The topic covered here is the hazards of retail sale of set-top boxes. Congressman Bliley has put forth an amendment requiring the sale of set-top boxes from consumer electronics retailers such as Circuit City, one of his constituents. As I mentioned in a previous column, the consumer electronics industry has positioned set-top boxes as evil things, the work of the devil. These nasty things get in the way of all of those wonderful TV and VCR features and functions (whether you want those attributes or not!). The only reason folks don't use those features and functions is not because nobody cares, but because the evil set-top box gets in the way.

A mixed bag

Sometime in 1995, there was an apparition from heaven that told the consumer electronics guys they were not seeing things clearly. The set-top box is in fact a wonderful thing that can be sold at retail! Rather than trying to kill off set-top boxes, the consumer electronics guys now want to make and sell them! We've entered a new era!

Very little in life is all bad or all good. Most things have advantages and disadvantages. From a cable operator's perspective, the advantages to subscriber ownership of set-top boxes are primarily economic and potentially customer satisfaction. Certainly, getting the subscriber to pay for the hardware and its maintenance is a real blessing. Also, there is the potential that the subscriber who owns the set-top box will see it as a benefit, rather than as something that gets in the way of TV and VCR features and functions. There is something about a pride of ownership that brings a "halo" effect. As I mentioned in a previous column, the VCR is in almost every way a "set-top box" which has as much interference with the features and functions of a TV as does a cable set-top box. Yet you never hear any complaints about VCR interference with TV features!

Serious hazards arise from subscriber set-top box ownership. Perhaps the first issue is that of resolution of in-home problems. Most subscribers do not realize that the leasing of a set-top box brings with it in-home pre-paid service. This service is generously provided and covers not only technical difficulties, but even assistance in usage and user errors such as not checking to see if the set-top box is plugged in. It will be important to advise subscribers who purchase their set-top boxes that this assistance must come from the retailer, the manufacturer, or will be an extra charge when provided by the cable operator.

Signal security is a major concern. When the cable operator provides the set-top box, it can decide when signal security has been breached and replace the boxes. Subscribers will not lose an "investment" in in-home hardware. When subscribers own set-top boxes, they will be faced with replacing them if they wish to continue service.

When a service fails

A serious drawback to subscriber ownership of set-top boxes comes from the hurdle this creates to taking new services. If the set-top box owned by the subscriber does not have the technology to provide access to a new service, the subscriber will have to choose between a) not taking the service, b) adding a second set-top box to provide access to the service, and c) replacing the existing set-top box with a new one that combines the old capability with the new. Clearly, this presents financial, convenience and "just doing it" hurdles to subscribers who might otherwise try a new service.

Another aspect of this problem is that a new service needs to attract subscribers quickly. If the cable operator provides the set-top box, it will be installed in a large number of homes simultaneously. The service provider quickly adds subscriptions. When the service provider has to rely on consumers purchasing set-top boxes, there will be a significant reduction in the speed of penetration. Many service providers will not be able to survive long enough under these conditions. This raises yet another concern: what happens when a service fails? Under current conditions, a service which fails and leaves hardware useless does not directly impact subscribers. If the subscriber purchases a set-top box for the new service and it then fails, the subscriber will bear the loss. Not only will this cause unhappiness, but it will further reduce the willingness to try new services in the future.

Subscriber education

While these problems are not yet upon us, the potential is high that they will be in the near future. It is worthwhile giving them some serious thought now. Probably the most important action to be taken by cable operators is subscriber education. The issue here is "management of expectations." If the consumer is well aware of the advantages and disadvantages of his purchase decision and proceeds with an informed decision, the likelihood of later problems is reduced.

Another way of minimizing the problem is to require all set-top boxes sold at retail to comply with FCC requirements for "cable ready" TVs and VCRs. This includes the Decoder Interface. A modular set-top box minimizes many of the problems described above.

Contact Walt Ciciora at: