Malone's Open Cable boxes..................................
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Optimism in Anaheim
Western Show-goers look to cable's high-tech future
By Cable World Staff
Last week's Western Show in Anaheim, Calif., portrayed a U.S. cable industry trying to forge a united front in an increasingly competitive marketplace as it tries to gear up for the 21st century.
While few major deals were announced, cable operators and vendors tried to send a clear message to Wall Street that they're better positioning themselves than their competitors to offer such new services as high-speed modems and digital television through OpenCable.
But despite all the good feelings expressed by operators, programmers and vendors who sipped champagne and microbew beers on the heavily trafficked convention floor, a few clouds hung heavy.
The darkest: the threat of Congressionally sanction rate regulation.
During a Dec. 10 address, FCC commissioner Susan Ness said that Congress may "pounce" on the cable industry if rates continue to climb faster than the inflation rate. She said Congress will "look very negatively" on cable rate increases if consumer complaints mount in 1998's election-year environment. While Ness said she doesn't like the rate-freeze idea, she noted that a political "tornado" is building that could zap cable operators still smarting from the FCC's 1992 rate rollback.
On another front, several cable industry players and observers noted that much of the rhetoric about cable's new era sounded remarkably similar to the industry's party line in 1992, when Tele-Communications Inc.'s John Malone pledged that every consumer would have 500 channels of TV service within two years.
"We can only make grandiose statements so many times and not follow up on them," said one top 10 MSO executive, referring to the 500-channel pledge. "We're still waiting for that one. We have to make our promises work this time."
But Malone is sticking to his vision: During a Dec. 11 luncheon, he preached industry brotherhood, noting that TCI will order 5 million to 10 million "OpenCable-compliant" digital set-top boxes that he wants delivered in two to three years. Malone said that large an order will lower prices and raise feature flexibility. He added that the OpenCable box also will let the cable industry offer digital television, standardized cable modems and Internet telephony for retail sale as early as 1999.
TCI is reviewing responses from a request for information [RFI] due Dec. 15. But a ground rule would be to "try to define a product within OpenCable that would accommodate all currently conceived products," Malone said.
He said the 5-million-unit OpenCable order will cover TCI-owned systems and approximate the number of current TCI homes that are multipay households. He added that that figure could reach 10 million or more if other MSOs in TCI's "friends and family" join the initial order.
Those "friends," including such TCI joint-venture cable system partners as Cablevision Systems Corp., cover 40 million cable homes, Malone said. "The cheaper they [the boxes] are, the more we'll buy," he added.
TCI's boxes will be compatible in the future and more powerful as silicon integration continues, Malone said. He pointed out that Scientific-Atlanta Inc.'s Explorer is now priced at $430 in quantity, but that 75% of that cost is tied to silicon.
"The S-A Pegasus equipment [Explorer 2000 digital set-top developed initially as part of a Time Warner Cable purchase order] would meet all the requirements to be OpenCable-compliant, and they are saying [it will be available in 1998's] first quarter," Malone said.
Malone said the OpenCable box can be economically deployed and that consumers' monthly equipment charges will be similar to today's for analog and digital set-tops. He even raised the possibility that long-distance companies, advertisers, merchandisers and financial services companies may underwrite the boxes' cost in return for broadband access to consumers' homes. In addition to S-A, NextLevel Systems Inc. is part of OpenCable's' foundation for backward-compatible products. Who'll supply those boxes is still an unknown, Malone said. But he added that he already has received several RFI responses: "Are there manufacturers out there who can see all the way to the end game? We don't know. We're still getting responses." Noted Jim Robbins, the president-CEO of Cox Communications Inc.: "I don't know if we'll be putting out an RFI ourselves. We like the process that's going on now."
For all the talk of standards, modems and digital platforms, panelists featured during the convention's Dec. 11 opening session agreed that the technological delivery mechanism won't be as important as content and how that content will be marketed and packaged.
"We're here to talk about technology today," said America Online CEO Bob Pittman. "But marketing will be the name of the game in the next couple of years."
Panelist Maggie Wilderotter, the CEO of Wink Communications Inc., agreed: "No matter what the delivery method, [customers] need to be able to get what they want when they want it."
Indeed, many cable operators said lots of work still must be done.
"There's a lot of enthusiasm out there right now," said Marcus Cable COO Lou Borrelli. "But there are issues we can't ignore, and we still have business to take care of before we get ahead of ourselves."
Cable's spirit of brotherhood also could be felt on the Western Show's heavily trafficked convention floor, where champagne flowed and optimistic programmers and technology vendors passed out hand-rolled cigars and served blue martinis and microbrew beers.
Between cocktails, there was a lot of speculation about forging Silicon Valley and telco alliances. News that AT&T might invest $1.3 billion in cable-owned @Home sent the convention floor buzzing Thursday morning.
"1998 is going to be the year of alliances," predicted Dob Bennett, the CEO of TCI programming arm Liberty Media Group. "I think you'll see the computer and cable industries coming together to form alliances in a big way next year."
However, TCI president Leo Hindery said 1997 had been the "year of the fix and the year of the deal, and '98 will be the year of delivery and the year of the alliance."
Such alliances were part of the discussion at the convention's Dec. 10 opening session panel discussion that featured Steve Young of CNN/fn, ICM CEO Jeff Berg and Comcast Corp. president Brian Roberts
But AOL's Pittman said alliances that may be created today may quickly change as consumers' choices expand and desires change: "Alliances will shift everyday because no one knows what consumers will buy yet."
Indeed, Microsoft Corp.'s convention-floor booth generated so much traffic that it was almost impossible at times to access the company's displays.
(December 15, 1997) |
