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Will Cable's Superboxes Pay Off?

Creating a business model around souped-up, $400 hybrid gateways is one big challenge that lies ahead for MSOs, says Heavy Reading

Jeff Baumgartner

September 14, 2011

2 Min Read
Will Cable's Superboxes Pay Off?

Cable operators are preparing to launch hybrid video gateways ahead of an inevitable IP video transition, but will the business model work if the devices run $400 a pop?

That's one of the key questions raised by a new Heavy Reading Cable Industry Insider: The Superbox Arrives: Hybrid Gateways to Unify TV & IP.

Although one operator believes these hybrid boxes can be had for $100 or less in volume, others tell industry analyst and report author Craig Leddy that full-featured devices, integrating things like DVRs, will likely run $300 to $400. At first, operators will probably have to lease them to customers -- which means the operator will have to buy the boxes, devise ways to manage them and train techs on how to install and troubleshoot them.

That sounds like a bit of a problem, particularly as MSOs are trying to trim their capital expenditures, reduce box costs, and, perhaps well down the road, get rid of leased set-top boxes altogether. (See Cablevision Eyes $50 Set-Top, The Rise of Cable Apps and Comcast, TWC Stream With Samsung.)

The gateways should reduce costs per-TV, because devices connected to them won't need their own CableCARDs and individual DVR storage.

But operators "will have to create a pretty big business model around this strategy," Leddy writes. U.S. cable, which has been losing video customers by the hundreds of thousands each quarter, will want these devices to support new apps and attract new video subscribers. (See Can Comcast Stop Losing Video Subscribers? and Q2 Video Scorecard: Cable, Satellite Get Creamed .)

So far, there's not much uniformity to cable strategies beyond some baseline gateway features, such as integrating cable modems and Docsis 3.0 technology. While Shaw Communications Inc. and BendBroadband look to Arris Group Inc. (Nasdaq: ARRS) for video gateways, Comcast Corp. (Nasdaq: CMCSA, CMCSK) and Liberty Global Inc. (Nasdaq: LBTY) are going against the grain with products that adhere to their own technical specifications. (See Liberty Opens an IP Gateway, Shaw Deploys Arris Video Gateway and Comcast Demos New Web-Based TV Service.)

The report also outlines the cable gateway strategies of several suppliers, including Motorola Mobility LLC , Pace plc , Samsung Corp. and Technicolor (Euronext Paris: TCH; NYSE: TCH). Leddy also sheds some light on "Project Altoids," an obscure Cisco Systems Inc. (Nasdaq: CSCO) initiative whose name refers to the size of the remote client that would feed off the vendor's central gateway.

— Jeff Baumgartner, Site Editor, Light Reading Cable

This report, "The Superbox Arrives: Hybrid Gateways to Unify TV & IP," is available as part of an annual single-user subscription (six issues) to Heavy Reading Mobile Networks Insider, priced at $1,595. Individual reports are available for $900. To subscribe, please visit: www.heavyreading.com/cable.

About the Author(s)

Jeff Baumgartner

Senior Editor, Light Reading

Jeff Baumgartner is a Senior Editor for Light Reading and is responsible for the day-to-day news coverage and analysis of the cable and video sectors. Follow him on X and LinkedIn.

Baumgartner also served as Site Editor for Light Reading Cable from 2007-2013. In between his two stints at Light Reading, he led tech coverage for Multichannel News and was a regular contributor to Broadcasting + Cable. Baumgartner was named to the 2018 class of the Cable TV Pioneers.

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