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By Arthur Cole, CT Contributing Editor

Next-generation set-top models have started to hit the scene, but today's digital box still has plenty of miles left in it.

Even as the cable set-top market continues its march toward more power, better graphics, greater storage capabilities and a host of other advanced features, industry observers recognize that today's lower-end units still have plenty of life left in them.

Practically every set-top maker in the market today is upping the ante with its latest releases. By the first quarter of the year, we saw the following:

• The Motorola Digital Convergence Platform (DCP). Designed exclusively for retail, it combines a set-top with a standard audio-video receiver, a digital versatile disc (DVD) and CD player and five channels of 100W audio.
• The Scientific-Atlanta (S-A) Explorer 8000. This device features a dual-tuner with a 40 gigabyte (GB) hard disk drive and personal video recorder (PVR) functionality.
• The Pioneer Voyager 3000, featuring a single-chip dual processor and up to 32 megabytes (MB) of random access memory (RAM). This marks the first Pioneer set-top that uses the Broadcom 7100 chip, rather than an S-A chipset.
• The Pace 750, featuring a 40 GB hard drive and the Microsoft TV package. Sega's Dreamcast gaming chipset also is headed for the high-end Pace box.

That's impressive technology. But while multiple system operators (MSOs) have begun ordering top-of-the-line boxes, they are not rushing to abandon today's units either.

"Over the last six or eight quarters, we've progressively increased our manufacturing capability by 100 percent to 200 percent per quarter," Paul Richards, vice president of marketing and business development for North America at S-A's subscriber unit, says. "Most of our orders are for the Explorer 2100 and 3100."

Of course, these high-end boxes have only just begun emerging. Paul Kagan Associates estimates that by the end of 2000, virtually all of the 14.7 million digital set-tops sold in the United States were low-end models, primarily the Motorola DCT-1200 and DCT-2000, the S-A Explorer 2000 and Explorer 3000 and the Pioneer Voyager 2000 (see Table 1). For 2001, the firm predicts that barely 10 percent of the 12.8 million boxes sold will be high-end.

Still, a 10 percent market penetration in the first year is not bad. And over time, most vendors see sales gravitating more toward today's high end, even while new generations of boxes continue to push the envelope.

"The low-end boxes will stay in there for a little while, while MSOs figure out what advanced services they want to offer," Dan Ward, director of marketing at Pioneer's cable division, says. "When subscribers start using advanced services, they want instant connections and functionality."

Ward says it takes an advanced box to power advanced applications, such as 3-D graphics and network gaming. "These sorts of things can't be handled by lower-end boxes," he says.

Fortunately, cable has a little wiggle room when it comes to offering advanced services. With the most robust network architecture on the scene today, cable has a greater ability to deliver services such as gaming and Internet protocol (IP) video using lower- end boxes than either the telephone or satellite industries do. By housing the software applications at the headend or hub rather than on the set-top, a selected app may be downloaded in a fraction of second. Less robust networks can't do this as quickly, and therefore need to store advanced applications in the home.

"The thin-client model speaks to cable's strength," Gary Schultz, president of industry-tracker Multimedia Research Group, says. "MSOs won't change any faster than they have to."

Many middleware and applications companies are pursuing this model, primarily because it represents quick access to today's installed base of boxes.

"WorldGate hasn't focused all its energies on the advanced boxes," Gerard Kunkel, senior vice president at WorldGate, says. "There is certainly an awful lot you can do with the current generation of set-tops as proxy to another server sitting at the headend. You can do Web browsing, chat, games, messaging--all are entirely possible for today's box."

That's not to say the software companies are brushing off the advanced platforms. As Kunkel puts it: "You have to continually bring the middleware onto new platforms. You have to keep on top of the market."

The lower-end boxes may have more staying power than you might think for another good reason. At the moment, the hottest application is video-on-demand (VOD). Not only does it have a clear revenue model for MSOs, it is the one application that cable delivers better than any other network provider. And it may be done with today's generation of boxes.

"VOD is certainly driving this market," Bernadette Vernon, director of strategic market for Motorola's DigiCable Group, says. "Many MSOs are already seeing success with VOD, and others are jumping on the bandwagon."

Many MSOs see VOD as the leading-edge interactive platform, one that eventually will lead to a host of other services. By touting VOD first, system operators believe they may get subscribers accustomed to interacting with their television sets in a familiar setting. Most subscribers already are familiar with the pay-per-view concept, and VOD simply enhances that service with Stop, Pause, Rewind and Fast Forward capabilities. After that, operators may offer additional interactive services, such as enhanced TV, t-commerce and gaming.

"VOD is seen as the start of the evolution of interactive services," Vernon says. "It introduces the whole interactive concept."

The whole question of whether the cable industry will use advanced boxes or simple ones probably is moot anyway. Unlike yesterday's analog world, where all set-tops were roughly the same and offered the same feature sets, there is no reason why a plethora of different box types cannot find marketshare today and in the future.

Many vendors and MSOs are counting on a new universe of multi-box households, in which the high-end device sits on top of the living room set, while the plain-vanilla boxes find their way to the bedroom or the den.

"There is no reason to think (the set-top market) will be convergent," Terry Glatt, director of technology for Pace MicroTechnology of the Americas," says. "Look at the Miata, and look at the SUV (sports utility vehicle). Both are good solutions in the same space."

Glatt predicts similar coexistence in the set-top market. "Some people want home automation and the full-tilt boogie, and others want a simpler set-up."

What's on the minds of many vendors and MSOs these days is whether the set-top box will evolve into the home gateway, thereby making the cable industry the dominant player in the entire field of consumer electronics. At this point, cable seems to be on the fast track to the home gateway, but a number of powerful industries exist that are bent on seeing the gateway tied to the telephone or the home computer.

For many of the set-top manufacturers and their parent companies, the winner in this race largely is irrelevant because they have their hands in most, or all, of the competing technologies. Pioneer, for one, has laid out a home networking strategy that sees the first wired homes by 2005.

"We see the set-top becoming the gateway, becoming the control center for all electronics in the home with Passport being the unified user interface through which to access all these devices and services," Ward says.

Even if the gateway evolves into a completely separate device, either outside the home or housed in the basement as a home server, it likely will contain many of the internal components that are going into today's set-top.

"The technology that we are developing for the high-end set-top is very easy to port into any product that sits inside the home," S-A's Richards says. "We've already demonstrated the capability of the set-top for enhanced video and data transferred over (such wireless protocols as) BlueTooth, IEEE 802.11b and HomeRF."

S-A designed its box with heavy multi-tasking in mind. "We've shown our gateway product as part of a PC watching active video and being able to change channels, while still performing traditional PC operations and streaming MP3 audio while looking at pages on the Internet--all at the same time," Richards says.

All of this technical innovation is, of course, a positive development for the cable industry. For nearly three decades, cable service was tied to the same old analog box, with the only advances being the number of channels it could provide. Now that we're on the cusp of a new interactive era, there's no telling how far the technology will go.

Art Cole is a contributing editor to Communications Technology. He may be reached via e-mail at .

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