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They say that once everything goes digital, you can do anything. Long-held beliefs and practices, like dedicated, 6-MHz "channels," are supplanted with bitstreams that simply don't care what the payload is. That's good news for cable operators, who can leverage their wide bandwidths, along with digital compression, to dramatically improve signal quality while simultaneously expanding the number of video bitstreams they can offer.

It's a bit like magic, these digital set-tops. Not only can they spit out video as it's been known for the past 50 years, but they're loaded with interactive applications that will alter the way television is consumed. Better graphics and navigation guides will please our eyes and easily whisk us to the kinds of programs we like to watch.

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Philips' new digital set-top box.

After years of waiting for hardware and software to be properly integrated, set-top costs to come down to affordable levels, and applications to be created to exploit digital devices, the industry is enjoying an unprecedented level of support from several manufacturers, and more may be on the way. That has resulted in an explosion of market acceptance among cable multiple system operators (MSOs), with nearly every major player well down the road toward deployment of a significant number of set-tops this year. AT&T Broadband and Internet Services (formerly Tele-Communications Inc.), which began aggressively deploying hardware from General Instrument in late 1997 and actually placed nearly 1 million set-tops by the end of 1998, is still going full-steam ahead, according to Tony Werner, chief technical officer at AT&T Broadband.

"We continue to deploy boxes as rapidly as we can," he reports. "Our budget is to have about 2 million paying customers on it (the digital platform) by the end of this year" in AT&T owned and operated systems, he adds.

GI will gladly continue to feed digital gear to quench AT&T's, as well as other MSOs', thirst, says Denton Kanouff, vice president of marketing, digital network systems, at GI. In fact, the company forecasts that it will ship roughly 3.2 million digital set-tops this year.

To date, Kanouff says GI has shipped 760 digital "systems" and now estimates that some 36 million households are passed by digital-capable networks.

Forecasts vary, but it is expected that by the end of this year, roughly 10 percent of U.S. cable subscribers could be watching TV through a digital set-top. Industry analyst firm Paul Kagan Associates estimates that digital set-top shipments totaled about 2.8 million units at the end of 1998. Senior Broadband Analyst Leslie Ellis predicts that this year, about 3.5 million total digital set-tops will be shipped.

The lion's share of those devices will be GI's DCT-2000, which has replaced the earlier DCT-1000 and DCT-1200 set-tops as GI's workhorse. The 2000 offers both 64- and 256-QAM processing and supports real-time reverse path communications, which allows cable operators to begin to offer interactive services.

However, by the final quarter of this year, GI is expected to roll out about 400,000 of its flagship DCT-5000+ set-tops, with AT&T expected to receive at least 25 percent of those as the company begins to offer interactive services and e-commerce. "We have assurances we'll receive 100,000 or more 5000s this year," says Werner. The unit features three tuners, including a DOCSIS-based modem, so that consumers can simultaneously perform a multitude of PC- and TV-based functions-all via the set-top.

AT&T's version of the set-top will feature the Microsoft WindowsCE operating system, a relationship that was further cemented last month when the two companies announced that AT&T would expand its commitment to use the Windows operating system.

Industry sources close to the situation say the announced agreement between AT&T and Microsoft actually consists of letters of intent, and negotiations were underway to forge a contract while this article was going to press. The sources also say Microsoft is pressing for AT&T to adopt the WebTV technology.

In addition, the giant software company is working with AT&T to develop two showcase systems-insiders say Denver and Cedar Rapids, Iowa are the locations-to show off the capabilities of an interactive cable TV system.

Time Warner Cable's "Pegasus" digital program is also being aggressively brought to market, but without all the hyperbole. Digital services are in the process of being deployed in more than 30 markets, although company officials have only been willing to publicly discuss activities in Austin, Texas; Columbus, Ohio; Tampa, Fla.; Charlotte, N.C.; and Hawaii.

In those markets, Time Warner is deploying the Explorer 2000 digital set-top from Scientific-Atlanta, as well as Pioneer's Voyager digital set-top.

Originally, S-A had the right to precede Pioneer in box deployments, but delays have made it possible for Pioneer to offer its equipment at essentially the same time that S-A's gear debuts, according to Mike Hayashi, vice president of advanced engineering at Time Warner Cable.

The Pegasus program has its roots in the highly-publicized Full Service Network, an interactive cable network that was built in Orlando earlier in the decade. "The whole point of Pegasus is to enable that level of services to all of our subscribers at a substantially reduced cost," notes Hayashi.

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U.S. digital set-top deployments (in millions) Source: Paul Kagan Associates

To get to that level of service, Time Warner is actually deploying Pegasus in two phases, starting first with a broadcast offering, followed by deployment of an interactive suite of services. The engineering work for phase one is substantially complete, and systems are presently rolling out with a digital broadcast tier. But Hayashi and his staff are now focused on getting interactive services operational. "Our group's focus right now is to get VOD up and running," Hayashi says.

That's been made possible by tremendous cost reductions. "The (set-tops) have come down from $4,000 (the cost of the set-top that was used in the FSN) to the $300 range, and we expect that to follow Moore's Law," he says.

Future generations of digital set-tops are "pretty far along" the development cycle at S-A, according to Bill Wall, technical director of subscriber networks. A prototype of the S-A "Explorer 6000" box was actually seen at the recent National Association of Broadcasters convention in Las Vegas, used as a way to demonstrate the removable security card that's part of OpenCable.

Wall says the high-end box, which offers a choice between the PowerTV and Windows CE operating systems, would probably be formally announced prior to this year's National Cable Show, but he declined to be more specific than that.

Wall added that the Explorer 2000 would continue to be S-A's workhorse unit for several years, but the 6000 box would appeal to those who want to choose between operating systems. He also said a third set-top, one that features a built-in DOCSIS 1.1 modem, would probably debut sometime in 2000.

S-A officials were also a bit more hesitant than their Pennsylvania-based rivals to speculate on how many digital set-tops and systems will be deployed by the end of 1999, but a recent press release boasted that 17 North American cable operators have committed to deploy the hardware.

To date, according to the company, 79 systems have been shipped to customer sites, 64 of those have actually been installed, and 29 have been commercially launched. Those include: Adelphia Communica-tions in Buffalo, N.Y. and Toms River, N.J.; Charter Communications in Glendale, Calif.; Cox Communications in San Diego, Calif., Las Vegas, Nev. and Phoenix, Ariz.; Time Warner in Austin, Texas and Tampa, Fla.; and Videotron in Montreal.

Over at MediaOne, which announced early this year that it would deploy a digital system that's based on both OpenCable and DVB standards, work continues to get set-tops from Philips married to middleware from Canal Plus and headend gear from Divicom. Although the waters have been muddied recently because of the AT&T takeover of MediaOne, the goal is to launch the system by the end of June.

"We're working really hard, and the signs are really encouraging," Bud Wonsiewicz, MediaOne Group's chief technology officer, recently told CED sister publication Multichannel News. "I (recently) visited Philips and Canal Plus and was really amazed by what I saw. It confirms my feeling that DVB is going to be quite an amazing innovation in the industry."

Wonsiewicz likes the DVB approach so much because it has worldwide backing with countless operators in Europe, as well as several set-top manufacturers. That latter category includes GI, which has committed to building a DVB-based device. That amount of support will naturally lead to lower-priced equipment, Wonsiewicz says.

"They (GI) are committed to a DVB, OpenCable implementation," he adds. "I'm using DVB a little loosely because we're using their conditional access but we're using the rest of the North American electrical standards. We've had a number of discussions with other firms about pushing the standard forward. We're pretty optimistic that you'll be seeing significant events."

MediaOne will focus first on adding digital technology to stay competitive with satellite competitive threats, says Wonsiewicz. The goal is to offer a similar number of high-quality channels, along with a good, useful program guide.

After that, MediaOne intends to investigate video-on-demand applications. Wonsiewicz notes that because of cost efficiencies, the capital expenditure related to servers and other VOD equipment has fallen to the point where it's now economically possible to offer a service where consumers can pick and choose content and control its playback.

"We're very bullish and aggressive on video-on-demand," he stresses. "I think the advantage we have over satellite is our ability to have interactivity."

At last month's Cable-Tec Expo, an annual convention hosted by the Society of Cable Telecommunications Engineers, Philips Electronics took the wraps off its digital set-top box, which has been designed to be compliant with the OpenCable specifications.

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Pishal

Philips has already deployed about 2 million set-tops worldwide since 1995, mostly in European systems owned by Canal Plus, says Paul Pishal, director of business development at Philips Broadband Networks. Philips intends to offer two set-tops: a "basic" model that allows operators to select from several conditional access schemes and features a DAVIC/DVB return channel which along with a Java-based application environment.

A souped-up version of the box, which will be available at the end of 1999, will feature a MIPS core processor and a programmable media processor built by Philips, known as the TriMedia chip. The chip allows for real-time processing of audio, video, graphics and communications data streams, and has been optimized for Internet-based applications, according to Pishal. It will also feature a built-in DOCSIS modem, a 1394 (FireWire) interface, videoconferencing capability and video-on-demand based on MPEG-1 over IP.

Finally, Philips debuted its Crypto-Works conditional access system, which has been embedded on a removable "point of deployment" card to comply with OpenCable requirements.

The goal is to emulate the company's success in Europe and become a major supplier of set-tops in the U.S., says Pishal. He admits it will be an uphill battle to take marketshare away from both GI and S-A, but he says several operators have shown interest in finding second, or third, sources of equipment.

And Wonsiewicz/MediaOne aren't the only ones. "We wouldn't have made the choice (of Philips) if we were the only operator," he says. "You saw in our (press) announcements endorsement for Time Warner and Comcast. Since then, we continue to have encouraging discussions with them and other key cable companies. We've all got to negotiate with the vendors independently, but they've been very supportive, and we're pretty optimistic. A real key will be when the first city is up and running. A lot of folks are waiting to see that happen."

Meanwhile, West Yorkshire, England-based Pace Micro Technology recently broke into the North American set-top market by striking a deal to provide more than 100,000 digital set-top boxes for BellSouth Corp.'s digital cable service. The first boxes are expected to arrive in November 1999.

BellSouth first launched its digital television service in New Orleans in November 1997. Since then, the company has launched service in Atlanta and Orlando and will begin offering service in Daytona Beach, Miami and Jacksonville later this year. Currently, more than 2 million homes and businesses in BellSouth's region have access to the service.

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