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.

What this means is that you can buy a tru2way TV set (initially offered in 42-inch class and 50-inch class sizes), get it set up on your Comcast service, and receive  two-way services without a set-top box.

Tru2way technology is being used to create a common software platform that will enable cable companies, consumer electronics companies, content developers, network programmers and others to extend interactivity to the TV set and other kinds of devices. The new Panasonic VIERA HDTVs are built with tru2way technology inside enabling consumers to access two-way digital cable programming, like video on demand, without a cable operator-supplied set-top box. Panasonic and Comcast have worked together to lead the development and deployment of tru2way technology and related products which are based upon specifications developed by CableLabs®, the industry’s research and development arm.

Comcast customers in the Chicago and Denver areas will be the first in the U.S. to have access to tru2way digital cable service with additional cities expected to go live in the coming months. The tru2way VIERA HDTVs will be available in the Chicago area at Abt Electronics in Glenview and at Circuit City locations and at Ultimate Electronics and Circuit City stores in the Denver area.

Let’s step back in time to January. I wrote about the launch of the tru2way brand and Panasonic & Comcast’s announcement of tru2way products. In May, I posted a video introduction to tru2way, shot at the CableNET exhibit during The Cable Show. in June, I posted about CableCARDs and tru2way and how those two technologies differ and overlap.

For example, I see tru2way described as “CableCARD 2.0,” which is cute but not technically correct. I see questions about when there will be a “two-way CableCARD,” when in fact all CableCARDs are capable of accessing two-way cable services such as video-on-demand. I see people expressing expectations that the introduction of tru2way means that CableCARDs will go away, when in fact tru2way devices require use of CableCARDs.

It’s great to know that so many people are passionate about these issues, but the misinformation is a little frustrating.

I thought I would back up and walk through a very brief history of CableCARDs and tru2way, so as to hopefully clear up this confusion.

The Beginning of CableCARDs
In the Telecommunications Act of 1996, Congress sought to foster competition in the set-top box market by enacting a new provision of the Communications Act, section 629, whose purpose was to make set-top boxes available for retail purchase. Specifically, that provision called on the FCC to adopt rules to ensure the commercial availability of “navigation devices” (e.g., a set-top box). But you couldn’t jeopardize the signal security of the provider (e.g., your local cable operator).

The FCC determined that this could be accomplished by separating security (i.e., conditional access) from the function of the device. The security functions would instead reside in a separate security module that you would get from your local provider. These security modules were first known as Point-of-Deployment (POD) Modules and later were named CableCARDs.

An FCC order in 1998 required the cable industry to develop PODs which it did by 2000, but, for a variety of reasons, there were no retail devices built with which the PODs were intended to work. By December of 2002, a “Plug & Play” agreement was reached between major cable operators and major consumer electronics companies setting the stage for the release of the first wave of devices – such as digital “cable ready” television sets – which would work with CableCARDs. These DTVs could be sold (and moved) anywhere in the country and allowed cable subscribers to receive one-way digital cable services without the use of a set-top box by obtaining a CableCARD from his or her cable operator. CableCARDs allowed cable customers to view encrypted digital programming after being authorized to do so by the cable operator.

That “Plug and Play” agreement took effect in the Summer of 2004. As of August 2004, there were approximately 700 CableCARDs deployed by the top 10 MSOs. NCTA just reported new numbers to the FCC and we found that there are 372,000 CableCARDs that the top 10 operators have supplied to date to customers who requested them for Digital Cable Ready TV sets or other CableCARD-compliant products, such as some TiVo digital-video recorders.

In addition, as a result of the FCC’s “integration ban” requiring that cable operators use CableCARDs in their own leased set-top boxes, we just reported that major cable operators have deployed more than 6.2 million digital set-tops with CableCARD conditional-access systems since July 2007.

One-way versus two-way
It’s good to stop here and point out that the 2002 agreement was an agreement for building devices to access one-way cable services such as linear (e.g., TNT, ESPN) and premium (e.g., HBO, Showtime) digital channels, including high-definition channels, but not two-way (“interactive”) services such as video-on-demand.

The reasons for this are long and involved and include technical, business and legal issues, but the short answer is that the cable and CE industries decided to adopt a one-way agreement as a first step to a “two-way” agreement. But agreement on a two-way agreement proved to be much more difficult and complex than a one-way agreement.

In particular, two-way services involve high-value content and we have three affected industries: cable, content providers (such as studios) and consumer electronics manufacturers. Not all of the companies within each industry have all the same views and not all of these industries have the same views. It’s a hard thing to accomplish.

The Story of tru2way
Now, I need to back up one more time and point out that something else was going on at almost exactly the same time. In the fall of 1997, came the beginning of the cable industry’s OpenCable project. Its mission was to provide a set of hardware and software specifications for the next generation of cable’s set-top boxes and other two-way devices. The software involved was called the OpenCable Applications Platform or OCAP, now known as tru2way. The tru2way hardware and software forms the basis for interactivity in two-way retail devices, as well as cable operator devices, and is used in conjunction with – not as a substitute for – CableCARDs which are still needed to provide access to secure cable services.

These are two separate stories
Now, let’s put it all in context. CableCARDs came from a government mandate to separate security from “channel surfing” functionality in set-top boxes, making them available at retail. The CableCARD itself can handle one-way or two-way communication, but the first Digital Cable Ready sets were one-way, because that’s all that was negotiated.

Meanwhile, tru2way comes from a decade of development and was focused on developing specifications that would allow interactive services to be deployed – and interactive services are two-way by definition. Two-way Plug & Play negotiations have been going on for some time, since the one-way agreement was finally settled.

In the meantime, the tru2way specification emerged as an option for building two-way Digital Cable Ready devices. Major CE companies such as Panasonic, Samsung, LG, and Sony have agreed to use tru2way technology to build two-way Digital Cable Ready devices (IT companies such as Intel have also endorsed tru2way). And, as noted, tru2way devices still require a CableCARD for security.

After all, without such security, you can’t have content. Cable operators typically have contracts in place that they have to guarantee conditional access and other limits on unauthorized distribution.

So, there you go. It’s understandable that there’s confusion over CableCARDs. After all, customers with Digital Cable Ready devices represent probably less than 1% of cable customers. But I hope this post will serve to bring some clarity to the issue. If anyone wants a more detailed history, the best one I have seen can be found here.

In his address, entitled “Cable’s Broadband Platform: Innovation for the Consumer,” he is expected to challenge the notion that there is a rivalry between innovation taking place at the edge of or in the network. In contrast, he will discuss the notion of an interactive “Internet ecosystem.” He will also discuss new developments in tru2way.

His speech will be webcast through this link [Archive available at this link for 6 months].

UPDATE: It’s also being streamed at C-SPAN’s site. The text of the speech has been posted at NCTA’s website.

I wanted to capture something about tru2way, since that set of technical specifications has been in the news lately. This video attempts to show that there are three key parts to tru2way: consumer electronics, such as TV sets or other devices; applications, which can be written once and then run anywhere; and cable operators, who would then support tru2way on their networks.

Here’s some of the coverage:

• Sony Embraces tru2way
• Sony, Cable Bury Two-Way Hatchet
• Sony signs up to support tru2way
• Sony to Build ‘Tru2way’ Interactive TVs
• Sony + Tru2way = No More Set-top Boxes?
• Sony commits to ‘Tru2way’ TV

For more on tru2way, watch this CNBC interview with CableLabs’ President & CEO Dick Green that took place at our recent annual event The Cable Show.

Saving the best for last, the event was closed out by New Zealand’s fourth most popular guitar-based digi-bongo acapella-rap-funk-comedy folk duo Flight of the Conchords. As seen in the photo, Bret McKenzie and Jemaine Clement showed off their integrated media center, which consisted of a disposable camera, taped to a cell phone, and then thrown on top of a TV equipped with rabbit ears (antennae augmented with foil).

They closed by singing their hit song of seduction, “Business Time.” You can see a video of them performing that song on another occasion.

UPDATE: I am reminded that they then added a toothbrush to their converged device by placing a toothbrush on top of the TV as well.

UPDATE #2: You can now see the video of their performance by clicking here and then fast-forwarding to the last 12 minutes.

Following that experience, the cable industry reached out to the consumer electronics industry. He said that they heard complaints that cable was a regional business that operated in silos, that cable set-top boxes are closed and proprietary, and that, in general, cable made it too tough to innovate and to create products and services that could be sold in the retail environment. This morning’s address seemed a valuable pay-off to those efforts, with Roberts describing cable as a real partner to consumer electronics and retail.

He went on to describe the latest stage of his company’s development: Comcast 3.0. As part of the new Comcast, he said they were committing to a series of issues:

• Having the best fiber optic networks and IP infrastructure
• Delivering superior experience in hi-def and interactive
• Providing new levels of excellence in customer service
• Being a leader in innovation by providing “products and services that are converged, plug-and-play, user-friendly, and most important, easily open for third-party innovation.”

Many in the cable industry have debated over whether content is king or distribution. Roberts said that today the answer is clear: The consumer is king. The best way to serve consumers is by offering a wide array of choice.

He went on to profile such new services as wideband, Fancast, Project Infinity, the AnyPlay portable DVR, and the SmartZone communications center. You can read about the details elsewhere, but the important feature was that Comcast was preparing to offer more video that could be consumed in a more flexible fashion, more bandwidth and more features on its communications services. In a word: more.

On May 8th of last year, during NCTA’s annual Cable Show (also held in Las Vegas), Roberts demoed a DOCSIS 3.0 Cable Modem capable of delivering 160 Mbps using its “channel bonding” technology. You can see a video of that demo here and, as a sign of how far we’ve come over the last decade, you can also see Roberts demo a high-speed cable modem in 1996. Look at how fast the photos download! Check out the White House website!

Roberts began with a trip down memory lane. He told of a walk through the CES show floor he took with Glenn Britt, CEO of Time Warner. They were surprised to see the proliferation of devices that leverage cable’s platform, yet cable had virtually no presence at the event.

Cable, through CableLabs, began to reach out to the consumer electronics industry. As cable modems became available at retail, cable broadband took off.

Today we’re announcing the age of the closed proprietary set-top box is behind us.

Today Cable is employing a similar approach to TV and this week Panasonic and Comcast announced <tru2way>, the open standard for cable. This year <tru2way> will be rolled out to cable systems across the country and consumers will be able to purchase televisions with <tru2way> that plug directly into the cable network with no set-top box, no extra wires, and access to cable’s interactive services. <tru2way> offers an open platform for development with open APIs and a Java based system.

<tru2way> will be supported on MS Media Center PCs as well with all cable content, including program guide and OnDemand, accessible through the Media Center system.

AnyPlay

Roberts introduced Panasonic’s Toshihiro Sakamoto to introduce AnyPlay – a new set-top box with removable DVD and DVR capability. AnyPlay is a take and go device that connects to a docking station when working as the set-top box, but can be lifted out and taken as a portable media player for watching media at home or on the road. The device is about the size of a portable DVD player, but has DVR functionality embedded as well.

Roberts recognized his father, Richard Roberts who originally founded Comcast in 1963 as a 1,200 subscriber system in Tupelo Mississippi, offering 5 channels (twice as many as were available over the air).

The original premise then, as now, is “choice sells”.

Comcast began offering On Demand video services with 250 viewing choices. That increased to 1500 in a year. Now more than 10,000 viewing options are available every month. Comcast is now the largest provider of OnDemand in the world. 90% of their content is free. Customers using OnDemand have accounted for 6,000,000,000 views since launch – twice the number of iTunes downloads and six times more than NetFlix.

What’s more is OnDemand is only available to 15 of 25 million Comcast homes, but they have plans to roll out to everyone.

Beyond that, however, Comcast announced plans to provide 1,000 HD choices in every HD home by the end of 2008 (versus 150 for DirectTV). 2008 also begins rollout of a new system architecture, with 6000 movies on demand, 3000 in HD.

As they continue to grow Comcast is launching Project Infinity. Project Infinity is expected to scale well beyond 10,000 OnDemand options “to provide every piece of video content that a producer wants to put on TV – every movie, any TV show, any conceivable kind of video… it’s a content hungry consumers dream. You’ll never want to get off the couch.”

Comcast is also changing the communications experience. As the 4th largest phone company in America, Comcast serves more then 4 million customers. They’re rolling out new features like caller ID to the TV and integrated messaging on the web through a new feature called SmartZone.

SmartZone – introduced, via video, by Dennis Miller – integrated e-mail and voicemail in one inbox and integrates with another Comcast service called Fancast – a video and entertainment portal.

Ryan Seacrest joined Roberts on stage to introduce Fancast.

Fancast is not just another entertainment site. It’s a personal experience site with 3,000 hours of streaming videos, 10,000 movie trailers, and 11 million pages of entertainment. It provides personal recommendations based on your entertainment consumption (like Amazon). and it allows you to remotely control your DVR to record programs you’re looking at online.

Roberts used the discussion of Fancast to demonstrate cable’s new DOCSIS 3.0 cable modem standard with speeds in excess of 160 Mbps planned for rollout this year. Seacrest and Roberts downloaded a 2 hour HD movie in 4 minutes during the presentation – a download that would have taken 6 hours via DSL and 7 days on dialup.

After a couple of questions from audience members, Roberts introduced HBO’s Flight of the Conchords for a performance.

The presentation was well received by the audience including much applause for the new Comcast services, wideband cable modems and <tru2way>. We’ll try to get video of the event and put it online for you.

Update: Comcast has the video (minus the performance by Flight of the Conchords) here. And you can get a copy of the prepared text here.

2nd Update: New version of the video available, which includes Flight of the Conchords.

Why the name change?

The tru2way brand was developed by the global brand consulting firm Siegel + Gale, in consultation with the Cable & Telecommunications Association for Marketing (CTAM), the National Cable & Telecommunications Association (NCTA), and marketing and technology representatives of a variety of major cable providers.

Which basically means that, based on talking with consumers, it was felt that a new name would help with branding. Manufacturers can then make products under that name.

For example: Panasonic and Comcast Announce Products With Tru2way(TM) Technology. Specifically, this means that you’ll be able to soon be able to get a portable DVR which you can take on the road, watching those TV shows you recorded.