An End Run Around The Set-Top Box

CableCARDs bypass a rental box, but the old providers won't give up without a fight

Cable companies, telephone outfits, and consumer-electronics makers are back at it, fighting over your television. At issue this time is an obscure, wafer-thin device called CableCARD. It could determine how much money they rake in when viewers in the not-too-distant future can start downloading most of their premium movies and videos from the Web.

CableCARD, which most cable companies must start renting out beginning July 1 because of an FCC mandate, will let a variety of store-bought devices tune in premium cable channels. Congress ordered the change years ago as a way to free cable viewers from renting a set-top box. Simply by slipping the card into a slot on the back of any enabled equipmenta digital videorecorder (DVR), a media-center PC, OR a flat-panel TVsubscribers can get premium programming such as HBO's The Sopranos or Showtime's The Tudors.

Sounds easy. The headache will come from sorting through all the little extras each side is throwing in to get you to use their gear, or not use the opposition's. TiVo Inc., for instance, is offering the Unbox (AMZN ) movie-download service. Meanwhile, Comcast (CMCSA ), Time Warner (TWX ), and other cable providers are likely to do everything possible to keep you from buying a competing device at a store. New cable customers have to call them to get a CableCARD, no matter where they plan to use it. And, as many consumers found in a trial run two years ago, cable providers were happy to point to the downside of using separately purchased equipment. Some cable providers may charge as much for a card as you now pay to rent a box.

Cable companies believe customers will keep renting boxes from them because only their equipment provides easy access to popular on-demand shows and pay-per-view sports events. Indeed, cable customers who purchase TiVo's $800 Series 3 high-definition DVR at Best Buy Co. (BBY ) might be surprised to find there's no way to watch on-demand shows. The cable industry will license software to let such equipment makers offer on-demand and pay-per-view, but only if they agree to display prominently the cable provider's logos, ads, and programming. That's a deal-breaker for many companies that are trying to establish their brand and make money off downloadable content.

The cable industry is still lobbying the FCC to exempt providers from installing CableCARD in their own machines. The National Cable & Telecommunication Assn. argues that its members may have to raise customer bills to pass on the more than $600 million a year the companies will spend on equipment that "provides exactly the same functionality as their existing set-top box."

Makers of DVRs and other gear, however, see CableCARD asthe future. They say it will provide vastly more choices as companies strike deals to allow movies and other content to be pulled directly from the Web--so that one day you may not need cable at all. "Cable is all about controlling what you watch, while we're about offering more options for consumers to get a better [viewing] experience," says Mike Fidler, CEO of Digeo Inc., which will begin selling its Moxi digital media recorder in late summer.

By Cliff Edwards

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