Many Reviewing Cable-CE Compromise on Plug-and-Play

“Nothing happens quickly in this space,” NCTA President Kyle McSlarrow said in an interview Friday. After 2006 talks involving many parties failed, he and CEA President Gary Shapiro agreed that December to have Pioneer and Sony from the CE side and Comcast and Time Warner Cable from the operator side sit down, he said. Those conversations, in 2007, also were unsuccessful, but “we actually learned some things.” Discussions that produced the deal sprang from a visit of cable operators to Asia. “Everybody was frustrated on both sides; we just needed to keep people talking,” said McSlarrow. “But it was easier said than done.”

The FCC was reluctant to intervene by issuing two-way plug and play rules, and instead encouraged the industries to work the matter out, McSlarrow said. “The constant drumbeat we got was ‘keep talking, keep talking, don’t give up, you don’t want us'” intervening, he added. Analysts and executives not involved in the negotiations share McSlarrow’s assessment. Lack of commission intervention and momentum for CEA’s DCR-Plus two-way solution seem to have enabled the deal, said Heavy Reading analyst Adi Kishore. “But we're been through this so long, I'm kind of cautious to predict” whether the MOU will be successful, he added. “It’s an incremental step,” but one that will probably benefit consumers because they'll be able to buy two-way boxes at retailers and lease them from operators, Kishore said.

CEA is “pleased that an industry solution has been found” but doesn’t yet know what’s in the cards for DCR-Plus, said Brian Markwalter, vice president of technology and standards. “We don’t know how I think some of the other parts play out,” how “widespread the MOU” adoption will be and what will happen to DCR-Plus, he added. The CE industry also hasn’t figured out what the deal means for its strategy at the FCC, which it had asked to adopt DCR-Plus as a standard, he said. “As an association our preference is industry solution over government having to figure out what’s best for two industries.” McSlarrow said it’s too soon for NCTA to gauge the regulatory effect of the agreement.

CE companies besides Sony are examining the MOU, Markwalter said. LG, Panasonic and Samsung, supporters of cable’s tru2way two-way standard, are logical candidates to sign on to the deal, but it’s not clear if they will, he said. Motorola considers the memorandum “a very positive development” because it has sold millions of tru2way-capable set-tops, said Jason Friedrich, director of broadband policy. “I really view this as a positive development for both operators and the CE industry because I think there was a lot of confusion around tru2way, and this appears to go a long way to resolve that confusion.”

Sony’s participation means it’s now backing the tru2way standard, said McSlarrow and other executives from cable and CE. Content protection under the MOU will be the same as under tru2way, which the Motion Picture Association of America has supported, they said. “Since it was the same stuff that we'd already announced and agreed with them, it wasn’t an issue,” McSlarrow said of MPAA.

The MPAA wasn’t involved in talks leading to the MOU, as Sony Electronics isn’t a member of the lobbying group, a spokeswoman said Friday. The agreement “appears to be a good example of an industry-driven approach bringing a greater level of service and choice” to consumers, it said late Thursday. The deal is “a positive indication that the relevant industries are listening to their customers and working together,” added the group.

Smaller cable operators that aren’t in on the deal have it in front of them, McSlarrow said. Bright House, Cablevision, Charter and Cox are the other parties to the agreement. “To wait and try to sign up every single person didn’t make sense,” McSlarrow said. With this “critical mass, now people on both sides will look at it,” he said. “Other MSOs will end up deploying tru2way. It just wasn’t necessary for the MOU.” Suddenlink believes that the MOU is “a very positive development, and we're very excited about the potential benefits,” a company spokesman said. “We do plan to keep our eye on future developments, and will consider joining in the future.”

Bresnan will evaluate matters as they develop, through its participation in CableLabs and NCTA, said a company spokesman. “I imagine as this develops and becomes a marketable technology, we'll participate at that time."Other cable operators declined to comment or didn’t respond to messages.

Cable’s concession in the MOU was agreeing to equip many set-top boxes with tru2way and upgrade its headends to work with devices sold by CE companies, said executives on both sides of the deal. By July 2009, five of the six participating cable operators will install gear in their headends to handle two-way plug and play devices from CE companies, said McSlarrow. Charter gets an additional year. All six operators agreed to put tru2way software in at least 20 percent of the set-tops that they lease to customers, starting July 1, 2008, McSlarrow said. That “compromise” gave CE companies “comfort that we have real skin in the game,” he said. “It was meant to be a minimum, and I expect in all likelihood the percentage will be higher.”