Pace Micro, Philips Set-Tops Spin Box as Home Gateway

The digital set-top box is quickly evolving from a glorified tuner box into a high-end home gateway.

That's the vision of U.K.-based set-top developer Pace Micro Technology plc and Dutch consumer-electronics giant Philips Consumer Electronics Co. Both companies will send high-end set-tops capable of much more than tuning digital video into the field this year.

"There's a whole range of applications we see emerging that use that gateway," said Jos Swillens, president of Philips' set-top division, who added that the company is working with "all major players"-including Open-TV Inc., Canal Plus S.A., Liberate Technologies and Microsoft Corp.-to develop applications for high-end set-tops.

The notion of a high-end digital set-top flies in the face of the cable industry's long-held model of low-cost, inexpensive digital set-tops to eventually be made available to price-conscious consumers at retail.

But both Pace and Philips believe the futuristic capabilities of their boxes-with electronic-commerce, home-networking and advanced video features-will entice consumers to digital interactive-TV services and offer operators new streams of revenue.

"We've been talking a lot to the industry about where the set-top box will migrate," Swillens said. "Clearly, there's a move away from the low-cost set-top," he added, and a move toward a box with more processing power, more graphics capability, extensive input/output functionality (such as fire wire and universal serial bus) and a high-speed return channel.

Swillens' vision will quickly move into the field in the third quarter as United Pan-European Communications N.V. (UPC) will launch a digital-TV service in Amsterdam using a high-end, dual-processor Philips box with a Data Over Cable Service Interface Specification return channel.

The boxes' MIPS-based (million instructions per second) chips use 3-D rendering and graphics coder-decoders developed by Philips Semiconductors' former TriMedia Technologies Inc. unit. Tri-Media became an independent company in March, with Philips and Sony Corp. as investors.

The Philips box introduced by UPC this year will run applications enabled by the "Microsoft TV" platform.

For its part, Pace has gradually developed set-tops incorporating elements that transform the functionality of the set-top into an e-commerce and communications hub for the home. The goal is to equip the set-top so that it serves as a gateway for a "networked home," where devices are linked to the outside world via the broadband connection.

Under this scenario, Pace senior vice president of global marketing Andrew Wallace said, the set-top supplies video and data information to other TVs, PCs and personal data assistants through wireless, wireline or power-line home-network connections.

Pace's first step in this direction, according to Wallace, occurred 18 months ago, when the company realized the importance of incorporating a hard drive into a set-top and worked with software maker NDS Ltd. to accomplish the task.

The latest version of the box integrates a 29-gigabyte hard drive into a digital receiver. The hard drive uses NDS' conditional-access technology to ensure that content saved on it is encrypted.

The hard drive enables both time-shifted programming and video-on-demand applications, as well as targeted interactive advertising. The hard drive allows for several ads to be downloaded, with only targeted ads displayed, Wallace said.

The box was designed to deliver NDS' extended TV concept. Dubbed "XTV," it uses "smart" software to select and store programming. The box will be available later this year in volume, according to Wallace.

Philips also sees storage in the set-top as a big steppingstone to a fully interactive gateway box.

Swillens cited the eventual incorporation of CD-R (compact disc-recordable) and DVD capabilities. DVD is an option Pace is exploring.

After adding storage to the set-top, the next step for Pace was initiated last year, when it integrated a Cisco Systems Inc. DOCSIS modem into its "Di4100" set-top, Wallace said. More than 250,000 of these set-tops are being deployed in the United Kingdom by MSOs Telewest Communications plc and Cable & Wireless Communications plc for e-commerce and VOD services.

It's the hard drive and integrated modem that "make the whole concept of a [home] gateway possible today," Wallace said.

The next step Pace will take is to include wireless connectivity in a set-top. The wireless link will be achieved through a base station connected to the set-top's Ethernet port, which transmits data to a PC with a receiving station connected via a USB port.

Using Digital Enhanced Cordless Technology, the scheme allows a PC to receive data, such as Web pages, at a rate of 500 kilobits per second. The wireless link is intended to feed multiple TVs in the home with multiple applications, including voice over Internet protocol.

The range of the setup is 100 meters "in open air," Wallace said, and 50 meters in a typical home.

Further utilizing the wireless link, Pace will introduce in the first half of next year the "Shopping Mate," a handheld device with a bar-code reader that links wirelessly to a set-top. A consumer can scan grocery items, and the bar codes are stored in the handheld to be moved over to the set-top hard drive wirelessly. Theoretically, a prospective shopper can then view a shopping list on the TV screen and send it off via the modem connection to the grocery.

Tailored shopping lists for special occasions, for example, can be stored on the drive and accessed later.

Network operators can make money by grabbing a slice of the grocery order. Wallace sketched a scenario of a family paying $30 per month for digital TV and spending $600 per month on groceries. "If an MSO can take 1 percent of that food bill by capturing that revenue and sending it through the set-top, [the operator] can increase revenue by 20 percent," he added.

The Amsterdam rollout of Philips' turbocharged box was part of a strategy to develop a future-proof architecture that is not only high-performance, but that also offers the consumer a box with a longer life.

Through software upgrades, Swillens said, a box could be upgraded to support emerging formats that are unknown today, much like the now ubiquitous MP3 audio format, which quickly jumped onto the scene from virtual obscurity.

Philips will ramp up its research and development and call on its vast consumer-electronics expertise to execute its set-top vision.

New generations of Philips' boxes will include storage, voice control, Java and HAVi support, the latter referring to the Home Audio-Video Interoperability specification based on the Institute of Electrical and Electronics Engineers' 1394 specification.

It will also support the Moving Picture Expert Group's MPEG-4, which is rapidly moving off the drawing board and into set-tops. At last month's National Association of Broadcasters convention, Philips demonstrated a set-top displaying streamed MPEG-4 content.

MPEG-4 is an emerging video-compression technology that allows quality video to be streamed at bit rates of 600 kbps to 700 kbps. Unlike MPEG-2, which is a "frame-based" video and audio technology, MPEG-4 specifies a description of audio/visual scenes in the form of "AV objects," which can be natural or computer-rendered, aural or visual, two- or three-dimensional. These objects can be hyperlinked, or they can trigger other multimedia events.

MPEG-4 enables a lot of new applications, and will play a significant role in Philips' plans, Swillens noted.

Targeting the vast market for video games, Pace is considering integrating a game console into its boxes. Without naming names, Wallace said, Pace has worked on such a concept with one of the top game-console makers-Sony Computer Entertainment Inc., Nintendo of America Inc. and Sega Enterprises Ltd.

Such a configuration would allow gamers to download gaming titles, saving a trip to the video store and giving operators another opportunity to capture a slice of revenue.

The missing part of this Cadillac set-tops equation is price. While Pace and Philips believe that new functionality means new revenue sources for operators, Swillens also pointed to the creative retail partnerships the satellite and PC industries have forged as examples of how discounted digital boxes can be sold at retail along with programming services. He sees no reason why that model can't be re-created for high-end set-top boxes.

Not all set-top makers are buying into the high-end gateway concept, though.

Denton Kanouff, vice president of marketing for Motorola Inc.'s digital-network-systems unit, said Motorola Broadband Communications Sector is focused on "what is the least expensive and best way to deliver services to the customer. To date, the gateway concept is the most expensive way to go."

At the same time, Kanouff pointed out that Motorola's "DCT-5000+" set-top, introduced last September, contains a DOCSIS cable modem, an IDE (integrated drive electronics) hard-drive interface and optional personal-video-recording capability.

Motorola has shipped 250,000 of its less-expensive digital set-top, the "DCT-2000," and it will ramp up marketing of the DCT-5000+ later this year.

According to published reports, the DCT-2000 is shipping in volume at under $300 per box, while the DCT-5000 is priced at about $100 more. Given the added horsepower and features of the Pace and Philips boxes, it can be assumed that they will sell for more than the DCT-5000.

With home networking, PVR and e-commerce beginning to capture mind share among consumers, incorporating these features in a set-top may help cable operators to attract digital subscribers, if they can make the price palatable.

Pace and Philips hope new capabilities and features will attract consumers to high-end set-tops. "Innovation is going to be a key factor that will drive the future of the set-top," Swillens said.