Comcast Spreads Set-Top Wealth

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Las Vegas— Comcast Corp. broke new ground last week, signing deals to buy digital set-top boxes from Panasonic Consumer Electronics and Samsung Electronics America Inc., instead of cable’s traditional equipment suppliers. It’s the first time the operator has bought set-tops from consumer-electronics manufacturers.

The Panasonic deal covers 250,000 high-definition digital video recorder set-tops, with an option to buy up to 1 million units.

Comcast will buy 200,000 standard definition set-tops from Samsung, with an option to purchase 500,000 in total.

“This is not just about building a set-top box,” said Comcast executive vice president of new business development Steve Silva. “It’s about improving the consumer’s experience.”

Comcast, like most MSOs, has traditionally bought most of its set-tops from the Motorola Inc. and Scientific-Atlanta Inc. “dupopoly,” while adding Pace Micro Technology as a supplier and testing Digeo’s Moxi Media Centers over the past several years.

The new deals stem from a development program begun 18 months ago, emerging from Comcast’s next-generation architecture initiative, according to Silva. Comcast invited visiting engineers from a host of consumer-electronics companies to develop specifications for “real next-generation” (RNG) set-tops, he said.

Comcast established specifications for its next generation of set-tops: a lower-end RNG 100 digital set-top, a mid-level HD/DVR RNG 200 set-top and the RNG 1000 media center.

Samsung addresses the RNG 100 level. The all-digital set-top includes DOCSIS (Data Over Cable Service Interface Specification) 2.0 capability, supports OpenCable Application Platform middleware and can handle MPEG-2 and MPEG-4/H. 264 advanced video codecs.

The Samsung set-tops also include a CableCard slot, universal serial bus ports and allow for downloadable conditional access, allowing Comcast to change the security system by which cable service is authorized.

The Panasonic set-tops will also support OCAP, but its core features are HDTV tuners and a 250-Gigabit DVR hard drive — twice the disk space of current Comcast DVRs.

The set-tops also will be able to decode both MPEG-2 and H.264 signals.

“It’s a device that bridges the network and new formats and other locations,” Silva said.

The new boxes, for example, would allow the cable company to send video streams at customers’ demand, using MPEG-4 encoding rather than MPEG-2, conserving bandwidth. A consumer could also take an MPEG-4 video file from a Web site and, using the USB port, display that content on the TV set.

Comcast declined to discuss unit costs but Silva said “the devices are very cost effective. We’re very pleased with the economic impact. Even if the blended price of the two deals amounted to $250 per box, the initial order would range between $100 million and $125 million.”

Comcast expects to get boxes from Panasonic and Samsung for trials later this year and deployments in 2007.

In a research note, Sanford C. Bernstein senior analyst Craig Moffet wrote that that the Panasonic deal’ main significance is as an illustration of the increasing flexibility Comcast enjoys in sourcing set-top boxes. It also points to lower unit costs and more innovation in the future, he added.

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