The FCC is addressing the failure of CableCARD‘s in its National Broadband Plan that takes further steps to encourage development of the Home Gateway, a device in which consumers can easily and seamlessly access video programming from all distributors.

In a proposed Network Gateway-NOI and CableCARD NPRM, the commission is seeking input on how to best rework the CableCARD rules to make Set-Top-Boxes more universal in nature and easier for consumers to connect and network throughout the home to any video provider offerings.  The question remains; is the FCC suited to take on another attempt to create competition within the Set-Top-Box market? Or should it leave this to market forces?

A Universal Provider Gateway Concept could be flawed

Most, if not all video providers want control of the user experience in their Set-Top-boxes, or proposed Gateways, and are not willing give up that control universally. That means each provider wants to create its own Gateway and harkens back to the premise of why CableCards did not work. Companies are not willing to share the proprietary customer relationship with other competitors. This is why only a few set-top boxes are in the market. Cable companies created their own devices to offer video content to customers, while investing billions to do so; but as market forces continually change the demand for a more competitive STB/Gateway continues to emerge. See (FCC to “improve” CableCARD rules this month)

A Sub-Market of Over-The-Top competitors

With the advent of Hulu, and YouTube along with NetFlix, Apple TV, Roku, Blu-Ray, and X-Box the concept of a possible competitive residential gateway, or STB if you prefer, has taken hold. Video programmers have accepted these non-traditional video providers as a new pipeline to distribute their wares. See (Park Associates Blog). But should these companies be looking to themselves to have unique home gateways built for home distribution which will connect consumers with mainstream video, Internet, and phone services? I think so, and this also means contracting with an Internet Service Provider-Video Provider-Telephony-Wireless Provider for a residential service interface to their STB. This may be easier said, than done.

Drive Private Sector competition

Near term competition does not lie in building hard-line infrastructure, although Google is testing those waters; it lies in the sub market of Over-The-Top competitors willing to create their own unique consumer experience, and compete with traditional providers with a superior customer interface that delivers video-wireless-Internet-telephony to the hardware within homes. It will not work to have a mandated universal gateway that all competitors must share. This means that competitors must contract with video programmers, wireless and telephony providers, or build their own networks to compete. Cable-Telecom providers have a huge advantage on that market segment. That is to say they have invested billions in infrastructure, hardware, wireless, and telephony products to offer consumers through their networks and STB’s. This is where potential competitors must look to have a chance at capturing an all-in-one home gateway market share. See (Hot Boxes: The Explosive Potential for Residential Gateway Devices)

Solution

View the Residential Gateway as a unique way for all providers to connect with their customers. It should be specific to the company with all the applications consumers’ demand, one that is easily interchangeable to all home hardware. This requires competitors to take on risk and invest in new ideas and concepts that will capture that market segment. As new markets unfold, the best and the brightest will be there to take advantage of any changing landscape in residential gateways to the consumer.

This again, goes back to whether the FCC should involve itself in manipulating the market to create more competition. It should encourage competition; it should incent competition within the marketplace by tearing down barriers to compete. But it should never mandate private companies to compromise their markets by opening up their STB’s, or consumer gateway.  

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Now that the broadband experience is reaching a milestone in bridging the gap between digital content and consumers, we all may soon be accessing our Home Gateways to maximize the experience of downloading and viewing relevant content on TV’s, PC’s, Laptop’s, DVR’s, and Mobile Devices. 

The term Residential Gateway is not new and has been used in VoIP, and DSL applications by the Telecoms. Corporations have long been using Gateways for application connections. So, it makes plenty of sense to have one (in-home device) to act as a digital storage system, server, modem, and router to connect consumers with all of the broadband related devices, and content becoming widely available from a multitude of Internet sources.

Comcast (Nasdaq: CMCSA, CMCSK), Time Warner Cable (NYSE: TWC), and Cox Communications are partnering with The Digital Living Network Alliance (DLNA Certified device), to bring consumers a more integrated home network device to play back premium content HD/digital shows, photo slideshows, and music offerings for their customers. This Home Gateway device would work seamlessly with all consumer devices within the home to connect content to the TV.

NetGear (Nasdaqgm: NTGR), is introducing such devices at the Consumer Electronics Show with its award winning NETGEAR Stora , putting music, video, and photos at your fingertips, and the NETGEAR Wireless-N Router with DSL Modem – Mobile Broadband Edition, to connect wireless devices with content.  

Home Gateways are the next generation of devices to offer universal access and in-home-networking to speed along the delivery of broadband seamlessly within the home. Having a Broadband Pipeline which is Hybrid/Fiber/Docsis3 enabled, or a Fiber-To-the-Home connection, via your ISP to the Home Gateway will be the critical to the adoption process. This all-in-one device would be able to handle all the functions universally which are now separated like modems, Set-Top-Boxes, WIFI, routers, home networking, Blu-Ray Players, gaming, etc…

In essence, the Home Gateway will be the device that will connect families to entertainment, education, healthcare, security, communications, and a global world of information. This scenario may not be quite here yet, but the Consumer Electronics Industry and Cable-Telecom companies are certainly moving in that direction. The bottom line will be consumer costs of these devices and the deciding factor in its proliferation for a near-term broadband solution, rather than a long-term one.

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