TiVo filed a cri de coeur (PDF) this week with the FCC, saying that its entire business is at risk of being shut down by the cable industry. In contrast to VCRs, which were a "thriving and intensely competitive market" in the 1990s, TiVo is the "only major competitive entrant left standing" in the DVR world.That's no accident, says the company, and it's not the result of natural market forces. Instead, it is largely a function of cable's historical reluctance to open its network to third-party devices in the way that, say, the telephone network was forced to do by the FCC back in the 1960s.
The newest threat: the growth of switched digital video (SDV).
Changing channels
SDV is a bit like IPTV; instead of delivering every channel at once, as traditional cable setups do, SDV sends only the channels currently being watched down the wire. This saves enormous amounts of bandwidth and makes it easy to set up systems with essentially unlimited numbers of channels.
The problem, though, is that traditional hardware tuners like those found in a TiVo box can no longer change channels simply by locking on to the desired station. Instead, the tuning device needs to send an upstream signal to the cable headend, asking it to send the newly requested signal down the wire. Cable companies often do not expose this upstream signaling functionality to third-party devices in a simple way. The result: cable's own set-top boxes can change channels on SDV networks, but TiVo's boxes cannot.
For years, this was a minor issue, but not anymore. As TiVo notes, SDV deployments have accelerated recently as cable operators look for ways to save bandwidth and offer more on-demand and HD channels. By the end of 2008, 25 million US homes had SDV cable hookups; by 2009, that number had climbed to 35 million homes.
"It is reasonable to foresee that the majority of, if not all, video programming will be SDV in the not too distant future," says TiVo. Without "immediate FCC action, no market for competitive video devices can emerge."
It wasn't supposed to be this way. The FCC has a mandate from Congress to open the market for cable navigation devices to third parties. The result was CableCARD, which did allow one-way access to encrypted cable video streams, but could not deliver program guide information, video-on-demand, or pay-per-view TV.
But with the change to SDV, CableCARD becomes almost worthless. TiVo's current models support CableCARD, but with no way to change channels, existing devices simply take up space in the living room. The cable industry wants TiVo to adopt its new "tru2way" middleware platform, but TiVo wants a "simpler and less restrictive approach." In addition, tru2way has basically gone nowhere since it was announced, while SDV is here today and affecting existing TiVo devices.
The cable industry's demand that TiVo adopt tru2way in order to do something as simple as change channels is, in TiVo's view, "no less an evasion than was the Bell System's claim that competitive telephones would be, ipso facto, incompatible with system security."
That decision, the famous Carterfone ruling of 1968, paved the way for consumers to attach any lawful device to the phone network—opening up such innovations as the fax machine, the modem, and the answering machine. The FCC has publicly hoped that such innovation would come to cable but to date has had extremely limited success in opening the market.
What TiVo wants is the ability to control SDV channel changes using "broadband signaling"—essentially using the Internet to interface with the headend. Cable doesn't like this idea, but TiVo points out that the industry's new "TV Everywhere" Internet video initiative is essentially the same system, putting cable content on the Internet and using existing Internet authentication mechanisms. Why would giving TiVo such capabilities be any more problematic?
Of course, TiVo could get everything it wants from the FCC and the company would still be facing problems. While robust third-party markets in DVRs and navigation devices might not currently exist, the DVRs coming from operators like DirecTV have gotten better and better, and online services like Hulu and Epix are slowly making DVRs themselves less essential.
Source: Arstechnica.com
