Tru2way's Retail Forecast: Cloudy

Tru2way is poised to provide major U.S. MSOs with a common platform to develop and deliver a bevy of interactive services, but its ability to spawn a substantial retail market for advanced TVs and set-tops remains questionable, a new Light Reading Cable Industry Insider report finds.

"The future of tru2way retail devices is cloudy," Craig Leddy -- author of the report, "Tru2way Troubles: Is Cable Losing Out to Telcos on ITV?" -- writes. (See Tru2way at a Crossroads.)

That forecast emerges soon after six major MSOs linked to a memorandum of understanding (MoU) originally negotiated with Sony Corp. (NYSE: SNE) confirmed that they failed to hit a key headend-readiness deadline of July 1. This came less than 18 months after Comcast Corp. (Nasdaq: CMCSA, CMCSK) chief Brian Roberts touted tru2way's retail potential at the 2008 Consumer Electronics Show in Las Vegas. (See No Penalties for Missing Tru2way Date, MSOs to Miss Tru2way Date , and CES: Roberts Declares Open Season.)

"While MSOs need to demonstrate a good-faith effort to meet federal guidemarks and terms of the MoU, it is unclear whether consumer demand will drive significant sales of tru2way HDTV sets, if the only advantage is to remove a cable set-top box," Leddy notes.

He adds that consumer electronics manufacturers have shown only "lukewarm enthusiasm" toward the idea of retail tru2way products, with many TV makers opting instead to deliver interactive applications and over-the-top video services from the likes of Amazon.com Inc. (Nasdaq: AMZN) and Netflix Inc. using on-board high-speed broadband connections and specialized software.

Panasonic is the exception, having led the way with two tru2way-certified HDTV sets, sold in tandem with Comcast in limited retail pockets of Denver, Chicago, and Atlanta. These efforts hit a snag when Circuit City went belly-up; its store in Highlands Ranch, Colo., was one of the few outlets around Denver that sold the Panasonic sets. (See Tru2Way in Atlanta and Denver, Chicago First to Get Tru2way TVs.)

Since then, Paul Liao, a tru2way champion at Panasonic, has since left to become CEO of CableLabs , showing that cable's pursuit of retail angles is far from dead. (See Liao Puts the CE in CableLabs.)

But if MSOs are unable to advance a longer-term retail strategy, "tru2way likely will become a solely cable enterprise that is focused on interactive applications delivered to next-generation cable set-top boxes, or new devices that are developed through deals that largely are initiated by MSOs," the report suggests.

Most of the box makers hoping for near-term tru2way headway appear to be going the direct-to-MSO route. Some of the cable box newcomers on that list include Advanced Digital Broadcast (ADB) , EchoStar Corp. LLC (Nasdaq: SATS), and Funai Electric Co. Ltd. (OTC: FUAIY). (See Funai Makes Tru2way Play , EchoStar Slings Its First Tru2way Set-Top, and EchoStar: No Cable Sale Guarantees .)

Digeo Inc. , a company with cable ties, does have a retail box, but it's not using tru2way. TiVo Inc. (Nasdaq: TIVO) has yet to announce a product or a distribution strategy for tru2way. (See Digeo Flips Switch on SDV, Multi-Room and Digeo HD-DVR Enters Retail Waters .)

Sluggish support for tru2way at retail could help to resuscitate DCR+, a tru2way alternative favored by the Consumer Electronics Association (CEA) , and one that "has not been officially declared dead yet," Leddy points out. (See Two-Way Battle Reaches FCC.)

Perfect the leased model first
Establishing a leasing model before diving into retail might be "the right order of things," says David Housman, who runs the Americas division of tru2way middleware stack maker Alticast Corp. Housman says most of his company's tru2way work is around leased cable boxes. (See Housman Takes Reins at Alticast .)

Housman, a former Charter Communications Inc. (Nasdaq: CHTR) exec, says MSOs will want to ensure that the leased tru2way boxes and the networks that are powering them are absolutely stable before a significant retail model comes into play.

"We're on the brink of technical readiness [for tru2way] across multiple MSOs," Housman tells Cable Digital News.

Still, Housman expects any tru2way retail efforts for the 2009 holiday season to be "very controlled" by operators and their CE partners. He likewise believes that activity will evolve by the 2010 season to include multiple retailers and multiple devices as MSOs get more more of their footprint ready for the platform and grow more confident that they can handle retail-bought tru2way device installations without having to rely on expensive truck rolls.

— Jeff Baumgartner, Site Editor, Cable Digital News

The report, Tru2way Troubles: Is Cable Losing Out to Telcos on ITV?, is available as part of an annual subscription (6 bimonthly issues) to Light Reading's Cable Industry Insider, priced at $1,295. Individual reports are available for $900. For more information, or to subscribe, please visit: www.lightreading.com/cable.