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Passage: Cable's Options Expand

Sony's new conditional access platform could open up the cable set-top market

NEW YORK

Having the option to run two or more separate conditional access (CA) systems on a single cable plant may not sound like a big deal, but for anyone watching for tangible signs of a culture shift in the cable sector, here is one that cannot be overlooked.

Sony Electronics Corp. launched Passage in late 2002. It enables MSOs to deliver two or more CA streams from a single headend. Among other things, it sets the stage for the mixing of set-top boxes (STBs) from multiple vendors in the subscriber's home, and it may open the door to smart card-based CA solutions as opposed to the single vendor STBs with embedded CA, which are fixtures in cable systems nationwide today.

Charter Communications Inc. is the first MSO licensee of this technology. Others, including Comcast, are expected to follow. Using Passage, an MSO could run Motorola or Scientific Atlanta STBs with Sony's new DHG-55, for example.

"This provides a single elegant solution which can be readily integrated into legacy infrastructure," says Michael Fidler, senior vice president of Sony's Digital Plant Division of America. "In addition to our agreement with Charter, we have run three other trials to date. We will be conducting more trials in early 2003."

"Satellite has taken a big chunk out of cable, and Passage benefits the MSO in terms of assisting them to realize the true value of their digital infrastructure by way of an open market strategy," adds Fidler.

IN THE CLEAR

Passage uses MPEG encoding with a bandwidth overhead ranging between 2 and 10 percent, depending upon the content in question. The transport stream remains unchanged, and the encrypted data is accepted by the appropriate STB. Anything in the clear remains in the clear.

"This allows for the deconstruction of the MPEG stream," says Fidler. "Only critical packets of data are encrypted."

Gary Arlen, president of Bethesda, Md.-based research firm Arlen Communications Inc., sees two forces at work here.

"The deluge of connectivity-based consumer products-including home network gateways, digital video recorders/media centers and related convergence products-is fundamental to the future of Sony, Panasonic, Thomson, Philips, Samsung and dozens of other CE makers," says Arlen. "They have been looking for opportunities to sidestep the cable supply duopoly and its allies-Motorola, Scientific Atlanta, Pioneer, etc.-and these enhanced STBs offer the first, best, extensive avenue into that realm."

"At the same time, cable is trying to shed its CapEx [capital expenditure] problem, putting the onus on consumer budgets, so long as there is adequate anti-piracy protection," adds Arlen. "Hence, the new appeal of flexible CE products-not to mention the potential for handing over upgrade expenses for HDTV, and whatever else lies ahead to the customer. The fact that the boxes come with reliable brand names and existing retail distribution channels adds to the appeal."

SONY VS. MICROSOFT

Is the raging battle between Sony and Microsoft for control of the entertainment space in the American living room another dimension to the passage story here? For sure, but we will leave this ongoing battle of the giants alone for now.

Richard Green, president of Colorado-based cable industry consortium CableLabs, shared his thoughts about Passage with us, doing so under a nondisclosure agreement with Sony. He describes Sony as very cautious about Passage.

"They only told us about it the day before they issued the press release. Our role in this is kind of as a technology evaluator. We are taking a 'due diligence' look at the technology," says Green. "While attending the 2002 CES, the cable CEOs saw technology moving along much faster than they thought it was. In order to maintain a very competitive position with satellite, the CEOs understood that they needed to quickly tap into R&D programs of the CE manufacturers."

"We have not hit a technology plateau. In terms of broadcast video and IP streaming, both keep advancing," Green adds. "Any sense of awakening aside, Passage will simply help MSOs compete better. The business model of this cooperative arrangement works well for the cable industry, too."

"Green and his 'MSO Cub Scout pack', as I describe them, may have been goggle-eyed at what they saw at CES, but to some CE makers, the MSOs still looked like arrogant, hauty monopolists," says Arlen.

Sony has attracted a number of partners to its effort to launch Passage from both the headend equipment and STB sectors including Harmonic, Terayon, BigBand and Pace Micro Technology. Among other things, Passage may be able to propel cable away from the point-of-deployment (POD) module approach.

"Passage is a true OpenCable solution," says David Novak, vice president of marketing at Florida-based Pace Micro Technology Americas. "This is an interesting alternative to the POD which, at $70 to $90 per POD, makes it very hard to compete with satellite STB pricing."