The largest video providers rule the roost when it comes to defining the set-top box ecosystem, according to a recent report by ABI Research.

While pay-TV operators are at the top of the set-top box food chain, hardware OEMs and semiconductor vendors function in supporting roles.  

The largest pay-TV operators not only provide the direction for set-top box market as a whole, but also have significant ownership over at least the logical layers of the implementation.

ABI’s report said that multi-source supply agreements, in which operators purchase functionally equivalent units from multiple vendors, were the norm today, with operators having multiple bids whenever they need to purchase new units.

“The current large scale pay TV operators we are seeing, including Comcast-Time Warner, AT&T-DirecTV, and Liberty Global’s acquisition of Virgin Media and Ziggo, will in the long term better align set-top box requirements across larger markets,” said ABI Research practice director Sam Rosen. “Hybrid set-top boxes, which leverage cable or satellite as well as IP capabilities, have largely become the norm in mature markets – but will be more important from a service delivery perspective especially as the result of the AT&T-DirecTV merger.”

The report said that ADB Global and Netgem, two European OEMs collectively responsible for only 3 percent of the market, were leading the charge for multi-network boxes.

The report also said the cable industry’s reference design kit (RD), which is a joint venture between Time Warner Cable, Comcast and Liberty Global, would further refine the set-top box marketplace.

“Similar to the impact of Android in the smartphone market, RDK will improve compatibility between different hardware boxes and even down to the set-top box chipset level,”  Rosen said. “While today’s set-top box market is highly fragmented, these common platforms will enable efficiencies leading both consolidation through further mergers and acquisitions, but will also force some natural consolidation.”