The legal questions that surround the stripping of Gemstar-TV Guide International Inc.'s electronic programming guide data from off-air television signals could prove costly for a vendor that makes blanking equipment for cable operators.
Duluth, Ga.-based engineering firm Electronic System Products — a division of Arris Group Inc. — has developed a line of vertical blanking interval (VBI) stripping equipment. It's now trying to figure out if it has a pile of dead products on its hands.
ESP started work on VBI stripping gear about eight years ago, at the request of Tele-Communications Inc., which was sold to AT&T Corp in March of 1999. At the time, TCI engineers had noticed that the operator could not control the data that flowed through its VBI streams. TCI then asked ESP to develop technology to change that.
VBI — the interval between television frames — is used to send data, such as news and weather information. In the United Kingdom, it's used for teletext broadcasts; U.S. TV stations use it to transmit closed captions for hearing-impaired viewers.
One potential benefit of VBI blanking is primarily revenue-driven. A network can tap the VBI to feed data that's not related to video programming, such as enhanced TV or interactive ads. With the proper blanking technology, operators can gain control of that data and keep it out of consumer homes.
In theory, an operator could charge networks for any non-programming related information that's passed through to consumers.
The first blanker out of the chute at ESP was the TollGate 100a, a standalone or rack-mounted device that stripped out lines 10 to 20 in field one, said ESP manufacturing manager Norm Filer.
Then, about 18 months ago, AT&T Broadband requested that ESP develop a product to filter out part of line 21 — a tricky proposition, because that line also contains government-mandated closed-captioning data.
The next generation of ESP's blankers, the TG210, can strip out as many as 40 channels of data, including line 21, but doesn't touch the portion tagged for closed captioning. ESP was prepared to launch that product early this year.
Before the TG210 was released, Time Warner Cable and some other large and midsized MSOs got wind of the original blanker. Those operators bought several thousand units and started to install them in some systems, Filer said. ESP has sold about $1 million worth of TG100a units.
But a legal struggle between Time Warner Cable and Gemstar-TV Guide International Inc. has put that to a halt. MSOs applied the brakes to data stripping and subsequently returned about 500 units. ESP honored those returns, Filer said.
In June — after waiting for more than a year for federal regulators to act — Gemstar withdrew its complaint against the MSO over the stripping of Gemstar's EPG data from off-air television signals.
Time Warner then told the Federal Communications Commission that Gemstar was not entitled to terminate the case on its own and waste the agency's resources. And even though there are no operators blocking the EPG signal at present, Time Warner argued that Gemstar's move to withdraw was irrelevant to the underlying legal issues in the complaint. The FCC is still reviewing the case.
Time Warner Cable spokesman Mike Luftman said the MSO has not made any recent changes to its VBI data-stripping procedures or policies. He said Time Warner Cable started to blank some VBI data in 1999, but reiterated that the MSO voluntarily ended that practice last June.
Filer said continued questions surrounding VBI technology have left ESP with a product that it can't sell.
"Analog will eventually go to digital, and this product will be dead," he said.
That would be disappointing, Filer said, because ESP has already spent from $200,000 to $250,000 to develop the TG210, and presently has about $120,000 worth of blanking boxes and parts in its warehouse, awaiting buyers.
When and if ESP can move that product depends on how much longer the Time Warner-Gemstar tiff drags on.
"We have inventory here that we can't move, and they'll probably be scrapped in the next 18 months or so," Filer said. "The [digital] transition will take a long time, so there could be some value left in these products."
At the same time, ESP is not about to make a financial commitment to develop and manufacture digital blanking equipment — at least not until it has a solid purchase order in hand and the legal picture involving VBI stripping clears up.
"We don't have the inclination to do it from management, because they don't want to get burned again," Filer said. "[Cable operators] have been good customers in the past, so we'll still talk to the same people when they need something in the future.
"Some [products] will be winners, and some will be losers. This one [the TG210] is somewhere in between."
Ted Hearn contributed to this story
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