Question for the cable industry: Does cable TV content always have to end up on a TV?

Comcast Corp. (Nasdaq: CMCSA, CMCSK) doesn't think so, and the cable provider says its new encryption software business with Motorola Inc. (NYSE: MOT) is not a gambit to keep up with telco IPTV.

Comcast and Motorola intend to develop a next generation of “conditional access” software, which cable systems use to provision and bill for premium channels. Right now, the software resides solely on a set-top box, which decodes the content sent from the headend. But the new joint venture will work to divorce the software from the set-top box so that other devices (TVs, PCs, handhelds) could receive the content (see Cable Braces for Services Rush).

“A Motorola set-top has the decryption keys for a Motorola headend,” says Motorola spokesperson Paul Alfieri. “But the software could be downloaded to anywhere so that any box could decode a signal from a Motorola headend.”

The flexibility a new decoding mechanism affords could be seen as a bid to keep cable providers ahead of the functions that IPTV affords. Motorola claims its multiservice access platform delivers digital video to over 90 percent of North America's installed base of telco IPTV services.

The joint venture is actually two companies: The first, known as Combined Conditional Access Development LLC, will develop “next-generation” conditional access software; the second, called Conditional Access Licensing LLC, will be a software licensing business.

Both will be headquartered in the Philadelphia area, where Comcast and Motorola are located.

The development venture will be staffed by 50 or 60 Motorola engineers near San Diego, where Motorola R&D is. It will be managed by a four-member board with two members from each of the parent companies. A search for a CEO is now underway.

The licensing venture will be overseen by a five-member board with three members from Comcast and two from Motorola. The two parent companies are still studying the staffing needs of the licensing company, a Comcast spokesperson says.

Both companies insist the new ventures are not a ploy to keep cable current with IPTV. In fact, the cable industry doesn't seem to feel threatened at all by the RBOCs' talk of advanced video services.“The feeling with cable -- and right now I don’t know if anyone can necessarily argue with them -- is that telecom could be a looming threat, but they haven’t really proven anything yet,” Motorola's Alfieri says. “And the impending fiber networks and IP solutions haven’t been deployed yet on a large enough scale to really have a Comcast or a Time Warner feeling a threat.”

Indeed, the real thorn in cable's side is still the satellite guys. Comcast's interest in the joint venture is to gain “the flexibility to design applications that add customer value and help us compete more effectively with folks like the satellite providers,” company spokeswoman Jenny Moyer tells Light Reading.

Motorola’s Alfieri has a slightly different take: “It will help Comcast drive down the cost of the set-top boxes in their networks because they could go out to multiple suppliers."

Motorola’s interest in the venture is a little more conceptual. “For Motorola we recognize this sort of open, plug-and-play world where giving up the license allows us to open up a new business model,” Alfieri says.

“Our thought is that will grow the pie by letting consumers see a lot of different types of devices that need to be connected -- and the more devices that are sold, the better for the cable industry, which in turn is better for us at Motorola.”

This “anytime, anywhere” accessibility sounds similar to what's possible with digital rights management software in the IPTV world. But the Comcast/Motorola conditional access software will be sold within the cable industry only, and it will not speak IP.

“The cable industry’s feeling right now is that they are in a position of strength,” Alfieri says. “So they are going to move to IP in their own time and on their own terms, and not necessarily because they are competing with telecom.”

The new entity will begin by releasing expanded versions of Motorola’s existing encryption software, which is baked into the Motorola hardware used by Comcast subscribers now.

Comcast has over the past few years formed a number of joint ventures. In February 2004 it started a business with Gemstar-TV Guide developing an interactive onscreen programming application. It started TVWorks with Cox Communications Inc. (NYSE: COX) in January 2005 to market a development platform for new digital services. And in August 2004 it launched a middleware company called OCAP with Time Warner Inc. (NYSE: TWX).

Motorola and Comcast also announced they would continue their hardware supplier relationship -- in a big way. The two companies signed an agreement wherein Motorola will sell Comcast more than $1 billion worth of low- to high-end set-top boxes over the next few years (see Comcast, Motorola in $1B Deal).

— Mark Sullivan, Reporter, Light Reading