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Digital Cable Drives Set Top Net Access Market
The set top box market has sputtered this
year, but Internet access and other features are making set tops more versatile
and more attractive to providers and subscribers. In addition to browsing capabilities,
Internet-capable set tops can provide e-mail, chat, t-commerce (television commerce),
enhanced programming, and selected Internet content in "walled gardens"
tailored for TVs. The Internet-enabled set top box market will grow from 6.9
million units in 2000 to over 74 million in 2005, according to Cahners In-Stat/MDR.
In-Stat/MDR recently analyzed the five major set top market segments:
- Digital cable
- Direct Broadcast Satellite (DBS)
- DSL
- Digital Terrestrial TV (DTT)
- Video game consoles
Internet access via set top boxes is still a relatively new feature with manufacturers
in each of the five segments trying to find the best combination of hardware and
software to appeal to consumers. The digital cable segment is the most promising,
at least in the North American market, because cable transmission networks already
provide high-speed data service and support streaming video.
"Cable is, and will continue to be, the innovation leader in the Internet
set top box market," says Cindy Wolf, In-Stat/MDR research analyst.
As cable operators intensify their analog to digital technology conversion,
more and more subscribers will use digital set tops to access the Internet as
well as to receive more video channels and cable telephony service. Cable operators,
especially in the United States, are highly motivated to deploy digital set
tops to as many subscribers as possible to support new revenue-generating services
such as e-commerce and video-on-demand.
Most cable providers are leaning toward the "walled garden" approach
for Internet access. Providers believe that this strategy, limiting Internet
access to pre-selected sites, is more compelling to users because Web pages
viewed on TV often do not support software applications such as Java and Flash
and are difficult to navigate with a remote control. The walled garden strategy
includes modifications to selected Web pages for the TV. Consumers also seem
to be most interested in features that enhance their TV experiences rather than
replace them, Wolf says.
Motorola (formerly General Instrument) and Scientific Atlanta, which together
own 75-85% of the market, have dominated the cable set top market for many years.
A few challengers-notably Pace and Pioneer-have emerged in the digital market
in the past year, however, and are taking a bite out of the duopoly's market
share.
Internet-ready DBS set tops will achieve the most success over the next few
years outside of North America, particularly in Europe, but not gather strong
momentum until 2003, Wolf says. Delivering DBS Internet service downstream is
easier than doing so by cable because it can be done over an entire continent
with virtually the flip of a switch instead of by a neighborhood-by-neighborhood
rollout. Therefore it's easier and cheaper to serve rural areas with DBS than
with cable. The drawback to DBS Internet service is that upstream communication
must be made by modem with the most common upstream connections at 56K with
analog modems. Cooperation between box manufacturers and telcos to use DSL modems
instead could provide opportunities to avoid this in the future, however.
By 2005, In-Stat/MDR forecasts that video game set tops and
DSL set tops will be the top worldwide segments. The widespread popularity and
new models with souped-up components coming on the market explains the growth
for the video game sector. The DSL segment is fairly small today, though, and
will take at least another year to achieve notable momentum
This research highlight is drawn from the Cahners In-Stat Group
report, Set
Top Box Internet Access: Planting Seeds for a Walled Garden (#ID0106AD),
which gives arguments for both the “full” or limited access via a
“walled garden” approaches to accessing the Internet, as well as insight
into trends affecting each segment. It examines set top box manufacturers, connectivity,
software providers, and presents a segmented worldwide forecast through 2005.
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