In a filing yesterday with the FCC on the current status on CableCARD deployments the NCTA revealed that there have been a total of over 374,000 CableCARDs deployed for use in Unidirectional Digital Cable Products (UDCPs), such as the TiVo HD, by the ten largest cable MSOs, which cover roughly 90% of US cable subscribers. That may sound like a lot, but in their last filing 90 days ago in June, they reported over 372,000 CableCARDs for the same ten MSOs and 90% subscriber base. That implies that only 2,000 CableCARDs have been deployed to UDCPs in the past three months by the top 10 cable MSOs - combined. That’s nothing. It would also make me wonder a bit about the sales of the TiVo HD, since I’d expect nearly all of those to have at least one M-Card CableCARD.

That is, of course, if the numbers are true - and they may not be. See the table below and especially the first footnote¹. Comcast’s numbers for September are estimated to be 10-15% lower than actual due to an internal error. We could be looking at an increase of more than 34,000 users instead of only 2,000!

While 34,000 would certainly be better than 2,000, it still isn’t really setting the world on fire. Maybe the M-Card is a ray of hope in those numbers - if customers who previously used two S-Cards are trading them in for a single M-Card on devices like the TiVo HD, it would result in a lower cumulative number. Still, I don’t expect that’s a huge number either.

This is not to say that the total number of CableCARDs in use is that small, not at all. Since the FCC’s ‘integration ban’ went into effect on July 1, 2007, forcing cable MSOs to begin using CableCARDs in their own STBs, those same ten MSOs have deployed over 7,800,000 CableCARDs in their STBs. So in less than fifteen months they’ve deployed more than twenty times the number of CableCARDs as have been issued for 3rd party UDCPs in the four years they’ve been available.

The integration ban was supposed to force cable MSOs to ‘eat their own dog food’ and thereby improve support for CableCARDs. The idea was that this would help foster the overall CableCARD market. Better support from MSOs would lead to more products, which would mean more 3rd party UDCPs in the field. For the most part, this hasn’t happened.

Why not? Well, I think I can sum it up in one brand name: tru2way. Starting late last year, and getting an official launch at CES in January, OCAP became tru2way and marked a push to get consumer electronics companies on board. Then starting with Samsung in May, followed by a larger push by Sony later that month, CE vendors started jumping on the tru2way bandwagon.

What does this have to do with slow CableCARD adoption? Well, these same CE vendors have held off on releasing UDCPs while they work on tru2way-enabled devices. Why invest in developing and marketing a unidirectional product when you’re going to obsolete it with a two-way product in a year? The first tru2way products are starting to trickle out, and there will probably be a bunch of them on display at CES in January. So I think the push for tru2way was a major contributor to lax CableCARD pick up. Vendors just haven’t been releasing CableCARD-enabled products so there aren’t many options for consumers, which naturally means not many cards are being deployed. Really the only major CableCARD product out there right now is TiVo. CableCARD TVs are thin on the ground. CableCARD-enabled Media Center PCs have had anemic sales. And Digeo outright canceled their Moxi CableCARD HD DVR.

CableCARD was slow out of the gate, and by the time MSOs had the infrastructure worked out vendors were already looking toward round two with tru2way and they just decided to sit round one with UDCPs out entirely. The deployment of SDV and the need to develop a Tuning Adapter, and to support it, was very likely a factor in that as well. I don’t expect to see any real pick-up in CableCARD utilization until a sufficient number of tru2way devices are available to consumers, and then I do expect to see a real uptick.

The filing also has information from several MSOs on their CableCARD pricing and install practices. To compare June to September:

¹Comcast states that their September number may by low by 10-15% due to internal reporting errors.

The count for this reporting period of CableCARDs installed in one way retail devices in active customer homes is estimated to be 10-15% lower than the actual number due to internal Comcast reporting errors that are the result of an internal Division reorganization during the reporting period. The next quarterly report will more accurately reflect the actual count.

Since Comcast has such a large installed base this could be the reason for the seemingly small total uptick. The other four combined yield an increase of 3,429. Comcast’s apparent drop of 1,383 drags it down. But if they’re short just 10% they would actually have an increase of 20,334 users. And 15% would mean an increase of 31,192! So we’d be looking at a total increase of 23,763 to 34,621 - rather more than around 2,000. And that’s just from these five MSOs.

²Comcast allows self-installs in at least some areas - 68% used truck rolls, 32% were self-installs.

³First card is free, fee for additional cards.

⁴$10.43 if install is included with other services, $25.14 if purpose visit.

⁵0.2% of Time Warner installs are self-install, which is negligible.

⁶The average is $2.26, but they report most divisions are $1.75 - which must mean the remaining divisions are rather higher to bring the average up.

TiVo and the NCTA have dropped a press release announcing their progress in developing the SDV Tuning Adapter - as the Motorola and Cisco boxes recently seen at The Cable Show.

Since this is a critical issue and of interest to a lot of readers, the full press release is below.
Read the rest of this entry »

The NCTA held a conference call this afternoon to try to clarify the issues surrounding CableCARD and it included an open Q&A. I like seeing this kind of thing, the NCTA recognized they have had a major PR issue with CableCARD, and with the most recent flare-up in the blogosphere they decided to get in front of the issue. I applaud them for that, I felt the call was a straight-forward presentation of the history of OpenCable and how we got to the point we’re at today, and the Q&A session was free-flowing. Representing the NCTA on the call were Brian Dietz from NCTA’s Communications group, William Check, Senior Vice President of Science & Technology, and Neal Goldberg, Vice President & General Counsel.

I did miss a couple of minutes in the middle of their presentation when my cell phone dropped the call. I quickly switched to Skype for the rest of the call, lesson learned - use Skype for this kind of thing in the future. I don’t think I missed much though, when I got back in they were still covering the history and I’ve been following that since early days. I’ll listen to the recording to make sure I didn’t miss anything important. (Nope.)

One interesting thing, the NCTA repeatedly praised or mentioned TiVo when talking about CE companies that have worked with the cable industry to work out issues with CableCARDs and to develop the Tuning Resolver.

From my point of view there really wasn’t any new ground covered, but then I’ve been following OpenCable, OCAP, tru2way, etc, pretty closely for a long time. So I’d be a little surprised if they did cover something I’d missed. But it was a good overview of the situation and their arguments do make sense. They pointed out that there are only roughly 380,000 consumer electronic devices using CableCARD - that’s TVs, TiVos, PCs, etc. And the cable industry overall has over 65 million video customers in the US. So the total percentage if people using UDCPs who will have issues with SDV is pretty small. And all of those using CableCARD TiVos will be able to use the Tuning Resolver, and likely all of those with a PC using CableCARD. The big question will be those using CableCARD-enabled TVs - many of them do not have USB ports, which means no Tuning Resolver. Those units that do have USB ports will require a firmware update, so it comes down to vendor support.

Gary Merson of HD Guru asked why cable companies don’t remove the analog channels to free bandwidth for digital channels instead of using SDV. This would inconvenience those using analog cable without a STB, for example connecting it directly to an old TV. Well, I think those numbers really help explain it. While Gary made the argument that CableCARD customers are likely to be premium customers paying for higher service tiers, there are a lot fewer of them than there are subscribers using analog cable. Cutting off analog channels would inconvenience many more users than implementing SDV does. On top of that, cable MSOs would have to provide STBs to all of their customers, which would be an enormous expense. And basic cable customers don’t like STBs any more than premium customers do.

Also, under an agreement with Congress and the FCC, it is an all-or-nothing proposition. Cable MSOs are required to continue offering an analog basic tier, unless they eliminate all analog channels. Going 100% digital is an exception to the requirement. But that would be a radical change to many MSOs, and again a great cost.

There are other business reasons not to take that approach. With the digital conversion coming to broadcast TV in February 2009, providing analog service is a business opportunity for cable. Antenna users are faced with adding a converter box or other device (such as a TiVo) with a digital tuner, buying a new TV with a digital tuner, or switching to a new service - analog cable. Analog cable would allow them to connect directly to their existing TV without adding another device.

Gary also asked for some assurance that consumers who invest in new tru2way TVs and devices will not be faced with another upgrade in 3-4 years, as those who invested in UDCP CableCARD devices are facing. I think the NCTA’s response was reasonable. Cable MSOs are deploying tru2way-enabled STBs now, with Time Warner in the lead and Comcast currently in second place. Over the next couple of years this will be an investment in millions of STBs and hundreds of millions of dollars. So the cable MSOs are not going to be eager to make that investment obsolete. But they really can’t state “Tru2way will not be replaced in the next five years” or anything like that. Predicting the future in a technical field is risky business. And despite what some might think, the cable industry isn’t one large conspiracy and each MSO is free to adopt different technology and services, within the regulatory framework.

However, I guarantee that tru2way will be replaced, someday. Probably not in the next 5 years, maybe not even 10, but it will happen. That’s just how technology works. Something bigger, better, faster will come along and the industry will shift. The cable industry tried to bypass CableCARD by going straight to DCAS, but when they lost that fight they were forced to invest hundreds of millions, perhaps billions, in CableCARD infrastructure. That will discourage any immediate push for DCAS, as they’ll want to recoup their investment. But DCAS, or something like it, seems to be the next logical step down the road. And when that happens it is likely there will be some new features that are not accessible to CableCard/tru2way devices. However, as more devices are upgradeable in software and firmware it is hard to say. Perhaps there will be a generic DCAS module that could plug into a CableCARD slot and add DCAS support to those devices. I wouldn’t rule it out, especially as the cable industry would probably like that to keep their CableCARD STBs compatible. But I wouldn’t worry about any of this in the near term.

They did say that the Tuning Resolver is a high priority for the cable industry and that development is still on track for summer availability. As I reported recently, it looks like early July will be the earliest possible availability date.

Ben Drawbaugh of Engadget shared his horror story of having his cable MSO try to talk him out of using CableCARD and the installers not knowing how to handle the install, and I have to second that. While Charter didn’t try to talk me out of using CableCARD, and the installers who have come to my home has been polite and courteous, they clearly didn’t have enough training and experience installing CableCARD. When I had my first install, as a TiVo Series3 reviewer, I could understand it as I was the first person in the territory to have CableCARDs installed in a TiVo and there weren’t even many CableCARD TVs installed. But over a year later the experience wasn’t much different. And when I’ve had trouble and needed support, the support techs are also woefully confused by CableCARD. As of the last time I called the automated system still didn’t have an option for CableCARD in the menus. Fortunately I’m fairly educated on the technology and determined (aka stubborn), and I was able to make a contact in my local office who has been willing to handle my issues without my dealing with the standard support system. The cable MSOs really need to do a better job on the customer service and support front with CableCARD.

I think Ben was a little confused on DCR+. My understanding of the DCR+ CE proposal pretty much agrees with how the NCTA sees it. It would be today’s DCR with the addition of limited two-way support for specific services such as SDV, PPV, and VOD. But it would not be an open platform for expansion and future services as OCAP is. Of course, specs can evolve so other features could be added to DCR+. However, at this point I personally think DCR+ is DOA. Consumer electronics vendors such as Panasonic and TiVo are already breaking ranks and developing OCAP/tru2way support, and virtually the entire cable industry is investing in OCAP/tru2way. DCR+ just doesn’t have the support to make it.

The call was recorded, and if you really want to know about the history and current situation I encourage you to listen to it, especially if you’re a blogger who covers this arena. It will be available after 15:00 EST today through May 25th (I guess they keep them for a month). Call 1-800-475-6701 and enter access code 920821.

A lot of bloggers were on the call, I know HD Guru, Engadget, Zatz Not Funny (which has already posted about the call), Multichannel News, and others were all on there, so keep watching for their posts.