Consumers Boxed In by Cable Dispute

Responding to pressure from federal regulators, cable TV operators announced plans this month to let customers do something most have never been able to: buy a cable converter box.

Of course, most consumers have never wanted to buy a cable box. What consumers want is a TV set that can tune in to digital cable and premium channels without requiring extra boxes, wires, remote controls and monthly fees.

They can’t do that, though, mainly because of a long-running dispute between the cable operators and set manufacturers. That dispute has held up the standards needed to bring “cable ready” sets into the digital age.

Cable companies, electronics manufacturers and consumers all want to move away from the current system of cable operators leasing set-top boxes to their customers, said Mark Smith, a spokesman for the National Cable Television Assn. “How can this be such a quagmire,” Smith asked, “that it could be in everyone’s interests and no one can work it out?”

The dispute is more financial than technical. It’s a tussle over who will be able to offer interactive program guides, Web-based entertainment and a host of other digital services--just the cable operators, or the set manufacturers too?

“There aren’t any good guys and there aren’t any bad guys here,” said Michael Petricone, vice president of technology policy for the Consumer Electronics Assn. “Every player is acting according to their specific business interests.”

There are signs that the dispute may be resolved over the next year or two, perhaps by the time that masses of consumers start shopping for digital TV sets. For now, though, the split between the two sides is causing the cable operators to make an interim offer that consumers can easily refuse.

That offer, announced by the cable association Oct. 10, would enable consumers to buy digital converter boxes identical to the ones they lease from the local cable operator. Because each cable operator uses a different scrambling technology and digital software, buyers could wind up with a useless converter box if they move to a different cable operator’s turf.

The association tried to address that problem by saying cable operators would buy back digital boxes when consumers moved. The catch is the refunds would be based on the wholesale price of the box, minus depreciation.

At the root of the dispute is the cable industry’s longtime reliance on two competing companies--Scientific Atlanta and the General Instrument division of Motorola--to equip their systems. Each company uses a unique and secret scrambling technique to protect premium and pay-per-view channels, and that technique varies from cable operator to cable operator.

The patchwork of private scrambling systems effectively blocked TV manufacturers from making converter boxes or sets with a built-in capability to display premium channels. But Congress intervened in 1996, ordering the cable industry to support an open, competitive market for converter boxes and truly cable-ready sets. The Federal Communications Commission eventually gave the cable industry until 2000 to provide descramblers that could be plugged into any manufacturer’s set-top boxes or sets.

Meanwhile, the compatibility issue grew more complex as all the major cable companies started converting to digital networks. These new systems, which enabled the cable operators to provide more channels and new services, couldn’t attach directly to a TV set--they need to run through a digital converter box.

Even the new generation of digital TVs can’t tune in to digital cable without a converter box. That’s because the cable operators use a different transmission technique than the local broadcasters, and today’s digital sets are built to the latter’s specifications.

The cable operators met the deadline for supplying plug-in descramblers, but TV manufacturers balked at building converter boxes or sets that couldn’t handle digital cable. As with scrambling technologies, cable operators have deployed a patchwork of incompatible digital-cable systems, effectively blocking manufacturers from building digital-cable-ready products.

The cable industry’s research and development arm, CableLabs, has finished its proposed initial specifications for digital cable hardware and software. Until the major cable operators commit to supporting those specifications, however, no manufacturer will build products for them, Petricone of the Consumer Electronics Assn. said.

Leading cable companies are expected to announce their commitment to the CableLabs proposal shortly. But there’s a more fundamental disagreement between the manufacturers and cable operators, reflecting their battle over new services.

The digital technologies embraced by cable operators have moved their systems from simple TV broadcasting into a host of communications and information services. As a result, the set or converter box that attaches to a digital cable system becomes a critical link to a variety of potentially lucrative offerings.

“This box is the gateway into the home for all these new services,” Petricone said. “It’s extraordinarily valuable.”

Petricone said cable operators are trying to exert tight control over what their customers have access to in order to maximize their revenue. But cable-industry officials say they’re not stopping the consumer-electronics companies from offering services--they just want to be paid for the use of their pipes.

The two sides are battling over how much freedom consumers will have to record programs and whether cable operators will be able to shut down devices unilaterally in the name of security. In addition, Smith said, CableLabs’ specifications “basically put in an off switch” that could stop set manufacturers from offering program guides and related services.

“What the retailers and manufacturers have said ... [is]: ‘We’re not going to do that under those conditions. We can’t make money that way,”’ Smith said.

A larger question is whether consumers want to invest in a converter box or digital-ready TV before the cable industry figures out what kinds of services it wants to offer digitally. For example, a box that has no storage capacity won’t be much use if cable operators start offering downloadable music.

Nor have the cable operators figured out yet whether to subsidize the boxes, as their competitors in the satellite TV industry do. An unsubsidized digital cable box could cost $300, which is more than consumers pay for the average TV set.

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Jon Healey covers the convergence of entertainment and technology. He can be reached at jon.healey@latimes.com.