Quoting consultant Richard Doherty, president of Envisioneering Group Inc., Bloomberg suggests the Xbox could even be stripped of its moniker as a gaming console in potential cable deployments, with Microsoft focusing instead on the hardware's video entertainment capabilities.

AT&T Inc. has used the Xbox as a set-top replacement option for U-verse subscribers since 2010. However, because U-verse is an IPTV service, the Xbox plugs easily into AT&T's home architecture.

Cable operators, on the other hand, either have to transcode QAM signals or create an IP simulcast of TV line-ups in order to stream video to an Xbox.

The idea of plugging retail devices into cable service is exactly what the AllVid proposition from the Federal Communications Commission (FCC) is supposed to encourage. But operators argue that the transition is happening without regulatory imposition. New residential gateways in particular have the potential to act as transcoding vehicles for IP video networking in the home.

Meanwhile, both Comcast Corp. and Verizon Communications Inc. already offer Xbox apps for authenticated subscribers. (See Comcast, Verizon Connect with the Xbox 360.)

And separately, in its ongoing dance with service providers, Microsoft may also be pursuing an HDMI pass-through feature that would allow it to overlay its own Xbox UI (user interface) on a cable video feed. (See Does Xbox Have a UI for Cable?)

— Mari Silbey, Special to Light Reading Cable