Demand for Gateway Video, Web Devices That FCC Seeks is Untested

CEA has long sought ways for subscription-video customers to buy plug-and-play devices from retailers, and thinks a gateway device could be easily produced, sold and installed, executives there said. Executives from Cisco and Motorola, the two biggest U.S. set-top box makers, are more cautious. DirecTV and Dish Network said there may be technical hurdles to equipping their subscribers with the product. CableLabs said it may be easier for consumers and multichannel video programming distributors (MVPD) alike if those companies were the primary source for gateways. TiVo said its subscribers want a gateway device, and though the company can’t precisely estimate costs, it probably wouldn’t be expensive to make.

All agreed consumer demand is untested for the devices because most people don’t know about them. “Clearly they don’t know if they want a gateway or what, but I think it’s been shown as with the analog phone market that they like competition,” Vice President Brian Markwalter of CEA said. Vice President Julie Kearney likened the prospect of gateways to CableCARDs: “People were pretty excited about CableCARD when it came.” On gateways, “consumers may not know what they don’t know at this point,” she said. “To make a device that’s more readily available, more ubiquitous, without the hassles [of getting a CableCARD for a plug-and-play device], I think you would see an explosion in demand.” Cisco, Motorola and DirecTV executives were less sure.

CEA is “certainly correct, the consumers don’t know about any MVPD gateway because none exist,” said CableLabs President Paul Liao, chief technology officer of CEA member Panasonic until last year. “The early adopters are very anxious to have this type of capability, the mainstream not yet and the late adopters are perfectly happy without it.” Most U.S. consumers have an Internet gateway in their house to connect to broadband service, he noted. “So they are very familiar with the concept -- it’s just not been available for accessing cable or telephone or satellite video services until now."

A seeming lack of demand now for a gateway device doesn’t mean people won’t get one if they become available, said General Counsel Matt Zinn of Tivo. Cable subscribers have a hard time getting and using CableCARDs in video devices not provided by their pay-TV operator, he said. “They want to have access to signals, they want to use a non-operator provided device. That’s what they want. And right now you have to crawl through broken glass if you want to use a CableCARD.” If it becomes easy to get such an device, “I think plenty of people would take us up on it,” he said. “It’s like a router. How hard is it to make a router? All it’s doing is translating from one language to another."

There is demand “for a home networking solution and that is something DirecTV and a lot of folks in the industry are working toward,” said Vice President Stacy Fuller. “We are moving in the direction” of a home gateway device,” yet “we need a lot more smarts in the set-top box itself,” she continued. “If you sort of mandate a gateway device that can only do limited functionalities as described in the broadband plan, you're going to limit our ability” for more technology in the box. “A lot of the smarts in our system end up in the box itself” largely because DBS is a one-way service, Fuller said.

DirecTV is developing what it calls a home media center that’s likely to be introduced in this year’s second half, a spokesman said. It will have client-server architecture with a remote user interface using the Multimedia over Coax Alliance standard “that can integrate consumer electronics such as TV displays, DVD players, etc.,” he said. The NCTA, which this month floated seven principles for gateway devices (CD March 15 p7), declined to comment. A spokeswoman for Insight Communications, which earlier had sought an all-MVPD set-top solution, declined to comment.

Dish sees “technical challenges associated with separating out functionality into two different devices,” Vice President Linda Kinney said. “The devil’s in the details.” Gauging consumer interest is hard “because there’s no such box available today,” she added. If a gateway device becomes available, it makes the most sense for MVPDs to directly offer it to subscribers since in a way it’s “the last element of their network” before connecting with a TV or other consumer device, said Liao. “Because you have this constant evolution of the technology, the value of having this gateway device, this interface device, being provided by the MVPD is as they change their network,” consumers won’t need to upgrade, he said. “Otherwise you're going to freeze the technology, which will only harm consumers."

The current system of pay-TV providers leasing set-tops to subscribers works and could be disturbed if consumers need both a box and a gateway device in the future, said Senior Director Jeff Campbell of Cisco. “It’s very unclear whether there is demand for that device.” Rather than buying a new box to get new technology, “they can swap out a box by the lease model without the expense of buying equipment that no longer meets their needs,” he said. “It’s a big benefit of the leased model which I think the FCC did not consider sufficiently in the broadband plan.” Cisco will work to provide what MVPDs and consumers want, he said. “What we don’t know is if we go through these rules whether consumers will view it as being an improvement or an annoyance."

Don’t “repeat the mistakes of the past and create a regulatory mandate that could potentially inhibit the evolution of an operator’s broadband network,” said Senior Director Jason Friedrich of Motorola, comparing it to CableCARDs. Gateway video devices are “a theory without a lot of substance yet to it, and once we get down to the details of what this device is and what’s included in it we'll have a better sense,” he added. There are many “unanswered regulatory, technical and economic questions,” he said. “We simply have no idea what would be involved to deploy this device. I'm not even clear if we're talking about one device per home, one device per television set."

"It’s impossible to come up with deployment deadlines without a better idea of what this device is,” which is why Motorola thinks an FCC inquiry is “more appropriate” than a rulemaking notice, Friedrich said. Liao sees “some heavy lifting through 2012 to really define this so you can answer that question” of deployment time, among other issues, he said. CEA still wants an FCC rulemaking, seeing an inquiry as “more navel gazing,” Kearney said. “We could lob pleadings back and forth for the next three years and get nowhere,” she added. “We have to get to work right away.”