Charter Order Puts Moxi Into Boxes

Charter Communications Inc. will be the first cable operator to turn on the Moxi, ordering 100,000 units of the multifunction, multimedia digital gateway design created by sister company Digeo Inc. and built by Motorola Inc.

The St. Louis-based MSO will roll out the Moxi Media Center design with HDTV and digital video recorder capabilities in Rochester, Minn., some time in the fourth quarter.

It's the first deployment for the Moxi reference design, which Motorola has built into its Broadband Media Center 9012 and BMC 9022D.

A "100,000-unit commitment is a really significant step for the industry, and we think this is a huge milestone for us," said Bert Kolde, Digeo's chief operating officer. "Our hope and expectation is we will have other distribution partners as well going forward."

The multifunction box comes as Charter faces increased competitive pressure from satellite providers, who are also busy rolling out HDTV and DVR offerings.

"We are in an extremely competitive business now, and how we react to satellite with the products and the services we offer — we're at a critical time," said Charter vice president of sales and marketing Kip Simonson. "And the Moxi box is another advanced service that positions us better against the competition that we face from the satellite companies."

Charter has been trialing the boxes in St. Louis with several hundred users, including employees and a number of subscribers.

But Rochester, Minn., was selected as the first market based on several factors, including demographics and the fact it was a smaller market.

The Moxi rollout also will mark the inauguration of HD and video-on-demand service in Rochester. "That's one of the other reasons that we chose Rochester, because it was a market where we could introduce several products at the same time," Simonson said.

About 80% of Charter's order will be the BMC 9012, a more basic unit configured to control a single television set.

Based on a Linux operating system, it features HD video, a dual-tuner digital video recorder, an 80-Megabyte hard drive and Moxi's homegrown interactive programming, middleware and applications software.

The remainder of the units will be BMC 9022D boxes, which add a DVD player to the design and can be configured to ship video to two television sets simultaneously. The second television set will have a Media Center extension module linked back to the BMC 9022D, using existing in-home coaxial cable.

The unit also has home-networking capability and can manage other media files, including digital photos and MP3 audio files.

Though Charter is now looking at several pricing models for the Moxi service, it will likely involve a premium based on the box's functionality.

"This box does several things that none of our other boxes do — it does add HDTV capability. And for customers that want that service, there is a premium to be paid," Simonson said. "The PVR capability is obviously as well as the interactive capability, so we are looking at several pricing models."

Charter plans to lease the boxes, providing installation "although, as with all products, we will look at self-install in the future," he added.

For Motorola, the deployment is the result of work with Digeo that began in early 2002 — and proof that the box maker isn't limited to only its own designs, according to Mark DiPietro, vice president of marketing and systems engineering for Motorola's Broadband Communications Sector.

"We have a lot of interest — really all of the various operators have taken a look at it and given us positive feedback," he said. "So this, from my perspective, is a good partnership for Motorola, because I think that folks may have questioned our ability to work with other people who design hardware, and we are demonstrating that we can take good ideas, wherever they come from."

The BMC 9012 costs a little less than $500 per unit, while the BMC 9022D sells for less than $350 apiece if it is used in a multiple-television household, DiPietro said. While $500 per box might seem a bit high of a price to attract cable-operator attention, he pointed out the early digital boxes sold for more than $400.

"Once we got volume going, we were able to take pricing down on them," DiPietro said. "If we get some good volume going on this class of box, we will be able to do the same thing with it."

Nor is Charter particularly worried about the higher unit cost — it plans to offset the box's price with increased revenue from the services it delivers, such as HD and VOD.

"When we deploy the Moxi box, we anticipate that we will generate incremental revenue from it as well, so the cost of the boxes is offset by the incremental revenue," Simonson said.

Meanwhile, Charter also is looking at its Scientific-Atlanta Inc. markets to expand its digital platform. The MSO is further along with deployment of HD and VOD in its S-A markets, but "we are not going to hold up launching other products for the Moxi solution," Simonson said.

Charter isn't ready to name the next markets for a Moxi service rollout, "but obviously there are several markets that will be rolled out after the Rochester launch," he said.

And Digeo's hunt for other MSO partners also continues. For the past few months, Digeo has also been in limited trial with about 100 Time Warner Cable employees in Houston.

All in all, the Moxi design isn't just an attempt to answer DVR products provided by satellite competitors but "it's actually an attempt to leapfrog those boxes," Kolde said.

"There are now over 1 million subscribers in satellite that have DVR, and that has been an effective subscriber acquisition tool for satellite," he noted. "With the Media Center, it is a more robust platform than what satellite has to offer, because not only can you do PVR, but you can also do HD, DVD and it's a platform for additional applications like digital music and digital photos, home networking — a lot more services that the cable operator can bundle to and trump DBS."