• Cable/CE/content industries work on second phase of CableCARD agreement.

• Cable operators face mandated conditional access separation in set-top boxes.

Competition for satellite television operators, who had offered HDTV from the beginning, and fears about a possible mandate from the FCC, served as a wake-up call to the cable industry to begin ramping up HDTV services over the new broadband pipelines afforded by recent upgrades to digital cable platforms.

The news was a breakthrough for the CE and terrestrial broad-casting industries, which had been at odds with some cable operators for their apparent lack of interest in carrying HDTV channels. All of the top 100 markets – and in 184 of the 210 cable markets in the nation – at least one cable operator now offers HDTV. In all, the total number of markets in which at least one cable operator is offering HDTV is 177 of the 210 DMAs nationwide, according to the National Cable & Telecommunications Association (NCTA). See www.NCTA.com for the latest cable TV statistics.

Digital Cable Subscribers Multiply:
In order to receive high-definition programming from a cable operator, a subscriber must sign-on for digital cable service. At the end of 2004, more than one-third of U.S. cable customers – approximately 24.3 million – subscribed to a digital cable service. To receive HDTV, those customers are required to add a special HD-capable converter box or use a new digital-cable-ready high-definition television set (see CableCARD section).

Digital cable delivers both standard and high-definition images in bit stream form using either 64 or 256 Quadrature Amplitude Modulation (QAM), which was determined to be the most bandwidth efficient system within closed cable pipelines. The ATSC digital terrestrial broadcast format used the 8-Vestigitial Side Band (8-VSB) modulation format, which was deemed superior for over-the-air broadcasting. When carrying terrestrial broadcast channels, local cable operators convert the 8-VSB signals to QAM.

Since January 2003, cable’s deployment of HDTV service has increased nearly 140 percent. In addition, the amount of cable HD programming has increased steadily, with 17 cable networks now offering HD programming during some or all of their network schedules, in a broad range of genres including movies, sports and general interest.

Cable Interoperability Agreement Reached:

In September 2003, the FCC took a major step in the DTV transition by adopting rules for base-level digital "plug-and-play" cable compatibility. The rules make it possible for consumers to plug their cable directly into their DTV set without a set-top box (STB) and receive both basic and premium cable channels. The approved standard provides for an integrated one-way-only digital cable television receiver. This would not enable such features as video-on-demand (VOD), return path of the cable system and the use of the electronic program guide (EPG) services provided by the cable operator.

Consumers will have to obtain a so-called CableCARD (formerly known as a point of deployment or POD card) from their local cable operator, which is inserted in the TV to unlock scrambled premium content. Consumers will still need a STB to receive two-way services, such as video-on-demand (VOD), impulse pay-per-view (PPV) and cable operator-enhanced EPGs.

CableCARD­enabled Devices Proliferate:
With the expansion of the FCC’s digital tuner mandate, the percentage of so-called digital cable ready TVs (digital sets equipped with CableCARD conditional access slots) is expected to ramp up significantly in 2005. That is because many manufacturers of television sets (particularly large screen models) have opted to include CableCARD slots in sets at the same time as the add ATSC tuners.

By the 2004 holiday selling season, an estimated 1 million CableCARD-equipped digital television sets were scheduled to be in the pipeline ready for sale to consumers. As of late 2004, 60 digital TVs from 11 manufacturers had been self-verified or CableLabs-verified to comply with the uni-directional CableCARD test suite.

Less prevalent were the numbers of CableCARDs distributed by cable operators to support the new devices. Cable operators must supply CardCARDs to subscribers in their markets who have purchased digital cable ready TVs. But cable operators were less than eager to promote the capability, holding out instead for the delivery of bi-directional products that would support their ancillary video-on-demand services. In early 2005, 25,000 one-way CableCARD-enabled products had been purchased by cable subscribers, according to testimony from cable industry executives.

Bi-Directional CableCARD Standard Sought:
Currently in discussions is the next phase of the plug-and-play system, which is a bi-directional standard that would enable two-way services, such as navigational guides, on-demand video ordering and other interactive applications. Some expected an agreement on two-way cable plug-and-play technology to come in 2005, leading to the first bi-directional cable-ready fully integrated DTVs in 2006.

To help speed the development of interactive digital cable-ready devices, some manufacturers reached initial individual licensing agreements with Cable Television Laboratories (CableLabs), a standards development and licensing body for the cable television industry. These early agreements grant intellectual property rights required to build interactive devices that are in compliance with CableLabs’ OpenCable hardware and software specifications. The agreement is known industrially as “CHILA” — the CableCARD Host Interface Licensing Agreement. (The agreement was known formerly as “PHILA,” for POD Host Interface Licensing Agreement; when the “POD” moniker was shifted to the more consumer-friendly “CableCARD,” the license name was adjusted.)

At the heart of the Samsung/CableLabs agreement is the OpenCable Applications Platform, or OCAP, which is middle-ware software that enables the developers of interactive television services and applications to design products that run successfully on any cable television system in North America. OCAP will serve as a common software layer so that all cable services will run on all devices. Although it is technically possible for cable providers to host applications from program networks without OCAP, it is a less-than-ideal path because programmers would have to port applications separately to dozens of proprietary CE or set-top operating systems.

FCC Adds Stipulations to Agreement:
At the urging of broadcasters, the FCC modified an earlier standard agreement between the consumer electronics and cable industries by requiring all DTVs labeled as "digital cable-ready" to include an over-the-air DTV tuner.

The FCC order also barred all multi-channel video programming distributors (MVPDs), including satellite TV providers, from using selectable output control with their services. This would prevent the MVPDs from reducing the resolution of broadcast programming (or "down-resing") over unprotected broadband analog outputs, while limiting transmission of high-definition signals to copy-protected digital interfaces, which were not included in most early HDTV-capable television displays.

The FCC said it would seek further input before addressing down resolution of non-broadcast programming. In the interim, MVPDs that plan to down-res non-broadcast programming are required to notify the FCC at least 30 days in advance.

Under the copy protection encoding rules adopted by the FCC, there are no restrictions on copying broadcast TV. Consumers also can make one copy of basic and extended basic cable service, but they can not copy pay-per-view or video-on-demand material.

Cable Operators Deliver New Boxes:
Beginning in April 1, 2004, cable operators were required by the FCC to supply, upon consumer request, HDTV boxes with functional IEEE-1394 (Firewire) connectors, and by July 1, 2005, all HDTV set-top boxes are required to include a DVI or HDMI 74 interface.

FCC Assigns Digital Cable-Ready Terminology:
Citing the inability of all relevant industries to reach a consensus, the FCC in 2001 issued its own set of DTV nomenclature so consumers can judge a product's level of interoperability with cable TV signals and equipment. The FCC specified three categories for cable-ready DTVs including:
• Digital Cable-Ready 1 - Devices receiving analog, digital basic and digital premium cable programming.
• Digital Cable-Ready 2 - Adds the IEEE-1394 digital interface connector to digital cable-ready 1 devices
• Digital Cable-Ready 3 - DTV sets that decode and display digital cable along with DTV broadcasts and interactive services, although no IEEE-1394 connector is specified.

Conditional Access Separation Required in 2006:
Looking to open the market to competition and innovation in the digital cable converter space, the FCC ruled that by July 1, 2006 cable operators are required to separate conditional access systems from their set-top decoder boxes. This effectively would force cable operators to supply digital cable boxes with CableCARD slots, and would better enable third-party manufacturers to sell cable set-top decoding equipment that will be compatible with any digital cable service across the country. The deadline also would provide an incentive for cable operators to work more aggressively with other industries in arriving at a standard for bi-directional digital cable ready capability. However, the National Cable & Telecommunications Association and cable operations have appealed to the FCC to drop the requirement, citing ample market competition.

Looking ahead to the deadline, cable operators have aggressively marketed bi-directional digital cable boxes without CableCARD slots. These boxes would be grandfathered for continued use after the July 1, 2006 deadline.

Cable Reaches Digital Carriage Agreement with Public TV:
In early 2005, the nearly 400 public television stations across the country reached an agreement with the NCTA and the Association of Public TV Stations to get digital cable carriage, including high-definition and multicast channels. The agreement was for 10 years, with 10-year renewals. Cable operators will carry up to four multicast channels of stations and their HD content after the transition. During the transition, at least one public TV station in a market would get carriage. The agreement opened that possibility that many public TV stations will return their analog spectrum voluntarily well before any mandated hard cut-off date.

Cable Uses Bundled Service Approach:
To better compete with satellite TV providers and telephone companies that are adding video service packages, many cable operators this year will add set-top boxes that incorporate multiple HDTV-capable tuners, large hard disk drives, easy-to-navigate graphical user interfaces, digital cable modems and voice–over-IP telephony services. The equipment will enable subscribers to perform multiple tasks using easy-to-navigate menus on their connected TV screens. Cable operators hope subscribers find the convenience of all-in-one services and equipment compelling enough to drop telephone and digital satellite services.  

Cable HDTV Programming Expands
• ESPN to launch second HDTV channel.
• Outdoor Channel adds HDTV service.
•  INHD adds Major League Baseball agreement.
• Cable MSOs and CE manufacturers launch HD programming promotions.

ESPN to Add Second HD Channel:
Since March 2003, the Disney-owned cable sports network ESPN has offered an ever-expanding list of major sporting events in high-definition 720p format on its ESPN HD channel. In 2004, it added to its list of live HD game coverage by producing its “SportsCenter” programming in high-definition. In 2005, the network launched ESPN2 HD. The new channel will launch as a simulcast of ESPN2 and is slated to include more than 100 live telecasts in its first year of operation. Scheduled HD events on the channel include: college football plus men's and women's and college basketball, the Little League World Series, Major League Baseball and the National Hockey League. Together, ESPN HD and ESPN2 HD will offer viewers more than 6,000 hours of originally produced HD programming and more than 2,000 original programs, according to ESPN.

Outdoor Channel to Offer HDTV Channel:
Another new cable television producer jumping into the HDTV game is the Outdoor Channel, which plans to launch a new and separate network offering its popular outdoor programming entirely in high-definition. Outdoor Channel 2 HD is set to debut in July 2005 and will offer programming both shared and independent of the existing Outdoor Channel. The Outdoor Channel began HD production during its 2003 fourth quarter and continues to expand its HD library, the network said.

INHD Increases Schedule:
Cable Sports Channel INHD said it will broadcast up to three games a week and a total of 75 games in HDTV as part of its multi-year agreement with Major League Baseball. INHD is available on Bright House, Cablevision, Comcast, Cox and Time Warner cable systems. The INHD schedule will feature a majority of the league's teams, including: the Florida Marlins, the New York Yankees, the Boston Red Sox and the Philadelphia Phillies. The games will be available on affiliated cable systems on an out-of-market basis. Viewers must reside outside the competing teams' territorial broadcast areas to receive the coverage.

INHD also reached an agreement with USA Network allowing INHD to present the first two days of the Masters Golf tournament in HDTV. The HD feed will be carried on INHD, while an SD feed of the HD production will be on USA Network.

Starz Encore Launches HDTV Channel:
At first hesitant about HDTV, Starz Encore began offering HDTV channels in 2004, including a new 1080i HDTV premium movie channel called “Sharper Movies HD”, a high-definition subscription video-on-demand (SVOD) service called “Starz! On Demand-HD” and an HDTV version of its popular Starz! channel, called “Starz! HD.

Bravo HD+ Changes Name to Universal HD:
Although Bravo HD+ launched in the summer of 2003, owner NBC Cable relaunched the service under a new name with an expanded programming lineup about a year later. Universal HD offers the best of NBC Universal's library in HD. Programming includes unedited and uninterrupted films, award winning dramas, series, sports, specials and performance arts programming. Launched in December 2004, Universal HD is currently available to more than 25 million homes in 1080i HD.

TNT­HD Arrives:
Turner Broadcasting launched in 2004 its first HDTV channel, TNT-HD. This channel features series, sports, movies and TNT originals.

HBO Continues to Set HD Pace:
HBO was among the first premium cable TV providers with an HD service (HBO-HD). The company continues to set the pace for the industry by offering the bulk of its film-based programming in full 1080i format, including some of its popular original content.

Showtime Shows HDTV Leadership:
Like HBO, Showtime also was an early pioneer in the delivery of HDTV content. The company continues to increase the amount of native 1080i HDTV content steadily, which represents more than 75 percent of its primetime content.

Cable Companies Court CE Retailers:
In 2003, CableLabs launched a computerized HDTV cable locator service as an extension to its Go2Broadband (G2B) HD system. The G2B HD platform assists consumer electronics retailers in selling cable-enabled HDTV devices and services at the point of sale of an HDTV set. Such MSOs as Comcast, Cox and Time Warner Cable have collaborated with local consumer electronics retailers to sell digital televisions supported by cable services using the G2B system.

The G2B HD system, which is an outgrowth of a similar G2B system developed to help sell cable modems at retail, identifies the markets in which HD content and digital cable services are carried. It also lists the service tiers and pricing for the HD channel packages.

In addition, major cable MSOs joined with select consumer electronics manufacturers in 2004 to promote cable HDTV services tied to major televised sporting events. The national advertising campaigns offered discounts on high-definition cable service when purchasing select models of HDTV sets.