Rent Your Cable Box

Rent or Own? The New Cable-TV Dilemma
Soon, Subscribers Will Have
Option to Buy Set-Top Boxes;
Pros and Cons of Cablecards
By COREY BOLES

A generation ago, federal regulators opened the way for consumers to buy telephones rather than rent them from the phone company. Now, the government has its sights on the television set-top boxes that consumers rent from cable or satellite companies.

Beginning July 1, the Federal Communications Commission has ordered cable companies to supply only set-top boxes that can accept a so-called cablecard that slides into the set-top box and determines a customer's level of access to cable service. The change is meant to give consumers nationwide the option of buying their own set-top boxes -- or TVs that can use the cablecard -- rather than renting one.

That new freedom may soon trigger an old question: Is it better to own or rent? On average, cable companies charge $5 a month for a regular set-top box and $7 for one with a built-in digital video recorder, or DVR. The National Cable & Telecommunications Association estimates those costs will increase to $8 and $10, respectively, for a set-top box with a slot for a cablecard.

A standard box with no recording capability, meanwhile, would likely retail for around $130 -- the cost of renting for a little more than a year, according to Ian Olgeirson, a Denver-based cable analyst with SNL Kagan, a market-research company. The price of a DVR that can use a cablecard is expected to be much higher. TiVo Inc. sells a version for $700 but plans a less-expensive model.
RENT OR OWN?

[Rent or Own?]
Factors to consider when weighing whether to rent or buy a set-top TV box:
• It generally costs $5 a month to rent a set-top box and $7 for a DVR.

• A standard set-top box is likely to sell for about $130.

• A DVR to use with any provider is $700 or more, but prices are dropping.


But this buy-or-rent equation has many variables.

Though the FCC imposed a July 1 deadline on the cable industry, few analysts actually expect sudden demand from consumers to buy their own set-top box when that day arrives. Even if they did want to rush out and buy their own box, they may have a hard time finding an electronics store selling one.

Consumer-electronics makers such as LG Electronics Inc. and Panasonic Electronics, a unit of Japan's Matsushita Electric Industrial Co., said they don't expect a retail market anytime soon and that they have no plans to start making boxes for the retail market. Panasonic plans to compete with the dominant box makers Motorola Inc. and Scientific Atlantic, a unit of Cisco Systems Inc., to supply boxes to cable companies so they can lease them out to subscribers, but won't be rolling them out directly to consumers. Best Buy Co., the nation's largest dedicated consumer-electronics retailer, says it will stock the devices -- but only if there is evidence of consumer demand.

FCC Chairman Kevin Martin, meanwhile, says that the agency's goal is to "end up making sure that there is a competitive market for set-top boxes." He says he's counting on consumer demand to light a fire under manufacturers, retailers and cable companies, with the result being a proliferation of affordable devices.

Some new television sets and DVRs already come equipped with cablecard technology built in. Electronics makers and consumer groups, however, complain that cable companies have been reluctant to hand out the cards. Consumers already have bought eight million digital TV sets and high-end DVRs ready to accept cablecards, but only 250,000 households have been able to obtain the cards from their cable companies, according to Jenny Pareti of the Consumer Electronics Association, an industry lobbying group.

The National Cable & Telecommunications Association, the cable industry's lobbying group, says few customers have requested the cards because they still require a set-top box from the cable company. But the association says it expects demand for cablecards to jump come July.

In addition, set-top box makers have been on the fence. Motorola and Scientific Atlantic control 80% of the market for set-top boxes, and while both say they plan to make set-top boxes available for sale in stores, their biggest priority is maintaining their sales to cable companies -- at least for now.

The real beneficiaries of the FCC's rule change could be TiVo and other DVR makers. Matthew Zinn, general counsel at TiVo, the largest maker of stand-alone DVRs, called the mass-market introduction of cable cards a watershed moment. "The delay has been frustrating, not just to TiVo, but to a lot of other consumer-electronics manufacturers," Mr. Zinn says.

"The stand-alone DVR market has not exactly taken the public by storm," says Mr. Olgeirson of SNL Kagan. He cites the numbers: At the end of 2006, 17 million households had DVRs, nearly 15 million of them rented from a cable or satellite-television provider. "TiVo has struggled with its stand-alone subscribers," he says. "Even after they really reduced their selling price, consumers still chose the integrated boxes from their pay-television provider."

Cable companies for years have fiercely opposed cablecards, arguing that they add complexity and costs but no benefits, while a better technology is just on the horizon. FCC's requirement didn't put an to the grumbling, but it left the cable industry with no choice but to comply with the rule.

The cable industry's "time, money and resources would have been better spent on something like downloadable security that would allow a real competitive marketplace to develop," says Kyle McSlarrow, chief executive of the cable-industry association, referring to next-generation technology to let cable companies set up a subscriber's channels remotely. Mr. McSlarrow complains that cablecards, unlike downloadable technology, aren't interactive so consumers won't be able to use interactive program guides or order movies and other programming using the remote control.

The FCC's Mr. Martin says that after cable operators wouldn't commit to a deadline for introducing the interactive technology, the FCC ran out of patience and set July 1 as a firm date for using cablecards -- as Congress had required more than a decade ago.

Chris Murray, an analyst at Consumers Union, says he is optimistic that the market for stand-alone DVRs will quickly accelerate. "In the early adopter phase, it will be the higher end, more discerning customer, but markets move from early adopter to mass market pretty quickly these days," he says.

DVR manufacturers are betting on that. Digeo Inc. of Kirkland, Wash., announced in January that it is planning in the third quarter to roll out its boxes to the retail market for the first time. Chief Executive Mike Fidler says around 400,000 cable subscribers already rent Digeo boxes through their cable companies, and he is looking forward to selling directly to consumers. "There is a need to stimulate innovation and to open the market up to competition," Mr. Fidler says.

Recording From Your TV To A PC

Recording TV on the Computer

Q. Is it possible to plug in a TV cable to my computer and use it like a VCR to record programs?

A. In most cases, you just need a TV tuner card for the computer and a program to do the recording. Some TV tuner cards are designed for installation inside the computer and some are external boxes that connect through a Mac or a PC’s U.S.B. port. Both provide the jacks to connect a coaxial cable or antenna to the computer so you can pipe in the programming.

Several companies sell TV cards, including Hauppauge (hauppauge.com) and AverMedia (www.aver.com/multimedia.html), and you can find many more around the Web. Some cards include their own recording software, but programs like SnapStream’s Beyond TV (www.snapstream.com) give TiVo-like powers to your Windows PC. You can also buy the Beyond TV software bundled with a compatible TV tuner card if you haven’t made the hardware purchase yet.

Some TV recording software includes onscreen program guides that let you easily select the shows you want to record, and a few can also handle high-definition content, so shop around. Extra features, like the ability to easily burn shows to DVD or export them to versions that play on a portable video player, are also becoming common.

ADS Technologies (www.adstech.com) has a number of internal and external TV recorders and Elgato Systems (www.elgato.com) offers the EyeTV 250, an external tuner box and recording software, for Macs running OS X.

If you plan to record a lot, you might want to consider adding an external hard drive to the mix to hold all of your programs, as high-quality video files can be rather large. For example, a guide on SnapStream’s site (www.snapstream.com/products/beyondtv/faq.asp) estimates that five hours of recorded video at the “good quality” MPEG-2 setting needs 10 gigabytes of space — and just one hour of HDTV can eat the same amount of hard drive real estate.