But in recent weeks, Boxee seems to have changed its tune.  Instead of telling regulators that its service is a replacement for pay TV service, they now seem to be saying that their service is dependent on subscription TV and that regulators must… wait for it… dictate how cable service is delivered to its customers.

Yes, that is correct.  This cord-cutting, end-of-cable-as-we-know-it dynamo is demanding that the FCC not allow cable systems to scramble its basic service tier (typically limited to broadcast channels, local access and a few others).  Their position is all the more ironic given that all of cable’s competitors – from satellite to Netflix to Boxee itself – already encrypt the programming they send to their customers.  But in Boxee’s world, all video service providers can innovate and compete except cable, which must remain frozen in a 1990s time warp.

What’s in It for Consumers?

But wait, Boxee’s moxie doesn’t stop there.  Their CEO Avner Ronen took to the Boxee blog this week to make the incredible claim that encryption of the Basic Service Tier wouldn’t help consumers at all.  Maybe Mr. Ronen thinks that consumers like to take time off work so they can wait at home for service calls, but I don’t think most American consumers would agree with him.

The simple fact is that basic tier encryption would eliminate the need for many service calls. Customers would be allowed to connect and disconnect service without having to wait at home or take time off work.  Admittedly, fewer truck rolls also permit the cable systems to operate more efficiently and focus service calls on more difficult installations.  But to assert that sparing millions of consumers the need to be at home to activate or deactivate cable service isn’t a consumer benefit is either completely out of touch or intentionally misleading – or both.

Ronen also injected a patently false scare tactic – that the TVs which receive basic channels without a set-top box will “go dark.”  Ronen knows that the FCC has already proposed a solution that will ensure these customers will continue to receive the channels they subscribe to by getting free equipment from their operators.

The Bottom Line with Boxee

In the end, Boxee’s disinformation campaign is nothing more than an attempt to distract attention from the fact that there is a simple technical fix that Boxee refuses to implement.  If Boxee included a CableCARD slot in its device, its customers could access encrypted channels without a set-top box.  Rather, Boxee wants cable operators and their customers to foot the bill for a special fix just for them. And if it doesn’t get what it wants, then no cable customers should get the benefits of basic tier encryption.

It’s time for Boxee to stop dealing from the bottom of the deck and for regulators to recognize that when a “competitor” asks for government help to stop the innovation and enhancement of rival services, such claims belong in the recycle bin, not an FCC docket.

To be more technical about it, as industry observer Leslie Ellis put it:

…we’re moving to a world where stuff can be done without set-top boxes, at least as they exist in hardware. Now, it’s set-tops; next, it’s gateways that bridge between set-tops and cable modems, and ultimately, it’s video delivered completely over IP, from the network, to the end devices.

I bring this up because NCTA’s President and CEO Michael Powell sent a letter last week to FCC Chairman Julius Genachowski about these new developments and what they mean for our ability to achieve a fully competitive and innovative retail video device marketplace.

This issue has been discussed for some time, but 2011 has brought a host of services entering the marketplace.  See some of our previous posts:

• Consumers Reaping Benefits of Smart Video Device Revolution
• Connected TV… Here to Stay

All of that was before The Cable Show. As Michael Powell’s letter pointed out, the various demos and panels from our event help show how the cable industry “is providing American consumers with powerful, personal, and portable services and networks that support unprecedented mobility of content to multiple devices both in and out of the home.”

The Cable Show demonstrated that Congress’s and the Commission’s video device goals are already being achieved in the marketplace.  …there is broad-based momentum in the cable industry to deliver cable services to consumers on any device.

Today, consumers have more sources of video programming and content on more devices than ever before, and the choices are only growing through a variety of market-based approaches: smart TVs, iPads and other tablets, TV from the “cloud,” set-top boxes that can combine TV with Internet content, the growing role of home networking and connected devices. All of these approaches are playing a role.

As quoted in this write-up in Multichannel News, NCTA is suggesting that regulatory efforts intended to encourage innovation may instead impede.

“The problem that remains in this marketplace is not the need for a single guiding regulatory prescription,” like the FCC’s proposed AllVid solution, wrote Powell. “The marketplace is at a critical juncture, inviting participants to make major bets and even more major investments in technology to meet rapidly developing consumer demand with rapidly changing technological tools. This kind of innovation is about risk taking. The environment that invites the greatest risk taking is one with the certainty that regulators will not step in and displace new technologies or new investments.”

FOOTNOTE: There was a lot of activity at The Cable Show along these lines, but you get a taste of what’s happening in this area, watch some videos from The Park, such as the demos from Comcast, Cablevision and HBO.

But despite the advanced features that today’s boxes offer, and their broad consumer use, not everyone is a fan of these devices. Washington Post tech columnist Rob Pegoraro apparently falls into this camp and recently wrote a column expressing his frustration with boxes – explaining that “three digital-cable technologies have failed to usher the cable box and its button-strewn remote from most living rooms.”

Pegoraro focused on the cable industry in his column, but did note that other video providers also require set-top boxes, certainly an important point in a competitive marketplace. As I was quoted in a story on the TV Barn blog last year:

If you switched to DirecTV or Dish, you have to have a new box. If you switch to Verizon FiOS or AT&T’s U-verse, you have to have a new box. It baffles me to no end why there are four companies competing with cable and nobody has ever complained that you have to have a set-top box for them.

The Progress of CableCARDs

Set-top boxes are necessary in many circumstances, but the cable and consumer electronics industries have been working for years on providing cable customers with ways to receive service without them. The first approach was one-way Digital Cable Ready TV sets – also known by the unfortunate legal term Unidirectional Digital Cable Ready Products or UDCPs (the history of them was discussed in this post from last year) – which utilize CableCARDs to provide security, ensuring that only paying customers can receive cable service.

NCTA periodically reports to the FCC on the number of CableCARDs that have been issued to customers for use in UDCPs purchased at retail. Last week, we reported: “As of August 31, 2009…there have been over 443,000 CableCARDs deployed for use in retail devices by the ten largest incumbent cable operators who serve approximately 90% of the cable subscribers in the country.” When compared against the cable’s 63 million video subscribers, my math shows that CableCARDs are being used in retail devices by well under one-percent of the overall base (.0008 to be exact).

Some blame cable operators for the low number of CableCARDs in use in retail devices, but that fact is that one-way Digital Cable Ready devices do not support Video-on-Demand (VOD), electronic program guides (EPGs), and other two-way services that cable customers want.

As the FCC has recognized more than once: “market demand for UDCPs is not strong”; “it is apparent that consumers have not shown significant interest in one-way devices, which cannot access features such as EPGs, VOD, PPV, and other ITV capabilities provided by cable operators“; and “many consumer electronics manufacturers have discontinued the manufacture of UDCPs because consumers are more interested in advanced two-way functions that UDCPs by definition cannot perform.” (Also, see this related article.) In fact, with the exception of certain TiVo digital video recorders, the consumer electronics industry isn’t building one-way Digital Cable Ready devices for the retail market.

There is another explanation for the low level of consumer interest in these devices. As Consumer Reports said as far back as its November 2006 issue, it makes no sense for most consumers to buy DVRs (“cable ready” or not), let alone “Plain Jane” digital boxes, when they can rent them from their cable company for a low, government-regulated monthly fee and exchange those boxes for more advanced models when they become available. Multichannel News’ Todd Spangler also recently examined the question “Why Haven’t CableCards Taken Off?”

The next step in cable’s set-top box evolution was the development of tru2way, which is a middleware stack that is being installed in cable headends nationwide and allows retail devices to access cable’s two-way services. Last year, the six largest cable operators concluded a landmark agreement with major consumer electronics companies (including Sony, Panasonic, Samsung, LG and Funai Electric (which trades products in the United States under the brand names Philips, Magnovox, Sylvania, and Emerson)) laying the foundation for development of two-way digital cable ready devices which would not need a set-top box to access cable’s two-way services. Those tru2way devices also use CableCARDs for security.

Panasonic has been selling, and cable systems are supporting, tru2way digital TVs in three major markets: Atlanta, Chicago and Denver (as we reported last year).

Clearing Up QAM

Another method for cable reception without a box is through the use of a device with a built-in QAM tuner. QAM (pronounced “kwam”) stands for quadrature amplitude modulation and is a method for putting digital signals onto a carrier so that it can travel from your local cable company to the home.*

You might recall a FiOS commercial from a few years ago where the tech rattles off a bunch of technical stuff and then refers to “true QAM.” Cable systems have been using QAM for years because it’s faster and more efficient than some other digital modulation techniques.

But there is a catch to consumers counting on QAM tuners. Currently, some QAM signals are sent in the clear and others are encrypted, but, increasingly, channels are being moved to the digital tier and are being encrypted. In some circumstances, with the right TV, you could receive the “clear QAM” signals, but you’d need a set-top box or a CableCARD-enabled device to receive the encrypted signals.

Pegoraro referred to “Hollywood’s paranoia about shows being shared online” and said that “this encryption doesn’t stop shows from being shared online.” I think that’s the point: Not all programming is encrypted at this point and it’s fairly easy to digitally copy a television program (or movie) and distribute it online. The proliferation of content online will require a level of confidence by content owners that their shows won’t end up being widely digitally bootlegged.

Protecting channels through encryption also allows cable companies to offer the opportunities to consumers to buy different tiers of service – such as basic, expanded basic and digital, as well as your pick of premium channels – or to select among packages of programming, such as kids, sports and news.

The Correct Approach to Ditching the Box

While the pace of progress hasn’t been rapid enough for some, cable has been leading the way on the development of solutions to serve customers who don’t want boxes. But there are other multichannel video programming distributors (MVPDs) than just cable companies (services like DirecTV and Dish, and telephone company offerings like FiOS and U-verse) and, as mentioned earlier, they also require set-top boxes.

To help achieve a universal “box-free” solution for all providers, NCTA has suggested an “all-MVPD” solution. Under this scenario, the consumer could buy a TV set or other device at a retail outlet and successfully connect it to any MVPD without a set-top box from that provider.

I’ll quote from a 2008 NCTA letter:

Verizon also expresses support in its [July 31, 2008] ex parte for an “all-provider” plug-and-play solution (i.e., a solution that uses a standard network interface that is platform agnostic). This is something that NCTA and traditional cable operators spent more than a year advocating. In the summer of 2007, the cable industry asked the FCC to encourage an all-provider solution, and actively sought support for the concept from AT&T, Verizon, and satellite providers during the summer and fall of 2007, including numerous high-level contacts among the parties. Unfortunately, AT&T, Verizon, and satellite all declined cable’s invitation, and cable proceeded with its plan to negotiate and conclude the Two-Way MOU with major consumer electronics and information technology companies. When we announced the MOU in June, 2008, we specifically renewed the cable industry’s invitation to collaborate on a voluntary all-provider solution. We are pleased that Verizon is now calling on the Commission to encourage all parties to work towards that goal.

More recently, TiVo has supported an “all-MVPD” solution as well. We would welcome further discussion of this concept.

Undeniably, there are challenges to providing service without a traditional set-top box. It involves issues of technology, regulatory policies, innovation, and consumer choice. For those who are deeply interested in getting rid of the box, we suggest that effort should focus on developing an effective solution for the reception of multichannel video that would work for all consumers and all providers.

As a public service, I’ll attempt to unpack what he wrote.

First, let me point out that NCTA has been saying for some time that there are two “digital transitions” – the digital TV transition for full-power, over-the-air television stations, and the cable industry’s efforts to transition analog channels onto digital cable tiers, in order to reclaim bandwidth and serve consumers with more and better services. This second transition is more of a “digital migration,” and it has been under way for many years now. See this earlier blog post for more details on the differences between these two transitions.

The article starts off correctly distinguishing between the two efforts, but then he makes the claim that cable’s transition “could leave up to 100 million TVs in the dark, unable to display any cable TV channels at all without adding extra equipment.” He further claims that this gathering threat will come to pass eight months from now: “Come February, though, millions of TVs will no longer be capable of displaying cable TV channels without new equipment…”

Having sounded the alarm, Sullivan then pulls back on the timing. First, he writes, “But the death of cable analog television is arriving a bit more stealthily, and more piecemeal.” And pretty soon he makes it clear that the change will be gradual:

…it’s unclear how the industry can turn off analog service without leaving millions of customers in the dark.

The cable transition will not be as brutal as the end of the analog broadcast, which will hit with one fell swoop in February.

Instead, cable operators will decide on their own when to make the switch. So far, some services – such as Time Warner – have indicated that its analog signal won’t be shut down any time soon. Robyn Watson, spokeswoman for the company, said its 3 million analog “basic cable” consumers won’t see any changes in service.

The rest of the article continues to mix concerns about the broadcast transition and the cable one, suggesting that something nefarious is afoot. The fact that cable’s transition has been going on for some years (since the late Nineties), and is anticipated to continue for several years beyond next February, appears to be almost entirely overlooked.

The transition to all-digital cable systems will provide a range of benefits for cable customers, such as access to many more channels, including high-definition offerings. Freeing up bandwidth will help with the deployment of DOCSIS 3.0, the ultra fast “wideband” Internet access that will deliver speeds of over 100 Mbps. In addition, new digital set-top boxes will deliver DVR capability, better interactivity, and improved technical quality. For consumers who don’t want a set-top, the coming deployment of tru2way technology, supported by recent progress in completing deals with television set manufacturers, will move us towards a world where consumers can elect to not have a box.

As pointed out already in the article, the cable industry is working hard to comply with the requirements from the FCC for continued carriage of broadcast TV signals in analog.

It’s important to note that DBS was an all-digital platform from its inception, which means that consumers have always needed a box on every TV for reception. AT&T’s U-verse multichannel video service has also been all digital since inception, and Verizon’s FiOS TV service is undergoing the exact same digital conversion, on a market-by-market basis, that the writer finds so sinister. Therefore, it’s amusing to read reader comments under the story expressing anger about having to take a box from a cable operator, complete with threats to go to the telcos or DBS – who will then require you to take a box.

UPDATE: Michael Willner also touched on this issue in a post today, in regards to the migration of premium channels from analog to digital on Insight’s Louisville system.

The broadcasters’ transition is about digital television, where the picture and sound information is expressed in the form of data bits representing, for example, a “1” or a “0”. You can think of this transition as analogous to the transition from vinyl records to CDs.

Cable operators are also transitioning some analog channels onto digital cable tiers in order to reclaim space. With digital cable, compression technology is used to allow more than one program service to be carried in the bandwidth space normally required for one analog program service. Typically, the signal is sent to the home, decompressed in the set-top box and changed into analog signals for display on the television. You can think of this transition as something like the manner in which you can compress large files for easier downloading, and then you decompress them for viewing.

Your local TV stations are offered in hi-def formats on digital cable, but digital TV and digital cable are two different animals.

As we’ve discussed before, part of the DTV Transition will require that you get a digital-to-analog converter box to continue watching full power over-the-air broadcast TV stations on an analog TV set. If all your TV sets are connected to cable, you won’t need to do anything to continue to watch your local broadcast stations.

However, some popular cable channels are only available on cable’s digital tiers. In addition, other popular cable channels may be moving from the analog tier to the digital tier because channel space is limited. In these circumstances, you may want to move up to digital service from your cable company — and a digital cable set-top box. But don’t confuse cable’s digital migration with the broadcasters’ digital TV transition.

Here’s one example. Earlier this week, on a Public Radio program dealing with current technology issues, that subject of the coming DTV transition was discussed:

Host: How do I make sure that my TV doesn’t go blank on February 17?

Guest: What you have to do is look at how TV gets to your TV. If you subscribe to satellite or you subscribe to cable, and in either case you have a box, some kind of tuner or digital video recorder connected to your TV, you don’t have to do anything. Any digital conversion that is necessary is done in that box. At worst, your cable or satellite company will ship you a new box at some point. The tricky issue is people who either…

Host: Have cable without a box.

Guest: Yes. They have a cable ready TV and they just subscribe to basic or expanded basic so that they’re used to the joy of watching TV with only remote control on the coffee table. They may need to get a box where they didn’t have one before because the cable companies – and this is actually separate from the digital transition in a certain sense – they only have to keep providing a very basic set of channels in an unencrypted analog form that you can get with your cable ready TV.

Here’s another example: In the latest edition of the Bose newsletter, there’s the same error. It says that you’ll need to do nothing for the transition if “You subscribe to digital cable TV.” Further down, it states that it is a “Myth” that cable subscribers are ready for the changeover, suggesting that cable subscribers who receive analog service will be left out.

The source of the confusion seems to be that two topics are combined. It’s important to remember that this DTV Transition is only for the over-the-air broadcast industry. Cable is going through its own “digital transition.” Because of that word “digital,” the two often get confused.

What will cable subscribers need to do in preparation for the DTV Transition next February? The current information is that cable customers – whether or not they have a set-top box – will still be able to watch television after Feb. 17, 2009. At the same time, the cable industry has been moving towards a digital platform; as part of that, sometimes operators will move channels from the analog tier to the digital tier, which then needs a digital set-top box for reception.

Bottom line: If you have cable service, you should be fine, with the set-top box as an irrelevant factor. However, if you want to get access to cable’s newer services, such as hi-def TV or digital video recorders, or if you want to see the hundreds of programming choices available through the digital cable platform, you’ll need to have the appropriate set-top box. You can avoid having a box by purchasing a Digital Cable Ready television, but the current sets are only one-way, which means you won’t have access to interactive services. However, the tru2way standard will address this issue.

As always, you can visit the Get Ready for Digital TV site for more information (también en Español).