Electronics Courtship Doesn't End Competition

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Motorola Inc. should just buy Moxi Digital and then put the DCT-5000 out of its agony. The sooner this happens, the faster Moxi-maven Steve Perlman can collect another nine-digit check from a giant company starting with "M" before any product actually comes to market. And Motorola will have a better assault vehicle in the looming battle for the last 20 yards through the house.

Moxi, Perlman's home gateway system launched at this month's Consumer Electronics Show, was the highest profile home network media server and distribution package at CES. But it was hardly alone. Perlman, who sold his previous start-up WebTV to Microsoft Corp. five years ago, spoke confidently of his negotiations with cable operators to put Moxi into their pipeline.

Of course, the only deal he actually confirmed at CES was a package with EchoStar Communications Corp. It makes you wonder if that threatening alliance gives Moxi a cable stigma, or if the deal is a cagey negotiating tool.

While Motorola may stubbornly want to hang on to its DCT-5000 set-top box as its home-brewed home gateway controller, Moxi and its rivals are reminders about the continuing contention for content and service distribution.

As seen at CES, the emerging home networking business — now in its 10th year of emergence (at least) — is finally looking viable.

And more complicated.

The avalanche of home media server products and concepts underscored the clash between consumer electronics and broadband providers. Hardware and/or service packages from Philips, Samsung, Sony, TiVo, SonicBlue and others were not necessarily intended for cable alliances, although many of those vendors were courting the horde of cable executives at CES. Microsoft's elaborate eHome agenda — of which only "Phase 1" was unveiled at CES — also counts on cable collaboration.

But there's a catch. The growing mantra among electronics makers and their retail outlets calls for bundling services with the hardware. The Consumer Electronics Association is a major cheerleader for that concept, which gives its constituency an annuity revenue stream. According to this vision, selling the network gateway devices would entitle dealers and vendors to a piece of the monthly subscription action.

This is where the set-top stalemate — now escalated to the home-network level — gets uglier. For a decade (at least), CEA and the cable industry have faced off in vitriolic TV and set-top box compatibility negotiations. Home gateway expectations promise to make that confrontation even more severe. Moreover, most home-network server implementations involve storage and distribution of movies, music and other digital content. That brings copyright protection and related digital asset and rights management into the mix — a lethal challenge in itself.

Against this convoluted background, the junket of cable's top honchos to CES assumed surreal dimensions. Even though they sometimes looked like just another tour group, shepherded through the aisles and back rooms of Las Vegas venues, this well-dressed and supremely confident cluster of cable's biggest names (Brian Roberts [president, Comcast Corp.], Michael Willner [CEO, Insight Communications Co.], Jim Robbins [CEO Cox Communications Inc.], Glenn Britt [CEO, Time Warner Cable], Bill Schleyer [CEO, AT&T Broadband], et al.) was on a mission. Their first-mile distribution facilities give them bottleneck control over the broadband services that the electronics makers and merchants are promising for those home media servers.

Despite the cordiality between CEA and the cable executives in Las Vegas, the standoff was in place. On the eve of CES, as Cable Television Laboratories Inc. unveiled its Open Cable Applications Platform specification, CEA president Gary Shapiro issued a polite reminder/threat.

"Many obstacles still remain to be cleared before consumers can enjoy the benefits of purchasing at retail set-top boxes and other consumer electronics [digital] products compatible with digital cable systems," Shapiro said.

Other consumer electronics operatives were much harsher about the compatibility issues that must be resolved.

"OCAP doesn't make any difference if the POD [Point-of-Deployment] solution isn't there," one electronics industry negotiator bluntly confided. He contends that electronics makers are "frustrated in their dealings with CableLabs," especially about the certification/interoperability testing along with concern about the POD license.

Not surprisingly, CableLabs president — and CES tour leader — Richard Green sees the situation completely differently.

"Every manufacturer we talked to was positive about OCAP," Green told me after the show. He cited the "very productive meetings" with companies such as Panasonic Consumer Electronics and Samsung Electronics America Inc., which have already announced plans to enter the set-top box arena.

The cable executives' sashay through CES may be viewed as a reconnaissance mission to scout out the hardware "competition," or it could indeed have been a prelude to real dealing. The top-level talks presumably paved the way for future nitty-gritty negotiations at the technical and operating levels of both sides.

At least that's the theory.

Nonetheless, the legacy of contumelious talks between cable operators and consumer electronics makers portend a continuing — possibly escalating — confrontation. The role and rollout of digital media controllers adds urgency to the negotiations.

Moxi may be one solution. But as Perlman and I discussed the origin of the new brand name, we both thought of a carbonated soft drink from Perlman's native New England: Moxie. And we agreed that it left a bad taste in your mouth.

A hint, no doubt, about the coming home-gateway negotiations.

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