Out of Tune with HD Opportunity

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What's the least-used electronic device in your home? No, not that antique Pong
video-game console you keep meaning to sell on eBay. Not even the calculator/backscratcher with built-in digital timer — a tchotchke you picked up at some trade show.

Actually, the most irrelevant gizmo may well be the channel selector on your TV set. Choose channel 3 or 4 when you hook up your video inputs, including set-top box: set it and forget it.

At least that's how it worked in the analog age.

Digital TV's arrival is as good a demarcation point as we've ever had to abandon the artifact known as the in-set TV tuner. The negotiations (originally sub rosa) between consumer electronics manufacturers and cable operatives about "cable ready" digital equipment offer an opportunity to take advantage of this moment.

In a similar vein, the Consumer Electronics Association's lawsuit against the Federal Communications Commission's digital tuner requirement makes sense for reasons that extend far beyond the guts of that case: a mandatory additional cost in TV sets.

Heart of the matter

This issue plunges into the heart of the ongoing conflict between the cable industry and TV set makers.

Most of the hardware manufacturers lust to become set-top box providers; a few of them even admit that their annual product planning includes soul-searching about building tuner-less TV sets.

In essence: Should they simply build the monitors that have become the only real mass-market digital TV product (and profitable, too!) during these early, unfocused days of the digital transition — and just put turners into the set-tops they want to sell?

Throughout this angst, the focus remains on hardware. Everyone acknowledges the familiar chicken-and-egg conundrum of programming and hardware adoption — so far, a deterrent to consumer appeal.

But the DTV technical negotiations often overlook the reality that high-definition TV content — a drawing card for digital TV — now amounts to 891 hours per week and growing.

Almost enough to satisfy video appetites.

Although it's still fashionable to question HDTV as a "killer attribute," the value is becoming apparent as Home Box Office, Showtime and Discovery Channel establish full-time HDTV channels. Mark Cuban's HDNet runs three high-definition networks, and several cable and broadcast networks (ESPN, USA Network, ABC, CBS and others) are expanding their wide-screen, HD offerings.

National Basketball Association Commissioner David Stern predicts that all NBA-TV telecasts will be in HDTV format by the 2004-2005 season.

Meanwhile, cable operators and their major suppliers — while paying lip-service to HDTV — are moving slowly, while they could be seizing the lead into the HDTV world by exploiting this tuner-less moment. I'm not saying "rudderless," but you can decide.

Comcast Corp. and Cox Communications Inc. are heading the MSO assault into HD distribution, albeit with an off-putting extra fee that limits the appeal beyond the early-adopter cadre, which is not particularly price sensitive.

Cox's upcoming deployments of BigBand Networks' Broadband Multimedia-Service Routers in its Phoenix and Las Vegas systems typify the small steps that MSOs are taking to set up HDTV-ready facilities, at least on a pilot basis.

Time Warner Cable is preparing similar moves.

Overall, the number of HD set-top boxes trickling into the market remains paltry. For example, Scientific-Atlanta Inc. acknowledges that it is on pace to deliver just over 100,000 units this year.

CE's hurdles

CE makers are all too aware of the situation as they plot their set-top strategies. Since they must go to the expense of putting an ATSC (Advanced Television Systems Committee) tuner into the set-top box, the extra cost for adding cable QAM (quadrature amplitude modulation) functionality — less than $10 — is an attractive option.

The larger hurdle is the price of decoding chips. Yet some component suppliers insist that their technologies can bring the price of a fully functional HD set-top box into the range of today's low-end box. TeraLogic, for example, foresees that its new Generation 9 integrated circuits will enable a $199 HD set-top within two years.

As I canvassed component suppliers, legacy and would-be set-top makers and cable programmers, I heard lots of dreams about HD programming — but almost nothing about interaction amongst the sectors.

All of them, of course, talk to cable operators, who are the gating intermediary in high-definition delivery.

The industry's tentative approach to HDTV squanders a timely and differentiating opportunity. The never-ending debate about cable must-carry of broadcast digital signals has muddied the environment, but a couple of the broadcast networks are proving their commitment to HD.

Whether it's sports, sitcoms or PBS specials, broadcasters are beginning to push the HDTV picture into homes — with the financial underwriting of those CE makers who want to sell new hardware.

A dozen cable networks are also toying with HDTV content. Collectively, these programmers could exploit the eye appeal of cable-delivered HDTV. A consortium of producers and distributors, working with the hardware suppliers (to whom they rarely converse right now) could pave the way into a high-definition world that would distinguish cable from its satellite and over-the-air competitors.

HD set-top products — in a tuner-less TV set world — would give cable a distinguishing feature and future as the high definition expansion continues.

Since the start of the HDTV era, advocates have envisioned a component TV household. That is, the high-priced monitor (with a relatively long lifespan) would be sold separately from the electronics-intensive receiver (which can be upgraded through software on a very frequent basis).

The 2.1 million DTV products being sold this year (overwhelmingly monitors being used to watch DVDs) testify to the appeal of that approach.

It's a good time for the cable industry to get in tune — and into tuners.

Contributing curmudgeon Gary Arlen opines regularly in Broadband Week.

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