Out-of-the-Box Thinking

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Charter Communications Inc. and Sony Corp. are working on a new headend platform that would separate conditional access from traditional digital network-controller functions.

That, in turn, would let Charter slash conditional-access (CA) costs in the removable security systems found in “digital cable-ready” devices and future digital set-top boxes.

The new initiative from the two companies is an outgrowth of the deal Charter signed for Sony’s Passage CA system three years ago. It also jibes with cable’s evolution toward an all-digital network and such industry initiatives as next-generation network architecture (NGNA), two-way CableCARD point-of-deployment modules and downloadable security, said Charter chief technology officer Wayne Davis.

LONG-SOUGHT OPENING

Cable MSOs have long wanted to open up the conditional-access piece of the network to drive down component and software costs and obtain greater flexibility in choosing vendors.

The original Sony Passage technology allowed an operator to open up conditional access beyond the Motorola Inc. and Scientific-Atlanta Inc. duopoly by introducing a third CA vendor to the market, Davis said.

“But you end up with a triopoly versus a duopoly,” he said of Sony Passage. “And the conditional access is still embedded in the controller.”

As Charter started rolling out digital simulcast, it took a fresh look at the Passage architecture and the functions of the headend controller: encryption, downloading, inventory, provisioning, program scheduling, element management, billing, video-on-demand/pay-per-view and the interactive guide.

The question, according to technology vice president Dave Feldman, became: “What if the conditional access was separated from those functions?”

Charter and Sony spent several months using off-the-shelf hardware to build a headend controller that would sit alongside the MSO’s existing controllers.

The prototype, built in Sony’s San Diego labs, is a Linux-based open-architecture system that deliberately separates conditional access. That will allow Charter to open CA up to bid to such companies as NDS Group plc, Nagravision, Irdeto Access, Widevine Technologies Inc. and even the traditional controller vendors.

On the flip side, that new headend setup would allow Charter to stop relying on the traditional suppliers of set-top conditional access cards and put that function out to bid for other vendors.

The CableCARD is the first U.S. iteration of removable conditional access, which is common around the world.

Charter plans to open up bidding for conditional access devices in future set-top boxes, which could lower digital set-top costs to $70 to $80 per unit.

“The single most expensive item is the conditional access,” Davis said. “We want to take that piece and expose that to competition.”

Because Charter and other cable companies are rolling out digital simulcast, new DTV set-tops won’t need analog tuners. That stands to shave another $25 or so from off the cost of a digital set-top, depending on the number of tuners.

The overall costs savings brings Charter — and all MSOs — much closer to the one-time magic $50-per-box price for an all-digital set-top, and more importantly, a low-cost box that would be able to handle an interactive guide, VOD and perhaps some interactivity.

That’s key to remaining competitive with direct-broadcast satellite, Davis said. That’s because by definition, all DBS set-tops are digital, which allows providers to upsell consumers.

It’s a big reason their revenue per subscriber is $20 to $30 higher than their lowest-priced package. Only 40% or so of cable subscribers are digital, which limits an operator’s ability to upsell services, Davis said.

LAB TRIALS UNDERWAY

Charter and Sony have begun lab trials of the new controller, which must interface with a number of other headend systems, such as billing applications and VOD servers. The two companies are also working towards an updated agreement to codify their relationship, Davis said.

By this summer, Charter hopes to issue a request for proposals for the controller’s removable-conditional access piece. The new controller will use Passage for authorization, and Sony is expected to receive a royalty based on the number of encoded signals sent to Passage-enabled set-tops.

Once Charter has the system in place, consumers who buy digital cable-ready sets would call Charter for a CableCARD, as they do now. Charter would send out cards based on the Sony-Passage system.

Over time, the new set-tops Charter would deploy would be authorized on the new Charter-Sony controller systems. Legacy subscribers and set-tops would continue to use the prior Motorola Corp. or Scientific-Atlanta Inc. system.

By removing the conditional access from the equation, Davis also believes he’s opened up the set-top market to new international players, such as Thomson and Humax Electronics Co. Ltd., which might be interested in what would normally be considered a “low-end” box in the U.S. market.

Charter has begun to brief other MSOs about its plans, which should especially help smaller operators, Davis said.

It envisions selling the new Sony-Charter controller to other systems looking to dramatically lower set-top costs and alter the current modus operandi of conditional access.

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