"We see ourselves as a technology and communications-entertainment company, much more in the consideration set of Apple and Google than more of the traditional cable and satellite providers,” Comcast residential products chief Matthew Strauss declared earlier this year.
Indeed, as the cable industry has consolidated to just four operators controlling around 90% of U.S. customers, the development and execution of cable-industry technology has changed dramatically, as well. And that isn't necessarily good news for vendors, many of whom have seen their roles in the cable industry marginalized over the last few years.
There was a time when a far more populated, symmetrical group of regionally distinct cable operators all shopped for the same products from suppliers like Scientific Atlanta. They stuck to their lanes. Whether your operator was Adelphia or Media One, they were basically in the business of laying cable, bundling programming, and treating you like you had no other consumer choice but them.
The cable operators let the real technology companies design set-tops, remotes and modems, as well as most of the other hardware and software associated with their businesses.
But then the world got even more complicated. Comcast isn’t just a regional cable operator anymore. It’s a conglomerate with a $177.4 billion market cap, competing with Google, Apple and Facebook for the future of the internet. The top cable companies must be active participants in delivering vastly complex consumer experiences that now extend to every facet of homes and businesses.
Under the guidance of head technologist Tony Werner, Comcast has established an ethos of R&D that spans the entire cable division. This isn’t just true in the Comcast Labs unit, where long-view development of technologies such as artificial intelligence is occurring. From Philadelphia to Silicon Valley to Austin, Texas, the R&D philosophy spans out to other engineering sectors of the company, where platforms like the X1 video service are ever-evolving.
Revealing a little Apple-esque mojo in July, Comcast even won a prestigious Red Dot Award for product design. “That wouldn’t have happened 10 years ago,” a press-skittish company spokesperson conceded to FierceCable. “We’re now building the products that we’re delivering to customers.”
Comcast isn’t the only cable company to have a research consortium. Headquartered in Aveiro, Portugal, and founded last year, Altice Labs developed a video/broadband gateway system, dubbed LaBox, that will soon arrive in the homes of Optimum and Suddenlink users here in the U.S.
With offices spread across the U.S., France and Israel, Altice says its labs unit employs “hundreds of engineers working for the research and development center. All are focused on developing, exporting and importing solutions and products made by Altice Labs to all Group companies.”
Of course, as the large cable companies do more of their own home cooking, roles for vendors have dramatically changed to more of a cook-to-order function.
The Tier 1 companies put the orders in. Everyone else has to eat what they do.
“There’s now a dividing line between large and small operators,” the CEO of one cable industry vendor told me. (This executive asked not to be named for fear of transgressing his clients.) “The top operators now go in and specify what hardware and software they’re going to buy, and everyone else falls into line.”
Pushing in recent years for open standards platforms such as the Reference Design Kit, the leading operators have created an environment where they “dictate the hardware and software they want to buy,” the vendor executive explained.
Charter’s WorldBox platform is another good example of this strategy.
“Five years ago, this wouldn’t have been the case,” the CEO added.
I also spoke to a vendor marketing rep who accused the leading operators of using their heft and their newfound engineering expertise to, in a few instances, steal technologies. The International Trade Commission, for example, recently checked Comcast for taking two patents from TiVo.
Entering next week's SCTE Cable-Tec Expo in Denver, all is certainly not lost for the cable vendor community.
The CEO I spoke to said the leading operators are still using their supplier partners for collaboration as they design their own systems. And they still rely on vendors to actually build the boxes and write the actual software code.
But I wondered if, in the not-too-distant future, Comcast or Charter or Altice might get it into their heads to start manufacturing things, as well.
For now, the vendor chief said, tasks such as establishing and working with Chinese factories remain too specialized for operators to get too far into those weeds.
Of course, the emergence of the lab trend comes as vendors struggle to keep up with operator consolidation. At the IBC show in Amsterdam last month, I spoke to one vendor, set-top software supplier Alticast, still reeling from having its two top U.S. clients, Time Warner Cable and Cablevision, bought out last year. As Comcast designs technology to support the white label version of its X1 video platform, Alticast is hopeful it will have a role there.
For now, the top cable operators insist they're still very much in partnership with their vendor community. But they concede that roles are changing.
“We still work with a lot of vendors,” the Comcast rep added. “It’s just a shift in focus in how we’re designing and developing products.”