Paul Gluckman

“We fundamentally disagree” with the NCTA’s assertion that CableCARD is “a priority for the cable industry,” TiVo told the FCC in an ex parte filing (MB 97-80). Cable’s real priority, “measured by its level of effort,” is elimination of the July 2006 integration ban “and complete control of navigation devices,” TiVo said: “If it was not apparent before cable’s onslaught of lobbying to eliminate the integration ban, it should be plain now that requiring cable operators to use the same CableCARD security system as CE manufacturers use is the only way to give cable operators the incentive to embrace CableCARDs and ultimately enable CE manufacturers to provide consumers with competitive cable set-top boxes,” TiVo said. It urged the Commission to leave the July 2006 integration ban unchanged.

Hours after XM told a CES news conference Wed. that it was the “big dog” of satellite radio (CD Jan 6 p8), Sirius challenged the claim in its own news conference to point out it had the faster growth rate. Although XM had 3.3 million subscribers at year-end to 1.1 million at Sirius, over 44,000 new Sirius subscriptions were activated Christmas Day compared to 50,000 at XM, Sirius said, adding that Sirius subscription growth in 2004 was up 300% from the year earlier. “Yes, we are the big dog in satellite radio,” said Chmn. Joseph Clayton. “Let the big dog hunt.” New CEO Mel Karmazin predicted Sirius would double subscriptions this year. Like Clayton, he said Sirius was “the fastest-growing in the satellite radio space” because it leads rival XM in “oh, wow” programming content. Anticipation of Howard Stern’s Jan. 2006 Sirius debut will be “huge,” Karmazin said, producing higher awareness of the Sirius brand and more subscribers.

Spurred by a projected 80% rise in dollar shipments of digital TV products, total consumer electronics (CE) industry factory sales are expected to jump 10.7% this year to $125.73 billion, CEA said in its annual consensus forecast report released on the eve of the Consumer Electronics Show (CES) in Las Vegas. If the 2005 forecast holds, it will mark the first time in a decade the industry logs consecutive double-digit increases, following 2004’s estimated 11% rise in shipments to $113.55 billion, CEA said.

NCTA Pres. Robert Sachs asked FCC Chmn. Powell to convene a meeting of “business and technical representatives” from the cable and CE industries to “clarify” key issues in the debate over whether to scrap or extend the July 2006 integration ban on cable set-tops or keep the deadline intact. But CEA Pres. Gary Shapiro, whose group has vehemently argued for maintaining the July 2006 deadline and forcing cable to use the same CableCARD interfaces as CE, labeled the NCTA bid “a delaying tactic” to forestall an imminent FCC vote cable knows probably won’t go its way. Shapiro repeated CE’s oft-stated claims that the issue had been postponed enough and that a final Commission decision was long overdue.

A CES news conference Jan. 5 (Wed.) will mark the official introduction of Mel Karmazin as new Sirius CEO, the company said. Sirius said it also plans new product and partner announcements and a technology update. Several shows ago, Sirius demonstrated technology for transmitting motion- picture video to mobile receivers using the Windows Media- based VC-9 codec. Chmn. Joseph Clayton has told us Sirius will discuss the progress of its video initiative at CES, but commercialization of the technology wasn’t likely before 2006. Meanwhile, among CES announcements planned by rival XM is a handheld portable receiver that’s the first device to be marketed under the new Tao CE brand from wireless telecom supplier Giant International. The Tao XM2Go, $350-list, has functionality to record up to 5 hours of programming into memory mode. According to Tao publicity materials, users “can easily record at the press of a button, or program a time for recording in the future, so even when they're not using it, their Tao XM2Go is capturing their favorite programming.” RIAA has cited similar functionality on future HD Radio terrestrial digital receivers as the basis for asking the FCC to impose content protections to thwart unauthorized Internet redistribution of recorded music. However, RIAA declined comment on the introduction of the XM2Go.

Cable bears the blame for the market deployment of as few as 10,000 CableCARDs, as it’s a far cry from the million that CEA had projected would be needed to support the shipment of CableCARD-ready DTV sets by year-end, Michael Petricone, CEA vp-technology policy, told Consumer Electronics Daily.

Cable “has had years to prepare” for the integration ban on set-top devices, and “there is simply no tangible case for any further delay” beyond the July 2006 deadline, CEA told the FCC in an ex parte filing (MB 97-80) responding to the NCTA’s latest call for extending or scrapping the ban (CED Dec 22 p6). “NCTA’s assertions that the costs associated with the separate security requirement will remain high are patently wrong,” CEA said. Moreover, cable’s arguments that licensing, warranty and indemnification costs are borne only by the cable industry are “grossly misleading,” and its claim that pricing of leased set-top boxes is set by govt. mandate is a “total fallacy,” it said. “Cable companies can and do charge whatever prices they choose. The notion that cable MSOs will suddenly have to switch out their entire fleets of set-top boxes, even though the regulation explicitly gives them the right to keep existing devices in service, also is unsubstantiated,” CEA said. “Innovation and consumer choice hang in the balance” with the July 2006 deadline, the association said. “Only full- scale production to service MSO devices will achieve the combination of priority, investment, and volume necessary to lower acquisition costs, achieve reliability and generate confidence for competitive entrants and consumers. NCTA’s misguided belief that prices will remain high even after full-scale production defies the laws of economics, the marketplace and common sense.” With the Commission likely soon to rule in the debate on keeping the integration ban, TiVo CEO Mike Ramsay was among those supporting the CEA in urging that the FCC “hold fast” to the July 2006 deadline. In a Dec. 22 letter to Chmn. Powell, Ramsay said what’s at stake is availability to consumers of alternatives to cable- supplied set-top boxes. Without the ban, innovations TiVo has developed “will not be available to cable subscribers because TiVo will not be able to sell a digital cable box that is either the functional or competitive equivalent of cable-leased boxes,” Ramsay said. In particular, he said, TiVo must be allowed to offer a dual-tuner set-top box in competition with dual-tuner boxes leased by the MSOs. “Most consumers will not purchase a TiVo box no matter how much better our user interface or how many additional features we can offer if the device must be purchased rather than leased and still is missing the minimum base functionality that consumers value most in a digital video recorder,” Ramsay told Powell. “Simply put, if cable is not required to use the same CableCARD technology that is required of scores of information technology companies, cable will leverage its dominant position in video distribution into the market for video-related consumer electronics and will control the market for the indefinite future.”

Nothing in the recent CE filings at the FCC “strengthens the case” for keeping the July 2006 integration ban on cable set-tops, NCTA told the FCC Mon. in an elaborate 9-page filing. With the possibility the Commission will address the issue at its Jan. 13 agenda meeting, NCTA disputed CE’s arguments point by point. Keeping the ban “goes well beyond the level of government intrusion in the marketplace that is necessary to ensure the commercial availability of navigation devices, especially now with the cable industry’s demonstrated support for CableCARD-enabled devices,” NCTA said. Over 140 unidirectional CableCARD-ready products are available from 11 CE manufacturers, and the number of CableCARDs deployed in the field has grown from zero to 10,000, “with the number rapidly escalating every week,” NCTA said. As with any new technology, “all parties expected some start- up problems” with CableCARDs, it said. On the CE side, problems have included firmware needing updates in the home, “odd arrangements of inputs,” and soldering irregularities making card insertion difficult. On the CableCARD side, “there also has been the occasional need for a firmware download,” or the occasional error by a customer service representative, NCTA said. But contrary to CE industry statements about the malfunctions’ seriousness, NCTA said “these are problems that are normal and are routinely corrected as they arise.” NCTA also disagreed with CE’s argument that keeping the integration ban will aid negotiations on a bi-directional plug-&-play solution. “It does not follow” that leaving the ban in place would create a new level of certainty in the talks or that they would gain impetus,” as CE has argued, NCTA said. “The simple fact is that those involved couldn’t possibly be working any harder than we already are to try to bring the discussion to a successful conclusion.”

PVR ownership will grow nearly tenfold, reaching 58 million U.S. homes for 49.5% penetration by the end of the decade, Smith Barney said in a new report that examines the technology’s impact on the media industry. The PVR boom will outpace that of cellphones and DBS, but not DVD, and network TV advertising faces the biggest risk, the report said.

When consumer confidence in the CableCARD interface “hangs in the balance, so does a critical element in the success of the DTV transition,” representatives of CEA and several of its member companies told the FCC in meetings Nov. 30, disclosed an ex parte filing at the Commission. CEA and the companies represented -- including Microsoft, Pioneer, Sharp and Sony -- reaffirmed arguments in CE’s campaign urging the FCC to resist cable industry pressure and keep intact the July 1, 2006, ban on MSO set-top devices with integrated security. Most consumers will receive DTV through cable, and as they choose their next DTV displays, they'll be more willing to pay the premium for a set with an integrated tuner if that set is CableCARD-ready, the CE group said. “Conversely, if consumers believe CableCARDs are unreliable, they may be motivated to buy monitors lacking a digital tuner on the assumption that they will use a cable operator-supplied set-top box and therefore will not need the integrated tuner,” the group said. “This threat to the DTV transition will be eliminated when the cable operator’s set-top boxes also use CableCARDs. Only common reliance on separable security will assure the development of a competitive market for value-added consumer electronics products with integrated DTV tuners.” The Commission’s existing rule “will serve its intended purpose only if it is left undisturbed,” the CE group said; no further action by the Commission is necessary. By contrast, it said, any delay in the July 2006 date “would be tantamount to repeal of this regulation -- with its never having had any chance to serve the Commission’s intended purpose.” But Comcast, meeting with many of the same FCC officials the same day, urged the Commission to delay its integration ban “a minimum of 18 months if it is not persuaded of the need to eliminate the integration ban altogether,” it disclosed in a separate ex parte filing. Reaffirming cable’s arguments for lifting or delaying the integration ban, Comcast told the FCC it believes “the statutory objective of ensuring the competitive availability of navigation devices can be and is being achieved” through the free marketplace. Cable “is fully honoring its commitment to support CableCARDs and to work assiduously on negotiation of a 2-way plug-&-play agreement,” Comcast said. Imposing the July 2006 integration ban “would increase costs to consumers and restrict the choices available to them,” Comcast said. Contrary to CE’s claim that leaving the ban intact was critical to a successful DTV transition, Comcast argued the ban would “impede development of a low-cost digital set-top box” and delay the transition.