The US Federal Communications Commission (FCC) has latched on to the disruptive technology formed when DLNA is combined with DTCP-IP and a form of high-bandwidth no-new-wire networking (such as MoCA or HomePNA, and possibly 5GHz 802.11n, G.hn, or other powerline networking in the future), and seems determined to use the opportunity to mandate the end of the pay-TV digital set-top box as it has existed since its inception. The Commission’s goal is simple: They wish to allow any CE manufacturer’s devices to access pay-TV content, which the Commission believes would foster competition and innovation in “smart video devices”.
What will replace the set-top box in the FCC’s “AllVid Concept” is a “Pay-TV Gateway” that translates from the platform-specific modulation and encryption (Conditional Access) to DLNA & DTCP-IP. The set-top box will be replaced with Digital Media Adapters that support the same protocols. An increasing number of televisions and Blu-Ray players are also including DLNA & DTCP-IP support.
According to Stephen Froehlich, a senior analyst for IMS Research’s Consumer Electronics group: “The effects of a ban on traditional pay-TV set-top boxes would be massive, as this regulation would enshrine what was already an extremely disruptive technology. Such a ban would directly effect more than 40 million set-top box shipments and $4.7 billion worth of sales annually. It would also enable much more rapid adoption of the same model in other countries.
Froehlich continues, “However, almost all of the industry participants I have spoken with understand that the move to open standards adds significant value for both consumers and pay-TV operators and are therefore preparing for this transition. Most suppliers of set-top boxes and set-top box components also supply the broadband gateway industry, putting them in a good position to compete in the new landscape. However, it is important to note that the new rule, if written correctly, will significantly decrease the overall cost of customer premise equipment (CPE) in US homes by minimizing the number of MPEG decoders and associated intellectual property fees per TV, which will in turn reduce the revenues available to the combined set-top box and gateway industry. The total financial impact of the new FCC rule depends both on its details and future innovation. Assuming that the new regulation allows the market to develop naturally by allowing content providers to provide their own user interface over an open-standard remote UI protocol, the general trend will be that the value-adding functions will move from the MPEG decoder to the broadband gateway or to servers on the ‘cloud’.” - Major set-top box vendors affected if the proposed rule is enacted would include Motorola (MOTO), Cisco Systems (CSCO), EchoStar Corporation (SATS), Technicolor (TCH), Pace Plc (LSE:PIC), Humax (KSE:028080), and Samsung (LSE:SMSN; KSE:005930).
- Major vendors of MPEG decoders for pay-TV set-top boxes will likely face increased competition from producers of commodity MPEG decoders, including Broadcom (BRCM), ST Microelectronics (STM), Trident Microsystems (TRID), and Sigma Designs (SIGM).
- Conditional access and interactive middleware suppliers to the US market would see a decrease in number of seats for their products. While number of seats are not directly linked to revenues for many of these products, those vendors are NDS Limited (private, nds.com) and Nagravision / OpenTV (Kuldeski Group: SIX:KUD), and Microsoft (MSFT) along with Motorola and Cisco.
- The firms that may see significant new revenues from the new rule will be makers of no-new-wire networking interfaces, such as Broadcom (BRCM), Entropic Communications (ENTR), CopperGate Communications (part of Sigma Designs), Atheros Communications (ATHR), DS2 (private, ds2.es), and other makers of Wi-Fi chipsets.
“The FCC views the new effort as a revision to its previously-failed efforts to create an open market for set-top boxes (“navigation devices”) as mandated in Section 629 of the Telecommunications Act of 1996. However, this time instead of fighting an uphill battle, the commission is in the much better position of riding a wave that was already forming. DLNA & DTCP-IP have proven to be attractive to US pay-TV operators as a way to inexpensively roll out multi-room DVR services. Froehlich concludes, “Given the frustration that the FCC has communicated about its previous failures to create an open STB market using CableCARD, I fear that the Commission may be determined to continue treating pay-TV providers as an enemy in this effort rather than the ally they now are. The loser would be the American consumer, who would yet again be forced to pay more than necessary for their video equipment. However, those costs would translate to improved revenues for equipment makers.” Stephen Froehlich is the author of several reports on this market including Secure DLNA Video: Implications for Set-top Boxes and Home Gateways, Semiconductors and Software in Set-top Boxes, and The Conditional Access Market. Comments from companies mentioned in this press release follow:
Comment from Sigma Designs Press Contact: Ken Lowe, VP of Strategic Marketing; kal@sdesigns.com, +1 408 957 9850
Sigma welcomes this FCC intiative as we believe it reinforces many of our current strengths and market positions. For quite some time, we have anticipated the shift to thin-clients architectures, which you will find in our latest platforms for digital media adapters (DMA), low-end set-top boxes, and DLNA-compliant devices. These latest platforms are based on our second generation thin-client chipsets which provide very compelling performance/price points for this class of device.
From a market growth standpoint, we believe this could result in an overall increase in demand for SoC and wired network solutions. For silicon suppliers like Sigma, much of what will be lost in STB volume would be made up in increased volumes of DMA devices. Sigma pioneered the DMA and as the market share leader, is likely to directly benefit from increased demand. Secondly, as consumers purchase their own DLNA devices for television connectivity, this retail market will open up incremental purchases for new TVs as well as a replacement market for upgrades. Third, this initiative reduces the barriers to gain share in the cable market, where our thin-client architectures are just now gaining ground. Finally, since this initiative encourages more no-new-wires based networking, it should directly benefit Sigma’s HomePNA, HomePlug AV, and future G.hn products.
From a consolidation risk standpoint, we believe it will take a considerable amount of time before these DLNA-compliant digital media adapters are built into mass market televisions. First, end-to-end reliability will be a challenge and with the long leadtimes for television design, this will mean multiple generations of DMAs. Secondly, the performance and cost requirements for meeting the robustness of the DMA is likely to exceed what the television vendors will support in the short term, until further integration makes it compelling. Finally, the infrastructure and field support requirements for a sophisticated networking product built into a television could be a major impediment down the road. Comment from Kuldeski Group (Nagravision / OpenTV)
No decisions have yet been made by the FCC regarding changes in regulatory rules in the US. Should any arise, the Kudelski group, including Nagravision and OpenTV, will be prepared to address these new opportunities. Any changes in US cable and IPTV regulations are potentially advantageous to us as this opens the market so that our customers can then harness our widely deployed solutions from other parts of the world including robust security solutions within the home." Comment from DS2 Press contact: Ann Whyte, Director of Corporate Communications; ann.whyte@ds2.es; +34 961366004
"Home Networking technologies are going through an evolutionary step where wireline technologies are merging under G.hn for multi room video from the Allvid gateway. This confluence of change, Allvid and the means to deliver the streams in-home, will improve the end user experience and enable a robust Consumer Electronics market." John Egan, VP Strategic Marketing, DS2. |
