Motorola goes for the middle road: the tech giant, reacting to low demand for its advanced box, upgrades its DCT-2000. Operators are `looking for a little bit extra,' one analysts says

Cable World, Nov 26, 2001 by Jon Lafayette

With few customers clamoring for its advanced set-top box, Motorola Broadband is packing more punch into its line of basic digital set-tops.

At this week's Western Cable Show, Motorola will announce two new boxes, the DCT-2500 and the DCT-2600, that have more processing power and memory than the DCT-2000 now broadly deployed by cable operators.

"I think we've taken our platform and made it more powerful," said Bernadette Vernon, director of strategic marketing, digital cable for Motorola. "It's going to be a juicing up of what the 2000 was so it can handle more and more applications."

Vernon said the DCT-2500's pricing will be in the same ballpark as the DCT-2000, which costs between $250 and $275 per unit.

The DCT-2600 includes a personal video recorder (PVR), manufactured under license with SonicBlue's ReplayTV. Both should be available by next fall.

Cable operators balked at buying Motorola's more expensive DCT-5000. With its DOCSIS cable modem, additional memory and more powerful processor, the DCT-5000 was designed to handle sophisticated interactive TV (ITV) applications and costs between $350 and $400 each. But with ITV showing few signs of generating revenue, operators had little incentive to trade up from the DCT-2000.

"I think that the upgrade is a reaction to slack demand for the 5000 and operators looking for a little bit extra," said Ian Olgeirson, analyst at Kagan World Media, the newsletter and databook publisher that, like Cable World, is owned by Media Central. "They're looking for something in between the 2000 and the full bells and whistles of the 5000."

Operators have found ways to stretch the capabilities of the DCT-2000 line to provide video-on-demand and some interactive applications, but now say they need a little bit of extra power.

The DCT-5000 "was a little bit before its time," because "some of the features may never be used," said Joseph Van Loan, SVP-technology at Mediacom, the nation's ninth-largest MSO. But Van Loan added that there nave been complaints that the DCT-2000 is under-powered. "We are interested in some of the feature-rich 2000 series in terms of better graphics and maybe TiVo capabilities," he said. He said he's looking forward to the extension of the 2000 line, which will enable it to handle high-definition television as well.

But Charlie Dietz, SVP-engineering for Insight Communications, said the box is useful only if it allows an operator to create a new tier of service. "With the number of boxes we've already got in the field, it's got to be some new feature that we can charge for. We don't want to have to change out several hundred thousand existing DCTs for a little bit of a gain."

Motorola's Vernon said the company is continually looking at its platforms to make them fit operators' needs.

And she foresees an environment in which cable homes have both 5000-level boxes and 2000 boxes in different rooms, doing different jobs.

Despite the upgrade in the 2000, the 5000 remains more powerful. The DCT-2500's processor can handle 175 million instructions per second (mips), while the 5000 speeds along at 300 mips, with a DOCSIS modem capable of a broad range of applications. "I think you'll still see people ordering 5000-class boxes and having them in the home as the main or primary system," Vernon said. "Then I think you'll see the 2000 and the 2500 as a secondary system. I think it's not unreasonable to say a home will have as many as three or four of these boxes. The 2500s are complementary, not competitive."

Kagan's Olgeirson doubts the new boxes will cannibalize business for the 5000.

"No one's buying the 5000 anyway. You're not really discouraging a market that is showing a lot of life at this point," he said. "The interest has not been particularly strong and AT&T backing away from their commitment certainly hurt the near-term success of the 5000 even further."

Last year set-top-box sales dried up as AT&T Broadband, the largest cable operator, shifted from emphasizing the 5000 to living with the 2000 and cut orders to most of its suppliers, including Motorola.

Operators are getting along just fine with the 2000 boxes they have now, he said. But the PVR feature may give operators a chance to recapture the added cost of the new boxes. "MSOs are so hypersensitive to the price of the box," he said.

Vernon said she's beginning to see a more normal order pattern.

"I think the economy continues to be a challenge for the industry overall, but I think from seeing the MSOs' third-quarter numbers, it looks like demand for digital remains high," she said.

Motorola will have other new products at the Western Show. One of them, a home-theater box called the Motorola DCP (digital convergence platform), is a 2000-class box, with a DVD/CD player, an audiovisual receiver, five channels of 100 watts and multiple inputs and outputs for CDs and VCRs. Vernon said Motorola may sell the product both through retail channels--where it would be Motorola's first set-top product--as well as through MSOs.