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Comcast Driving Real Strategy for Digital Video at Retail

An article earlier this week in The Wall Street Journal rehashed the same tired complaints from the consumer electronics (CE) industry about cable's lack of an 'open' retail environment for two-way digital cable devices. (See http://online.wsj.com/article/0,,SB111627935049735066,00.html?mod=yahoo for details). Yes, cable is moving cautiously, maybe even glacially on this issue, but can you blame MSOs? Their entire video business rests on the outcome of this transition. Retailers have much to thank cable for, such as creating services that drive the adoption of pricey new CE devices like HDTV sets, PVRs and home theatre audio systems. And while bashing cable, the CE industry has no problem sucking up to folks like Echostar, which define and contract manufacture their own set-tops. It is a completely closed CE model, but retailers are thrilled because they get margin on the boxes and commissions on satellite service sales. And let's look at another semi-closed CE category that is a retail industry darling: mobile handsets and services. Rather than a retail free-for-all, device manufacturers must meet stringent mobile carrier handset requirements and closely integrate their products with mobile service platforms. This is exactly where cable is heading and the CE industry should be thrilled, rather than shrill, about it. During Comcast's annual investor conference this month, Steve Silva, Comcast Cable's executive vice president of business development laid out the MSO's plans. Comcast has created a 'real next generation' (RNG) digital gateway program that specifies three set-top box reference designs for CE players. The RNG100 design is the basic model, while the RNG218 is a dual-tuner DVR and the RNG1000 is a multi-room DVR broadband media center. The designs are nice, but what gives the Comcast effort some real teeth are its joint ventures with Motorola and its Liberate application platform acquisition. The billion-dollar Motorola deal has two elements -- Conditional Access Licensing (CAL) and Combined Conditional Access Support and Development (C-CAD). The CAL joint-venture is 51% owned by Comcast and allows the MSO to license Motorola's DigiCipher conditional access technology to any device vendor. The C-CAD JV provides development and integration support for third-party device manufactures. 'Comcast, as the managing partner, can now go out to third parties such as a Samsung, Sony, Pace, Panasonic,' said Silva. 'We can grant a license to actually interface on our networks as they exist today.' This will be critical as MSOs work to move from today's clunky CableCards to downloadable conditional access solutions. Look for more on this topic from Alan Breznick in the June issue of CDN. The Liberate initiative, originally called DoubleC (referring to a Comcast-Cox partnership), delivers a middleware platform, called TvWorks, that will run on all Comcast-approved devices to create a common application development and execution environment. And to add icing to the cake, Comcast has created a JV with Gemstar/TV Guide called GuideWorks to deliver a best-in-class on-screen guide. 'Now, we have a platform from the hardware all the way up that people can build on and innovate with,' Silva said. 'For the first time that I've been in this industry É We can actually go out there and buy from the best. We can work the market for the best price, features and functionality.' And consumers will be able to buy devices they prefer at retail too with the assurance that these digital cable ready products will work seamlessly with all Comcast video services. Now the challenge is for other MSOs to craft as thoughtful a strategy as Comcast.
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