Satellite & Cable

Storage-enabled set-top boxes delight cable TV customers

Robert M. Pait

Cable MSOs in the United States are at the cusp of significant change in the television landscape. The set-top box is at the heart of this change. Its evolution will usher in the age of the digital home; benefiting consumers with new conveniences and helping cable operators unleash new revenue streams, cost savings and greater customer loyalty.

The hard disc drive (HDD) is the enabling technology behind this projected role for the MSO's set-top box. With the cost-effective capacity, performance and reliability of today's HDD powering the set-top box, cable operators can deliver on the promise of the 'home of the future' - today.

New applications for the customer
Broadcast industry analysts agree that 2002 is an inflection point in the development of these new services and revenue streams. Consumers of cable TV are ready for greater control over the time and space in which they watch television, be it the nightly news, premium subscription content or video on demand (VoD). Hard disc drives (HDDs) make real this new expectation of control, allowing the cable TV company to offer and control such new services as -

• Personal video recording (PVR), or the ability to time-shift the television viewing experience, i.e., 'pausing' live television, rewinding in real-time, etc.,
• Robust, easy-to-use electronic program guides (EPGs) and other viewership planning tools,
• Personal content aggregation, such as home video, still photo albums, and the household's collection of music CDs,
• Monthly subscriptions to premium services past television content, such as music services, (MusicNet, pressplay), customized educational content and video game networks (i.e., the Sony/AOL Time Warner partnership), and
• Rich interactive advertising and precisely targeted, on-demand infomercials.

Among these new services, PVR is the one most likely to encourage initial installation of the HDD capable set-top box. As a reference point, adoption of PVR in the digital broadcast satellite (DBS) customer base market is well underway. PVR penetration is expected to reach 40 percent of the DBS market by 2005.

Benefits from churn reduction
The HDD can also serve as a tool for defending MSO customers against other television service options. Cable TV consumers are more likely to be satisfied with their service when PVR becomes part of their package. PVR service offers the cable TV consumer control over live television and manageability for the vast channel offering of digital television. Analyst projections indicate that PVR could lower an MSO's monthly churn rate by as much as a full percentage point for the valuable yet volatile digital cable market.

The benefits of reduced churn is immediate when examined in light of customer value (on an average, $4,100 annually) and additional costs such as service truck rolls. Customers are clearly more loyal to a package that includes PVR service. Further, as the storage-enabled set-top box becomes a center for personal media, customers will be far less likely to switch with the family photo album and music collection located on the box's HDD. Using churn assumptions based on current cable PVR sales, the inclusion of local storage into the MSO's set-top box strategy is conservatively forecasted to add $500 in value to the MSO's market cap.

Benefits of reduced VOD delivery costs
In a model where the MSO provides the set-top box, who ultimately controls the use of the HDD inside? Of course, the MSO has control over the drive. In this scenario, the customer is purchasing a service, not equipment. This control over the equipment puts the MSO in a situation where the HDD can significantly reduce the delivery costs of premium content.

Today, VoD usage spikes during peak weekend day parts. When delivering movies 'live' over the network, bandwidth must be able to handle these peak periods even if this specific bandwidth lies dormant for most of the week. Building out enough bandwidth is the biggest current impediment to delivering VoD and SVoD services.

However, the capacity and value of today's HDD makes it a real substitute for much more expensive network bandwidth. Capacity has grown to the point where a PVR user can store almost 40 hours of standard definition television programming on half the capacity of an 80GB drive. One model for leveraging this affordable capacity is to combine it with dormant network bandwidth to create, as futurist George Gilder calls it, 'storewidth.' A library of the most popular current movies can be downloaded to a 'partition,' or section, of the HDD that is only accessible by the MSO.

When a customer orders the movie, it is unlocked for one-time or multiple-time use after payment is made. The difference between this method of VoD delivery and that of 'live' delivery is that the actual delivery of the movie to the home takes place during dormant network usage periods, not on Friday night.

This partition can be encrypted via standard hardware and software methods developed by Seagate engineers in our consumer electronics Design Service Centers to protect the content against hackers. This level of security requires a hacker to have access to specialized, expensive equipment, simply to gain access to the movie file, and then adds the additional requirement of unlocking the encrypted file. Seagate engineers have years of aggregated experience in building HDD-based security solutions, and bring practical expertise developed as a leader in supplying drives to the DBS industry.

Getting started
A complete system for delivering and consuming digital programming is best constructed through partnerships. Supplying approximately half of the market for consumer electronics HDDs, Seagate has developed a wide network of partnerships extending to reference design houses, manufacturers, and software/operating system developers for set-top boxes. Our partnerships additionally extend to host-side server and infrastructure suppliers. We would be pleased to extend this network to your technical and business teams.