The set-top box (STB) was originally a device with the sole function of receiving cable channels. The main function was to receive between 10 to 40 additional analog channels. For a while now, nearly all TVs currently being produced are cable-ready, meaning that there is no need for an STB. There are, however, some cable systems that require all subscribers to use an STB, because of certain encryption levels, regardless of what TV the subscriber is using. Additionally, a TV that claims to be cable ready will only work on analog channels, and not even all of them. In order to receive all tiers of channels, especially the digital tiers, an STB is required regardless of the TV being used.

With the rise in popularity of satellite services, STBs became a necessity for an increasing number of TV households. Moreover, as more and more satellite packages become all-digital, digital satellite STBs will become a necessity as well.

The last major delivery method, actually the most popular worldwide, is the terrestrial platform. The question here no longer seems to be whether or not broadcasts will be converted from analog to digital, but when. Digital terrestrial television (DTTV) requires an STB, just like cable or satellite, but some consumer electronics companies, and most notably the major television broadcasters, are exploring the possibility of integrating the STB functionality into the actual television sets.

Available Services 
With some of the services that are being considered for the TV platform, it is almost as though the STB will become a PC-like device in terms of power and versatility. Although the STB will have its limits, there are many valuable services that it will provide, such as:

• Email and Web Browsing - The consumer can use an STB as a computer to access the Internet.
• Cable/Satellite Modem - Broadband access is also now possible via a broadband modem. A number of service operators have already announced their intent to deploy STBs with integrated broadband modems. The speed and the "always-on" feature will create additional revenue opportunities.
• Video on Demand (VOD) - VOD has long been a goal, particularly of cable operators, but it has just begun to see scattered rollouts. The STB is already allowing customers to select and to view particular movies from a limited collection. As the number of titles increases, the service will become more popular and eventually be a considerable threat to video rental stores.
• Numerous Digital Channels - The digitizing aspect should allow more channels to be transmitted with better quality picture and sound. In many cases, the digital channels are also being used to deliver digitally formatted music or interactive gaming.
• IP Telephony - The prospect of sending packetized voice signals over hybrid coax fiber (HFC) plant is enticing. The consumer will benefit because of lower prices, which will be required to induce consumers to switch from wireline systems.

Thin vs. Thick
The name of the game in the STB industry is finding a happy medium between rolling out new services, while keeping the cost of the boxes as low as possible, and keeping an eye toward the future. In other words, even if there were an optimal solution given what is available today, would it prevent the rollout of even better services that might be ready two years down the road? This is exactly the dilemma that cable operators are currently facing.

Thin clients, such as Scientific-Atlanta's Explorer 2000, are already being deployed in volume, but they do limit what the cable operator can offer to the consumer. Thick clients, such as Scientific-Atlanta's Explorer 6000 and 8000 series, enable the cable MSO to offer a variety of more complex services to the end-user, but are still not seeing widespread deployments.

The main reason why the advanced digital STBs are not being rolled out is because they are more expensive than the basic models and have not yet proven to the operators that they are worth the additional investment.

Some of the advantages that advanced interactive digital STBs hold over basic digital STBs are:

• Internal hard drive
• DOCSIS-capable return channel
• Cable telephony

These features and capabilities will enable the STB to act as more of a residential gateway than simply as a device for receiving cable channels.

As more and more features are being added to STBs, manufacturers need to decide where to put everything. Taken to an extreme, the industry could be faced with an STB that will become overgrown and cumbersome due to all of the services it would be expected to carry. Another extreme alternative is a rack of four or five STBs, covering each added service with a new box, hovering over the TV console. These options would not be attractive to the customer, especially one who is already feeling inundated with every additional appliance that enters his home.

Some STB manufacturers are already trying to cram as many services into their STBs as possible, following the "thick client" philosophy. But, this leads to greater chipset requirements, greater power requirements, greater heat dissipation and of course, larger boxes.

At the other end of the spectrum is the drive for "thin clients." The thin client places much of the computational load on the network and the headend device, similar to the PC configuration of a mainframe supporting many dummy terminals.

Conclusion
The digital STB market has tremendous potential for connecting a wide variety of services and therefore, for generating multiple revenue streams for the operators. The problem is that many in the industry are already looking at all of the services that can eventually be offered, and that they are forgetting that if it costs too much to roll them out, nobody will win. Operators and vendors need to avoid obsoletion of a product before its successor is ready to take its place.

Allied Business Intelligence Inc is an Oyster Bay, NY-based technology research think tank specializing in communications and emerging technology markets. ABI publishes strategic research on the broadband, wireless, electronics, networking and energy industries. Details of these studies can be found at www.alliedworld.com , or call 516- 624-3113 for more information.