Translation Please: Reader’s Guide to the Two-Way Deal


For the past five years, while the rest of us plowed through digital simulcasts, the “7/07” deadline, the broadband speed wars, the voice launches, the onslaught of HD programming, and the bandwidth crunch, a small but enduring squadron of cable soldiers on the policy side of life relinquished dozens of nights at home to work toward an alliance — or at least to prevent further war — with the consumer-electronics (CE) folks.

Representation was vast. Battle stations arose well beyond the known cable and CE bunkers. Small armies of strategists and lawyers emerged from the computing side (Microsoft, Intel), and the movie studios. And from chip makers and box makers. The combined travel-and-expenditure receipts for those 60 months of face-to-face meetings, between 2003 and 2008, could likely buy a good-sized mansion. On a lake. Staffed.

At the end of it, though, were handshakes, not fisticuffs: An April 25 Memorandum of Understanding, (MOU) submitted to the Federal Communications Commission by a group of six “founders” (the six biggest U.S. cable operators) plus the CE “adopters” (led by Sony Electronics).

This week’s translation aims to unpack the highlights of the landmark deal.

Quick refresher: This is all culled from the story called “two-way plug-and-play.” That’s the one where the government tells cable operators and CE makers to play nice with each other. Start by building set-tops into digital TVs, the FCC admonished.

Oops. Except the cable box is part of a complex, two-way network, and the cable operator in charge of the set-top and the complex network is contractually and competitively obligated to keep its contents safe from theft and harm. Oh, and the CE side runs on razor-thin margins. Any whiff of extra cost is calamitous.

So the cable industry and the CE industry agreed to move slowly. They launched “one-way” devices — so that people could buy TVs and descramble premium content (hence, the CableCard).

Meanwhile, they’d keep working on how to do the two-way part — so that consumers could buy a digital TV that descrambles premium content and accesses services that need to reach up the plant in order to work properly — like the guide and the VOD ordering system, to name two.

Which brings us to now.

Here’s one big thing that’s different between the one-way MOU and the two-way MOU: The former was a set of suggestions to the FCC about how to go about making rules. It had no teeth. The new deal does have teeth. It’s a signed and binding contract, with enforceable obligations and liability clauses.

So that’s big.

Getting there involved concessions. (Duh.) The CE side had to lighten up on its desire to build TVs that plunk idly at the far end of this complex, two-way cable plant and instead participate, using software tools that ultimately allow everyone to continue to innovate. The cable side had to back off on wanting to test and certify every last device with a built-in set-top and instead agree to allow some degree of self-certification.

Then there’s “the guide issue.” Boiled way down, it was about who gets to gather guide data and present it, as an on-screen program guide. The CE side wanted that right — and got it, through the cable side’s agreeing to carry guide data embedded within, say, CBS’s signal. That’s huge.

Side note: In the language of two-way, cable-ready devices, there’s a difference between a “menu” button and a “guide.” The former brings up things you can do with your device. The latter brings up things you can see or hear through that device. It mattered in the MOU.

Think about it this way: On your digital TV at home, there’s probably a way to select between inputs. That’s the menu. You want to watch a DVD, you select that input. Ditto for a game player or a media gateway. Often, this menu selection shows as a crossbar on the actual TV screen, where you pick the item you want.

This mattered because the cable side didn’t want a CE menu to display with ads on it; doing so would violate existing carriage agreements between cable operators and content providers. The MOU addresses the issue by prohibiting the display of ads when consumers are using menu features in digital cable-ready CE devices.

A third biggie: The CE partakers agreed to a series of CableLabs licenses. Among them: OCAP, which remains the technical name for the underpinnings of what is now called “tru2way.” By saying okay to OCAP, participating CE manufacturers took a huge step toward making gear that can live and breathe on cable plant, instead of sitting, brick-like, at the end.

Last biggie: The creation of a “Founders Advisory Board” for conflict resolution. In essence, each stakeholder — cable, CE, content and computing/IT — has a clear path if something goes awry. Each stakeholder, in essence, got a failsafe vote, which they can take to the FCC, if they want to fight. It’s big because it removes the fear that one entity (cable) is the master controller. The FAB gives each constituent a voice.

Again: These are the highlights. Blessedly, the MOU is a svelte six pages. It’s worth a look. For more, go to for a detailed blog by attorney Paul Glist, of Davis Wright Tremaine.

The good news for industry: The work that produced the two-way MOU will almost certainly blunt the alternative outcome — further regulatory action. The good news for customers: One TV, one remote, no box and a healthy environment for more two-way services.

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