The U.S. cable set-top box market may still be the "Rule of Two," but there are some signs diversity is creeping in.
Although they must still develop boxes that run on box giants Motorola Inc. or Scientific-Atlanta Inc.'s conditional access headend equipment, challengers to cable's long-standing duopoly are still gamely battling for box orders.
British box maker Pace Micro Technology plc recently started delivering on its 250,000 box order with Time Warner Cable. So far, it has been deployed in 15 Time Warner divisions. But working with an MSO that has a decentralized management structure requires a fair amount of patience, according to Neil Gaydon, president of Pace's Americas division.
"You have to work with each and every division, of which there are some 40," Gaydon said, noting the Advance/Newhouse systems that will be separated from the venture with Time Warner are currently included in the deal. "All of it takes longer than you would think."
Pace also has a deal with Comcast Corp. for 300,000 set-top boxes over three years. The first of those units — which for the first time will run on a Motorola system — ships in mid-2003.
Meanwhile, fellow box provider Pioneer Electronics Inc. has made steady progress with its Voyager series boxes running on S-A access systems. It now has boxes deployed with Time Warner, Cox Communications Inc., and a smattering of other MSOs for a total of some 1.5 million Voyager 1000 boxes and 500,000 Voyager 3000-series units.
The volumes mean Pioneer is no longer a distant third in the box market, particularly with Time Warner. "We've got about 35 to 40 percent of Time Warner Cable business," said Pioneer senior vice president of operations Neil Jones. "That's substantial."
Like Pace, Pioneer is in talks with other operators. While one might think the well-publicized cutbacks in overall cable capex spending might damage prospects, Jones sees opportunity.
"If there is a downtrend in capex spending, it doesn't necessarily mean that we won't be successful with penetrating other MSOs with our product," he said.
It is likely S-A's and Motorola's dominance in the cable market will be preserved by their hold on the conditional access systems. But the fact Pace and Pioneer have started supplying boxes in larger numbers — not to mention Cablevision Systems Corp.'s use of some set-tops by Sony Corp. — does indicate the duopoly is not absolute.
"The operators are seeking them mostly as a means of keeping Scientific-Atlanta and Motorola honest, and until consumers complain, they don't really have to do much more than that," said Forrester Research Inc. cable analyst Josh Bernoff.