Cable Has More Questions Than Answers on What Google-Motorola Means for Home Video

A positive for operators and equipment vendors alike is that Google-Motorola Mobility may be more innovative than Motorola has been on set-tops, some executives said. While Google doesn’t seem poised to adopt an open platform for set-tops as the company advocates for the Internet, it may seek to work more closely than Motorola Mobility did with other cable vendors, an executive of a mid-sized operator and Motorola customer said. Motorola Mobility had no comment.

Competition in set-tops has been increasing, with newer entrants like Pace appearing to pick up corporate customers, operator and vendor executives said. “It’s too early to discuss plans” for set-tops and other video devices because Google “only just announced this agreement,” a spokeswoman said. “Until the deal closes, Motorola and Google will continue to operate independently."

The cable industry is watching the effect on so-called gateways that get cable, Internet and other content, serving as a central communications hub, executives said. Such gateways are “definitely an area in which you're going to see growth” industrywide, said Senior Vice President Steve Davi of VOD and gateway product maker SeaChange International. “Clearly, Google’s main motivation was on the patent” side in buying Motorola and on its mobile hardware, he noted: “That they picked up” the set-top business “is kind of interesting, so time will tell what they do with that” and the impact on Google’s nascent pay-TV product. Major U.S. and Canadian cable operators had no comment.

Motorola Mobility is the No. 1 cable set-top maker in North America, having shipped about 8 million last year, said analyst Sam Rosen of ABI Research. No. 2 manufacturer Cisco shipped about 4 million to North American cable operators, he estimated. Google doesn’t seem to know “what it will do with the set-top side of the business,” said Heavy Reading’s Adi Kishore. “The deal was clearly driven by the mobile handset business, and perhaps more specifically by Moto’s patent portfolio in that area. Google is obviously interested in getting into the home, and they probably hope to find ways to leverage Moto’s STB business to do so. But I don’t think there’s necessarily a clear plan for it at the moment."

Most Motorola boxes at U.S. cable operators probably can’t run new software such as Google’s Android, said Chief Technology Officer Joe Jensen of Buckeye CableSystem. “Probably half of them are old enough that they don’t really offer a significant advantage in terms of adding a new software layer on top.” Cable operators haven’t been very impressed with Google TV, said executives including Jensen, who has the product. “I don’t think it’s very compelling and I think Google realizes that too,” based on sales for products made by other companies that can run Google TV, Jensen said. “Can they turn that into something more meaningful, and offer a quicker path to innovative services and capabilities? I'm open to that, but also concerned about the baggage Google brings” because they dominate the online search ad market, he said: Cable operators don’t want to cede ad revenue to Google.

Even Motorola Mobility rivals may benefit from Google buying it, some vendors said. “For the industry at large, innovation is good,” and more may spring from the combined company, said Davi. It’s “good” an innovative company agreed to take over “a company that is not so known for innovation,” he said: “It’s going to be interesting to see how the cultures come together” and what new products come out of it. “If Google can help them innovate more, then that’s good for the industry at large -- it makes us have to step up our game and be more creative,” said Davi. Major consumer electronics companies had no comment.

A big concern for Motorola’s customers is whether Google would force new products that potentially compete with cable service into Motorola hardware, said President Robert Gessner of Massillon Cable. “Without basically throwing away what ends up being a stranded investment, we have to continue to buy the product.” Nearly all of Massillon’s two-way set-top boxes are made by Motorola. “Suddenly, if there’s a Google TV application on my set-top box, and oh by the way, we're required by the FCC to activate the DOCSIS 3 modem in it, then my bandwidth is being used to deliver a Google TV subscription service at the expense of my own service,” Gessner said. “I'm sure all operators in the industry will want to look very carefully at it."

Large cable operators, not Motorola, typically control what type of software runs on the boxes, said CEO Mike Ryan of interactive-TV application developer A Different Engine. Those operators are beginning to push tru2way into the field, and may not be quick to adopt Android, he said. Android doesn’t have many of the features, such as tuning and handling VOD, that are built into tru2way, he said. “For Android to really make inroads, they'd have to start absorbing those features.” It would be good if Motorola boxes can run Android in the future, giving operators access to new user-interfaces and program guides at lower costs, Jensen said. “I would welcome an alternative there because Rovi has not been able to stay up-to-date in terms of the user interface,” he said. “Customers view that interface as a mirror of our technological capability and view us as lacking."

There may be greater opportunity for Google to leverage Android or Google TV in home networking devices, executives of cable vendors said. “I think those devices are more where they'll have an impact, with a very small integration into the cable box,” said Ryan. An upshot of Google-Motorola Mobility is that the acquirer will gain a lot of experience and expertise in dealing with cable operators, said Chief Product Officer Jeremy Teoman of Dijit Media. It makes software that turns an iOS device into a remote control. “You could almost argue that Motorola’s set-top division should inherit Google TV, and not the other way around,” said Teoman. Making set-tops isn’t hard, he said. “What is hard is knowing how to run a set-top box business, and that’s what they just gained,” he said of Google.