Confronting Cable's Technological Frontier

Over the next 5-10 years, the cable industry faces what may well be its most formidable set of opportunities and challenges. The increasing adoption of digital technologies, and the disruptive set of forces unleashed by the Internet, will undoubtedly reshape the industry. This transformation promises new product opportunities, ranging from Digital Video Recorders (DVRs), new functionalities such as a “start over” service (enabling consumers to restart programs), and services that integrate wireless devices into a digital home experience (e.g., programming a DVR from afar).

The exciting opportunities confronting the industry present a series of technological and business challenges. Firms must consider whether to embrace a maze of new technologies that leverage network, hardware, and software innovations. In practice, the difficulties and expense of upgrading cable systems and their associated technologies (i.e., set-top boxes)–as well as the challenge of selling consumers on new technologies–is often a brake on innovation. Moreover, in many cases, firms must negotiate a set of complex legal and business relationships before rolling out new products and functionalities.

The innovations now being developed for the cable platform, particularly those using broadband as a facilitator of consumer product offerings, are often pioneered by upstart firms. The digital video recorder (e.g., a Tivo), the remote viewing device (e.g., a Slingbox), and Voice over Internet Protocol (VoIP) all emerged from the efforts of entrepreneurs acting outside of the established firms. Consequently, for established firms, remaining at the cutting edge of innovation and being open to adopting the innovations of outside firms will increasingly present business strategy challenges.

The opportunity to provide content in new forms and allow users a greater degree of control over their viewing experience is a byproduct of the digital age. At the same time, concerns about digital piracy threaten to kill the golden goose. How firms embrace digital technology and provide valuable enhancements to their existing content as well as develop protections against piracy remains a fundamental question for network operators and program developers.