It may have come several years later than originally forecast, but cable operators are finally deploying digital video services in significant numbers as they race to keep up-or even surpass-the brisk sales of digital direct broadcast satellite systems. Certainly, consumers are becoming more aware of the benefits of digital video, and are the driving force behind the new push. Research from the Consumer Electronics Manufacturers Association (CEMA) shows that consumer awareness of digital TVs has increased from 60 percent to 85 percent since last March. CEMA also reports that sales of digital TV receivers exceeded 50,000 units at the end of August, and that a plurality (51 percent) of the people it recently surveyed said their next TV purchase will likely be a digital set.

With prices of equipment coming down the cost curve-but more importantly, with new services like video-on-demand ready to launch-cable operators are in the midst of making an all-out transformation from the old analog technologies to new, digital ones.

To date, cable operators have rolled out digital TV to nearly 2 million customers, according to estimates from Paul Kagan Associates. AT&T Broadband and Internet Services leads the way, with 1.4 million customers, but some of its brethren are now making the leap, too.

For example, according to Kagan, Comcast has roughly 225,000 digital subs; Cox has nearly 145,000; Adelphia is next with 72,000 digital customers; and Time Warner follows with 40,000. In fact, the top-eight cable operators deployed digital service to 380,000 customers in the second quarter of 1999 alone, according to Kagan's analysts.

Even Time Warner, which experimented earlier this decade with digital services, then fell behind as it waited for set-top deliveries, has begun taking shipments of digital boxes from both Scientific-Atlanta and Pioneer. The nation's second-largest MSO will be launching digital service in 18 markets by the end of 1999.

And Cox, which has recently grown through acquisition, expects to have 500,000 digital boxes deployed in 12 to 15 systems by the end of 2000, according to Alex Best, Cox's chief technology officer.

That growth isn't likely to slow anytime in the immediate future, either, if Allied Business Intelligence forecasts are correct. A new study from ABI predicts the global installed base of digital set-tops will top 250 million units by the end of 2004 (that figure includes DBS boxes, but ABI predicts that by that year, roughly half of all digital box sales will be for cable set-tops). "The digital set-top box is not just at the convergence point between consumer electronics and computing, but also communications," notes ABI Analyst Navin Sabharwal, who authored the study. He goes on to predict that the digital set-top will become a "significant enabler" to the "networked home." Certainly, the vendors hope that's true-and they're building products to integrate voice and data services along with the video they know so well.

General Instrument, fresh off announcing that it will be merging with electronics giant Motorola, has begun shipping its long-awaited DCT-5000 set-top that enables advanced services, according to Denton Kanouff, VP of marketing for GI's Digital Network Systems group.

"We have shipped tens of thousands of the DCT-5000s," says Kanouff. "We're now in volume production." He adds that while a majority of boxes were shipped to AT&T, other MSOs have taken delivery of them, too.

The DCT-5000 features three tuners, including a DOCSIS (Data-Over-Cable Service Interface Specification) cable modem. It will soon also support third-party software systems and applications, so MSOs can deploy the set-top without locking into a proprietary software vendor. In fact, GI CEO Ed Breen announced during last month's European Cable Communications '99 show in London that the box has been successfully integrated with Microsoft operating software.

Including its already widely-deployed DCT-2000 set-top, GI has now shipped 5 million set-tops and just surpassed the 1,000 mark in headend controllers shipped worldwide (with the vast majority going to North American cable operators), to systems that pass a combined 40 million cable households, Kanouff adds.

Though farther behind, Scientific-Atlanta's digital rollouts are "going great" as well, according to Bob Van Orden, VP of digital product strategy at S-A. "Digital is a huge success-the Average Joe cable subscriber loves digital," he says, because it offers more choice, improved picture and sound quality, and an electronic program guide for navigation.

To date, S-A has installed digital gear in roughly 70 different cable systems that pass about 15 million cable subs, reports Van Orden. By the end of 1999, he expects to have service launched to about 370,000 subscribers in roughly 100 sites.

But like GI, Scientific-Atlanta is also developing a new line of hardware, designed to offer more services and more options to cable operators. Earlier this year, S-A executives announced three additions to the Explorer line, the Explorer 6000, Explorer 3000 and Explorer 2000S, each of which will have a different feature set.

The full-featured 6000 will deliver more than 300 MIPs processing power, support HDTV, provide operators with a choice of operating systems and have a third tuner to support both DOCSIS modem technology and DAVIC real-time IP technology.

Scientific-Atlanta's Explorer 2000 remote and wireless keyboard.

The Explorer 3000 set-top will add local storage alternatives via a built-in disk drive for customers who want to deploy multiple new multimedia and advanced Internet applications. And finally, the Explorer 2000S set-top will have fewer features and a lower price point, making it an option for entry-level subscribers or second TV sets in the home.

But the days when the health of the market was dictated by those two companies are gone. Because of standards initiatives like OpenCable, other manufacturers are seeking business relationships in North America. A classic case-in-point is Pace Micro Technology, Europe's largest digital set-top manufacturer, which was rebuked by U.S. operators a few years ago, but has returned with a new headquarters and a new executive charged with drumming up more U.S. business. The goal will be to build on the momentum the company gained with BellSouth, for which it is building a digital MMDS box.

Figure I

Pace is armed with a General Instrument DigiCipher license and has already demonstrated a digital set-top with a built-in DOCSIS modem, all in an effort to prove to North American cable operators that it's ready to build a set-top for them. Coming to the Americas for Pace is Neil Gaydon, who was named president of Pace's American sales effort. Based in Boca Raton, Fla., Pace's new U.S. base will house its engineering, sales, marketing, and service divisions for the American markets. As Pace's President of The Americas, Gaydon is responsible for the development of Pace's business in both North and South America, with a particular focus on digital television in the U.S. Not to be left out is Philips, which is close to debuting its set-top in MediaOne's groundbreaking, standards-based system that integrates a DVB-based set-top into a U.S. cable system.

Although no details about that integration were available, Philips officials said the company's vision for its set-top is to turn the television into a "portal" and personalize it by giving the consumer total control over his TV viewing experience. In essence, the set-top will act as a central "brain" within the house, into which a variety of other devices will be attached. Like other set-top manufacturers, integrated third-party software and applications (such as that offered by Microsoft, NCI and Sun Microsystems) will be a key focus for Philips as it attempts to gain more North American cable contracts.

Figure II

Another globally-known consumer electronics manufacturer that burst onto the scene in a big way is Sony, which last month announced that it will build up to 3 million digital set-tops for Cablevision, in a deal worth roughly $1 billion. Sony will build the devices to OpenCable specifications, and Cablevision will use them as gateways to new services like video-on-demand, Web-enhanced television, e-mail, interactive game services and other new programming.

In the meantime, CableLabs continues to oversee the OpenCable process, which is designed to offer manufacturers and software developers a common platform upon which to develop new devices and applications.

Canal Plus, a highly successful European cable operator and software vendor that's working with Philips and MediaOne on the previously mentioned system, intends to import its suite of applications-as well as a conditional access system-to North America.

"CableLabs wants one API and everyone to compete for it," notes Jean-Marc Racine, CEO of Canal Plus Technologies in the U.S. "We are responding to that." Racine says Canal Plus has been working to build relationships with cable operators, in an attempt to gain support for its middleware, which allows several real-time, interactive software applications to be run over a set-top box.

Perhaps not since the early days of addressability, when literally dozens of manufacturers attempted to enter the cable set-top market, has the North American cable industry seen such competition. That competition, combined with affordable new services, is working to make digital technology more affordable than ever before.


The road to self-installation

Although the pace of digital deployments has been impressive to date, installation of those units will have to get much simpler and less time-consuming if cable companies are to reach the penetration numbers they're hoping for.

"We're seeing a lot of demand for self-installation by cable operators because the high demand for service by far outstrips the operators' ability to implement it," notes Bob Van Orden of Scientific-Atlanta. "In some cases, the backlog (for installation of service) was between three and five weeks." As of last month, S-A's customers were installing new customers at a rate of about 24,000 per week-and the number was climbing quickly.

In order to allow self-installation, cable operators have to "stage" the set-tops first. They're plugged in, authorized and software is downloaded ahead of time. In S-A's case, it's developed a "broadcast parallel" method of staging that allows operators to authorize hundreds of set-tops at once. Recently, Van Orden says he saw one operator authorize as many as 500 set-tops in eight minutes.

This differs from other set-top vendors that still use the older "serial queue" method of box authorization that requires each set-top be addressed one-by-one. This method usually requires that the operator authorize set-tops overnight.

Of the 70 sites in which S-A has launched digital service, Van Orden says that 10 or 12 of them have implemented self-installation programs-and they're enjoying high success rates.

S-A's Canadian customers, especially Rogers Cablesystems and Le Groupe Videotron, have been particularly aggressive, according to Van Orden. Videotron, for example, owns videotape rental stores that serve as outlets for cable customers to pick up their Explorer set-tops and take them home. Using that method, Videotron recently deployed 2,500 boxes in a week, and 90 percent were installed without Videotron's intervention. An added incentive for customers is that by installing the boxes themselves, they can avoid paying an installation fee. "Rogers is heading down the same path," notes Van Orden.

In the U.S., the implemented self-install programs are typically enjoying 80 percent success rates, probably because some of the systems have had difficulty with drop cables or in-home cabling.

And that, indeed, is a major concern, says Denton Kanouff of GI. "Some operators are requesting that right now, and over time, it will become increasingly important," he says.