The Media One deal cracks "Open" the US "Cable" market.......................
cableworld.com
A Message to GI?
MediaOne Taps Philips
By Alan Breznick and Jim Barthold
Breaking ranks with other major MSOs and sending shock waves through cable set-top manufacturers, MediaOne Group announced last week that it will buy digital set-top boxes from Philips Electronics NV of the Netherlands, as well as digital headends from DiviCom Inc. and computer software to support the equipment from Canal Plus.
The move by MediaOne, which it called the first order of non-proprietary equipment, access control systems and software complying with the cable industry's OpenCable standards, means that General Instrument Corp. and Scientific-Atlanta Inc. will finally no longer have a lock on the U.S. cable set-top market. Other large MSOs, including Tele-Communications Inc., Time Warner Inc., Comcast Corp. and Cox Communications Inc., have ordered their digital set-tops from GI and SA so far.
"It's certainly the boldest move yet by an MSO in the set-top space," said Michael Harris, president of Kinetic Strategies Inc., an industry analyst and consultant. "It's the first OpenCable play that intentionally does not endorse the S-A/GI duopoly."
Analysts predicted that the entry of Philips and MediaOne's selection of an open conditional access system, DVB (for digital video broadcasting), widely used overseas will clear the way for other major consumer electronics manufacturers to plunge into the domestic cable set-top business. That should mean greater competition, further innovation and lower set-top prices for cable operators as they try to turn boxes into a hot retail product.
"Ultimately, it's going to be Philips, Toshiba, Sharp, (Thomson, Hitachi) and on and on," said Cynthia Brumfield, principal analyst at Broadband Intelligence Inc. "Every consumer electronics manufacturer will be making digital boxes at some point."
Tossing a bone to GI, MediaOne said it has also expanded its digital-box relationship with the cable set-top leader. Under the broadened agreement, GI will supply digital headends, set-tops and software for one of the two undisclosed markets where Media One plans to launch digital service this year. The new team of Philips, DiviCom and Canal Plus will handle the other market.
GI previously had a small equipment order for MediaOne's rollout of digital cable service in suburban Detroit last year.
In addition, GI will incorporate the European DVB standard in whatever digital equipment and software that it supplies to MediaOne, starting early next year.
"We can populate headends with two million households in front of them," said Ed Breen, GI's chairman-CEO, putting a positive spin on the announcement. "It's (MediaOne is) an account that just had not made a big decision before."
But overall, the MediaOne digital decision clearly seemed to be a slap in the face to both GI and S-A. It also signals the growing impatience of MediaOne and possibly other MSOs with the two manufacturers' so-called Harmony effort to share proprietary conditional access technology information for interoperable OpenCable set-tops.
"I don't think we're trying to move away from Harmony," said Time Warner Cable chief technical officer Jim Chiddix. Nevertheless, Chiddix called MediaOne's move "very useful" as a way to "keep competitive pressure on GI and S-A."
Industry analysts were much more blunt in their assessments.
"It's a huge wakeup call to GI and S-A that they need to embrace this open environment or be swallowed by it," Harris said. "If they're not careful, in three years GI will only be selling headends and POD (point of deployment) cards."
The new vendors chosen by MediaOne also crowed about ending the set-top box market domination by GI and S-A.
"This is certainly a crack in the dike that says 'We're not tied to you anymore; we're not locked into this design structure,'" said Ben Stanger, a marketing manager of DiviCom, which is a division of C-Cube Microsystems Inc. "'We can mix and match."
Bud Wonsiewicz, MediaOne's SVP/ CTO, preferred to frame the move as a way to "get a global scale into this box and break the back of proprietary" products and systems. He said the nation's third largest MSO now has the opportunity to "select the best piece of consumer electronics to work on our network in the world."
In a conference call with reporters last week, MediaOne executives declined to specify how many digital boxes they'll order from Philips. They said they're also talking to other manufacturers, particularly S-A and Pioneer, about supplying OpenCable set-tops.
MediaOne officials said they intend to start selling the new digital set-tops to consumers as early as this summer, about a year ahead of the FCC's deadline for bringing set-tops to retail. The MSO will continue to let customers lease boxes, as they do now.
"We're really committed to making this very customer-centric," Wonsiewicz said. He argued that the pace of digital set-top deployment should now escalate dramatically, matching the flurry of new products and services now seen in the cellular phone business.
Judi Allen, SVP-video for MediaOne, said the MSO will announce in a month the names of the two markets it's targeting for digital launches this year. At that time, she said, the company will also spell out its digital programming and pricing plans.
(February 15, 1999)
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