’t accept standard definition once they experience high-definition and then there will be an onslaught of demand," McCann says.D’arcy Hunt, director of TV product management at Rogers Cable Communications, says while digital penetration will spike up to 60% this year, HD’s growth is flat. He anticipates an aggressive growth rate in 2008 or 2009 once more broadcasters make the switch to HD programming and the prices for HDTV sets drop, but he says the key lies in working with retail partners such as Future Shop and Best Buy to educate salespeople that an HD television is nothing without the set-top box.To Hunt, it’s the missing link in this transitionary period that’s the easiest to recover. "The retailer is having a hard time because customers think their HD set doesn’t work, but it’s just because they didn’t sell the set-top box along with the television," he says, adding that investing the time to speak with sales staff on a regular basis about educating the consumer will ensure the boxes get into Canada’s living rooms. "From the customer’s point of view, they’ve already invested in the TV, and they will want the service at an incremental cost," he says.But that’s only a drop in the bucket. As reported in the Market Assessment of Broadcast Market for Satellite Services in Canada, conducted last November by Nordicity Group Ltd. on behalf of Ciel Satellite Group, an Ipsos Reid study from August 2006 shows only 13% of HDTV owners weren’t aware they needed a set-top box to get the signal – more ominously, 41% chose not to get the set-top box because of insufficient HD content.Currently, Bell ExpressVu offers about 50 channels, Star Choice carries more than 20 HD channels, and Rogers boasts 30 such channels. However, the report forecasts that number will explode, with up to 420 high-definition channels offered by 2020. Peter Lyman, senior partner of Nordicity Group, says broadcasters who are slow on the uptake may face regulatory sanctions such as an analogue switch-off date or the threat of losing genre protection unless their service is upgraded.The notion of paying thousands for a top-of-the-line television set only to be told there’s an additional cost to receive the high-definition programming may turn off a few customers, and most BDUs are cognizant that consumers don’t yet see the benefit in getting a set-top box to get better picture quality.Hunt believes there will be a day when HD customers will be paying the same price to receive programming as standard-definition viewers, but that won’t happen overnight. High-definition customers will have to pay more for the benefit of a crisp picture in the interim, but cable systems cannot afford to pass on the cost of this technology entirely to users."We’re all going to have to bite the bullet and live through the transition period," he says. "It will cost money and we’ll have to deal with it." Thus, cable systems will have to fork over money to purchase the set-top boxes and then subsidize the costs so the consumer will pick it up. Operators will then need to hold onto that customer for seven years in order to pay that subsidy cost back to the cable operator.Just as the consumer is in a transitory period from standard to high-definition, so too is the compression technology used by the cable industry to get signals into homes. Rogers, Clearcable and other cable systems want to efficiently use bandwidth to transmit HD broadcasting signals to get the most bang for their buck, and the latest generation of set-top boxes answer the call with HD MPEG-4 AVC (advanced video coding). Pegged as the successor to the MPEG-2 boxes which are currently used by most of Canada’s cable operators, the upgrade will offer greater compression and provide the same picture quality at about half the data rate (and price) than the set-top boxes used by most subscribers now.While replacing existing boxes with this more advanced set-top box would use bandwidth more efficiently, Hunt says the industry is exploring alternatives that are more economical than a massive recall of equipment in consumers’ premises. "There’s a point where introducing MPEG-4 is cost-prohibitive to replace all of the set boxes," Hunt says.Rather than tossing out the MPEG-2 boxes, he suggests moves should be made to reduce the bandwidth load on the current systems, and that includes switching off analogue channels to save space. Some current technology allows for the transmission of 20 digital channels for one analogue. "We would like to wake up and have analogue gone," he adds.Replacing less advanced set-top boxes is top of mind for Clearcable as well. McCann says the obvious scenario for his system is to move into MPEG-4 boxes, but the swap-out of more than 80,000 HD set-top boxes for the upgraded version is not for the faint of heart. He says there’s a cost to asking the customer to upgrade by making them go to the dealer to switch boxes. "Maybe it’s something we’ll have to eat over three to four years," he says.Although Rogers is looking at options to save bandwidth before jumping on the MPEG-4 technology bandwagon, Hunt says Rogers will likely purchase and deploy the boxes, "but whether we turn them on will depend on managing capital." Clearcable’s McCann sees this getting easier with time because OpenCable’s OCAP (OpenCable Application Platform) will eventually lower the cost of HD set-top boxes for the smaller systems.He notes cable modems were about $750 each in 1996, and today he pays $35 for the same system. "That’s what’s enabled us to move into a larger scale, and we anticipate the same for HD," he says. OpenCable is a middleware operating system recently approved for use in the US by Time Warner and Comcast, which will roll out OCAP-equipped boxes later this year.But Hunt isn’t quite as certain OpenCable will ensure the high-definition set-top box will follow the same pricing path as predecessor technologies. "You’ll see the prices go up because of the applications," he says. "I don’t see how that price in five years will get driven down, unless we have the HPs of the world drive it though media centre devices."In the meantime, the debate on how to deliver HD goes on, and Lyman says upcoming BDU regulations hearings will act as a forum for the cable operators and programmers to discuss even more issues of high-definition delivery and digital migration. In the meantime, the industry agrees the most immediate delivery method is to keep close ties with the retailers to ensure the next HDTV sold also comes home with a set-top box.HDTV household growth, 2005-2010 (millions) 20052010TV households - total12.112.6Total digital TV households5.39.3Number of households with an HDTV set27% estimate of HDTV households with a set-top box30%70%Total HD subscribers0.45% estimate of households receiving HDTV broadcast services3%39%

The last mile is the hardest: moving viewers and operators to HD

Broadcast | February 14, 2007

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