Cable Operators

DBS Enters Cable-Consumer Electronics Talks

5/21/2004 9:34 AM Eastern

In a move that could eventually result in retail set-tops that would work on both cable and direct-broadcast satellite systems, EchoStar Communications Corp. and DirecTV Inc. have joined the cable and consumer-electronics industries in negotiating a two-way plug-and-play agreement.

Satellite companies had complained that they were left out of negotiations for a one-way plug-and-play agreement that cable operators reached with consumer-electronics companies in December 2002.

That agreement laid the groundwork for digital-cable-ready TVs that are embedded with digital set-top technology.

Negotiations for a two-way deal that would allow consumer-electronics firms to build digital TVs capable of accessing video-on-demand and other interactive services have been more protracted, with debate over content protection hanging up the talks.

Time Warner Cable senior vice president of strategy and development Kevin Leddy said satellite companies began attending meetings with consumer-electronics and cable executives earlier this year.

“Their main concern with the first deal was that they were governed by the content protection, the encoding rules, but they weren’t part of the negotiation of those encoding rules,” Leddy said. “So their primary reason for being there, I think, is that if there are going to be any changes of the content-protection rules, they want to at least understand how they’re impacted.”

EchoStar spokesman Steve Caulk confirmed that his company has entered the negotiations for a two-way agreement. He wouldn’t detail what EchoStar hopes to get out of the talks.

DirecTV spokesman Bob Marsocci also confirmed that his company has been participating in the talks.

“Collectively, EchoStar and DirecTV have more than 22 million customers,” Marsocci said. “We want to make sure that our customers are not disenfranchised by this process and that our customers’ voices are heard and that our customers will benefit from this [two-way agreement], as well.”

Leddy said one result could be the development of retail set-tops that would be compatible with both cable and DBS systems.

“If [satellite companies] could somehow move to a model where a receiver sold at retail could be used as a DBS receiver or a cable receiver with just the change being the separated security, I think that would benefit them, just like it benefits us,” Leddy said. “It would get them out from under the capital requirement, which is really hurting them.”

The one-way digital-cable-ready TVs consumer-electronics companies began shipping this year require consumers to obtain CableCARDs from their local cable operators that are inserted into the TVs in order to decrypt scrambled programming. But there has been little, if any, interest in the digital-cable-ready TVs.

Leddy said Time Warner Cable hasn’t received a single request from subscribers for CableCARDs. And Cable Television Laboratories Inc. VP of advanced platforms and services Don Dulchinos said he doesn’t know how many CableCARDs have been installed by cable operators.

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