CONSUMER EDUCATION, PROMOTION DISPUTED AS PLUG-&-PLAY DEADLINE NEARS

A Comcast spokesman said while there was no promotional plan, “we are certainly committed to supporting the technology.” He said Comcast would be ready July 1 to meet customer demands, whether for a CableCARD or a set-top box. Asked how Comcast customers would find out about the CableCARDs, he said Comcast was relying on information to be relayed to the customer “at the point of sale.” CE manufacturers were dispersing information on the plug-&-play capability with the TV sets, including that cable customers would have to call their cable companies for the cards.

A Cox spokeswoman said there was no nationwide marketing effort but the company is decentralized and some systems were making local efforts. For example, she said some systems were working with local retailers and providing an information sheet and trouble shooting guide to help consumers understand the technology. She said some systems had sent memos to retailers with information and FAQs to help store clerks educate consumers. Yet other systems, she said, were publishing ads in local newspapers. Corporate hq, meanwhile, was informing local franchising authorities, she said, and has put information on its web site. She said it’s unclear whether the company would market CableCARDs more broadly for 2-way plug-&-play.

Charter has put customer notifications in bills and is going to do a joint promotion with manufacturers later in July, a spokesman said, not naming the manufacturer. He said he believes the company will have enough CableCARDs on hand but, “we just don’t have a good way of gauging demand. It’s pretty spotty.” Another spokesman said Charter planned only a “soft launch” on the CableCARDs. “The expectation here is that consumers will find 2-way much more useful,” a spokesman said. He said Charter doesn’t have promotional plans on 2- way yet, “but we will obviously take a hard look once that date for deployment is set.”

Adelphia has trained its customer service personnel to be able to respond to questions about the CableCARDs but isn’t doing anything proactive in terms of working with retailers or billing inserts. A spokeswoman said customer service representatives will be able to explain what the CableCARDs can and can’t do, stressing that there are limitations. “We're not going out and marketing the CableCARDs. We're responding,” she said. Asked whether the company might do a marketing push when there’s 2-way capability in the sets, she said, “that’s a little ways out yet and I haven’t really heard any discussion about that.”

A Cablevision spokeswoman said the company was “just complying with the deadline. We haven’t done any marketing.” CableCARDs will be made available to customers who call in request them, she said.

Under terms of the landmark cable-CE plug-&-play agreement, ratified last fall by the FCC, on July 1, cable systems 750 MHz or higher are required to have enough CableCARDs on hand to accommodate customers who have plug-&- play TV sets. Those systems must meet certain standards on headends and networks to enable plug-&-play sets to work. NCTA Gen. Counsel Neal Goldberg said the association was working with CE manufacturers to try to ensure that consumers who buy these new one-way plug-&-play sets know that they just have “one way” capability, meaning they can receive cable programming and services but the sets don’t allow interactive services like video-on-demand.

For that, consumers would still need a set-top box, at least for now. NCTA and the CE industry are currently working toward an agreement that would allow for 2-way digital cable-ready sets to reach the consumer market. The issue of consumer education is also being addressed by the FCC in a rulemaking that’s pending. Goldberg said the concern is that consumers won’t realize that they've just bought a one-way set until they get home with it and read the owners’ manual.

CE makers say part of the problem is that, by its very nature, one-way plug-&-play capability is both limited and limiting to cable companies wishing to earn revenue from interactive services, and that, they say, gives cable companies little incentive to promote one-way plug-&-play. One CE source asked why cable companies would promote it when there’s no obvious revenue stream involved in one-way capability. A cable spokesman said he wasn’t aware of any particular promotional plans by any member of the cable industry, and none of the cable operators we spoke with was going out of his way to push the capability. Therein lies the problem, some CE industry executives say, believing the cable industry won’t “buy in” until 2-way plug-&-play capability, which holds the promise of revenue-generating services.

A CEA spokesman said it would be “devastating and an abrogation of our understanding” with cable if none of the operators would support the one-way technology “in the fullest sense. Support is a broad word and I'm not an attorney, but the issue is, are they making it so that consumers are aware of it? Are they making it easy for consumers to receive the cards?” He said manufacturers are plug-&-play ready at a wide variety of price points for consumers. “That’s what we committed to. We'll do our part to promote the technology,” he said, even as negotiations on bi-directional plug-&-play continue.

NCTA reported to the FCC last year that 77% of all U.S. subscribers were served by systems 750 MHz or higher and that the figure was expected to grow to 84% by the end of 2004 and 86% by the end of 2005. The FCC said it would be accommodating to smaller systems, but many of those aren’t 750 MHz or higher and therefore aren’t covered by the mandate anyway. The standards for the cable systems were set by the Society of Cable Telecom Engineers (SCTE), and so, most systems meet minimum SCTE standards anyway, Goldberg said. “We expect to have everything ready and so far have heard no complaints,” he said.

NCTA was unclear about how many TV sets cable operators will have to accommodate July 1. “We're not entirely sure,” said Goldberg, noting that some CE companies have gone through certification waves at CableLabs. However, not all companies wanted their certifications publicized for competitive reasons. CEA agreed to gather data from all the companies as an aggregate so CEA could give cable operators an indicator of how many TV sets would be out there, and as a consequence how many CableCARDs would be required. Not all customers will need CableCARDs, though. Consumers who get just the expanded basic tier can simply plug the sets into the cable. The cards allow consumers to get scrambled services, such as premium channels like HBO. However, in areas where there is a high volume of cable theft, cable companies may require that all subscribers have the cards.

In May, CEA said it projected 1 million digital cable ready high definition TVs will be sold by year’s end. CEA told CableLabs that more than 500,000 digital cable ready HDTVs are to be on the market through Sept. 30, with more than a million HD sets and cable subscribers needing a CableCARD by the holiday season. That same number of CableCARDs will be needed to support the rollout of the dual ATSC-cable tuner integrated TV sets, CEA said. CEA said it has been preparing consumers with print materials and an educational video, distributed at consumer events, trade shows and through media partners. CEA also did a satellite media tour in March to reach consumers in 15 markets with information about digital cable ready HDTVs and the CableCARD.

Goldberg said he wasn’t aware of any cable operators that wouldn’t be able to make the deadline. The cards, which have conditional access capabilities, are manufactured by Motorola, Scientific-Atlanta and NDS. “The real issue that the FCC is going to hear about is consumer education, what it is they're buying and how to deal with it and what the benefits are and limitations of these sets,” Goldberg said. Some cable companies have retail agreements with retailers to deal with some of these issues, he said. -- Brigitte Greenberg

(This first installment of a 2-part series looks at plug-&-play from the perspective of cable operators. The views of the consumer electronics industry will be featured tomorrow.)