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Set-tops Morphing
Toward Super Net-tops If one were to choose the ultimate symbol of today’s convergence revolution, the traditional TV set-top box would be a strong candidate. Even one of the most visible levels, today’s satellite, cable, wireless cable and telephony providers are focusing more and more of their efforts toward what will quickly grow into the new set-top box of the New Millennium, also known as 1) the Net-top box, 2) the home control center, or 3) the Super Box. Yet at the most important level, which is that of the world’s consumer electronics (CE) dealers, companies like Sony, Thomson, Philips, Pace, Scientific Atlanta, Motorola/General Instrument, and Hughes Network Systems are looking at moving the traditional integrated receiver decoder (IRD) through a strange, complex and long-lasting metamorphosis. And not unlike the morphing of a green caterpillar into a gorgeous orange and black monarch butterfly, this metamorphosis is one which will completely change the functioning and capabilities of computing, communications, media, video, audio, data, storage, utilities, security and other signal forms or systems in the home and business. One can expect a huge deployment of video game-type services as a standard component, as well. As the chart indicates, by year-end 2003, a cumulative 38 million analog and digital set-top boxes will be deployed. Over these next four years, The Carmel Group expects digital boxes to grow at a compounded annual growth rate (CAGR) of 22%, pushing total digital set-top sales to more than 27 mil. units by year-end 2003. What can these new Net-tops offer? Well, the best thing they’ll offer is flexibility. Choice will become the new mantra in The Land of Net-Tops. Consumer Electronic stores have the potential to become like so many new car dealerships, i.e., come into any given one and chose exactly the model you want, based upon your wealth, needs, etc. Some customers will purchase the Lincolns, and others the Chevy Geos of the Net-top box world. Net-top examples will include standard Digital Versatile Disk (DVD) components that will become more and more a standard, built-in part of these Net-top devices. Additionally, most boxes will include component hard drives that will provide video and music storage, as well as personal TV capabilities. These will then provide further avenues for providers like WebTV, TiVo and Replay, as well as a whole slew of new players in the so-called "Personal TV" or "Personal Video Recorder" field. In fact, storage capacities are expected to measure as high as 30-40 gigabytes, which is the equivalent of about 20 hours of standard digital video, or about 500 hours of digital music. In addition, following Moore’s Law (of expanding capacity), within a couple of years, the standard Net-top hard drive should expand to around 100 gigabytes, which is the equivalent of about 60 hours of video and 1,500 of digital music. Further, the potential bundling of services (e.g., telephony, the Internet, and subscription TV) is also being studied quite carefully by the hardware providers of tomorrow. More set-tops are also including broadband access, which is really the key to the wide acceptance of future Net-tops. A key element suggesting the success of this broadband addition is TV’s status as an "instant medium." Broadband via TV speeds up the "World Wide Wait, " and makes the use of the Internet that much more appealing than the traditional delay associated with today’s narrowband Internet access. It’s also important to note that the Internet really enables true interactivity, because of the vast amount of customization it offers. Put another way, with the vast amount of storage space used by Websites connected to the Internet, these sites are able to provide Internet users with a higher degree of personalization than today’s Internet TV providers. Silicon Valley-based Liberate and OpenTV, key Interactive TV enablers, are quickly becoming standards on next generation TV boxes. Both are an example of today’s Interactive TV providers morphing toward a new status as Internet/Interactive TV providers. Additional elements crucial to a Net-Top device include a streaming media player and a standard-type Web browser interface. Specific examples include Netscape’s Navigator and Microsoft’s Internet Explorer, together with the hard drive that enables the downloading of streaming media and/or MP3 files . And just why is this revolution occurring? For one, set-tops have a distinct advantage over PCs, in that set-tops are located in the traditional entertainment area of the home (i.e., near the TV and stereo). Additionally, most set-tops today include both TV and stereo connections. Set-tops have the potential to be the home’s networked center of entertainment, as well as security, telephone, information gathering, appliance management, lighting, and other systems management within the home. In fact, U.K.-based Pace is developing a first generation of the "Gateway Expander," which will provide wireless Internet/subscription TV access to televisions, PCs, and/or other Internet appliances (plus possibly even game machines and cell phones). At least 20 Net-top devices are available today, which are available from a mix of subscription TV and retail providers. Subscription TV providers include EchoStar, with its WebTV device, as well as the forthcoming AOLTV service that was exhibited at last January’s Consumer Electronics Show and is now in its beta testing mode. Retail providers are best exemplified by Microsoft’s WebTV product and service, which has been on sale in CE stores for a couple of years already. And why should private broadband providers care about these set-top, net-top and Internet connections? For one, early reports suggest that in homes with both Interactive/Internet TVs and PCs, that T-Commerce (i.e., sales through the use of the television) are outpacing those of e-commerce (i.e., sales through the PC). That said, there’s a true, immediate potential of generating billions and billions of dollars from the expanded use of these devices. There’s also the potential to change significantly the way we undertake something as basic as shopping. Together they act together to reform our culture and the way that we live our lives. Plus, as if these drivers weren’t enough, the federal government’s new High Definition TV (HDTV) mandates will require that all consumers acquire some form of digital set-top in the next five to ten years. Further, the Federal Communications Commission (FCC) has also mandated that digital sales at retail must begin this summer and will culminate in all boxes being sold at retail by year-end 2005. Ultimately, what we’re seeing today is TV’s attempt as an industry to retrieve the ground it has lost to the computer as today’s lead home entertainment vessel. At the heart of this movement is the set-top box and tomorrow’s offspring, the Net-top box. About the author Jimmy Schaeffler is a subscription TV analyst for The Carmel Group, a publisher and consultancy located in Carmel-by-the-Sea, CA, specializing in telecom, computers and the media. He can be contacted at (831) 643-2222 or by email at jimmy@carmelgroup.com.
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