Q&A with Mike Pulli, president of Pace Americas

Mike Pulli, Pace AmericasAs president of Pace Americas, the American arm of the world's leading set-top box manufacturer Pace plc, Mike Pulli would seem to be in the unenviable position of trying to make his products household names in a market dominated by the notorious set-top duopoly of Motorola and Cisco. Yet, as demonstrated throughout this question-and-answer session with FierceCable, Pulli is anything but daunted.

FC: First of all, the basics. Is there a set-top duopoly and, if so, how do you break it?

MP: From my perspective breaking the duopoly starts where we can supply products for both markets. We have licenses for both Cisco and Moto so from my definition we've broken it. If you want to shatter it or put 10 or 15 suppliers in the space then you have to move to OCAP (Open Cable Application Program) and even in an OCAP world it may not totally break it.

FC: OK, if you don't break it, how do you compete?

MP: We've been selling boxes for over seven years into Cisco and Moto systems. It comes down to a speed-to-market issue for the customer. If you have what our customers, cable companies, want first you're more or less setting the stage and you should be relatively successful assuming the CA (conditional access) wall is down. If the CA wall is up you sit and wait for the guy who has the CA and then develop whatever feature you want.

FC: But isn't the CA wall still standing tall?

MP: The CA wall is up and active but we have licenses for both CAs. That's why I'm saying from my perspective the duopoly is there, get it, but Pace is coming in as a very viable second source. We're helping the industry create technology that they need faster--whether that's a dual-tuner DVR, widgets on a TV, those types of micro level features that are driving the industry.

FC: Speaking of driving, are the bosses in the U.K. (where Pace is headquartered) driving you to do more? After all, most sources say Pace is the number one box maker in the world and no matter how you shake it you're at best number three in the U.S.

MP: We set on a journey when I took over seven years ago to be a viable second option for cable companies in the U.S. I think we've accomplished that. Because this market is so big, we found our niche. I think from the U.K. perspective they're happy with that.

FC: Even as recently as its last third quarter earnings call, Comcast's Brian Roberts was asked if the set-top is dead or, if not, how long it has to live. So, what's your answer? Is the set-top dead?

Pace set top boxesMP: (Laughs) If the set-top box is dead I'd better find a new career. A lot of people talk about the TVs, they talk about the over-the-top services, they talk about the Internet but I think the set-top box is around for a long time because it, more or less, is a utility.

FC: How so?

MP: I don't think TVs can keep up with the way the technology moves. 3DTV is a pretty good example. If you buy a TV today that's not HDMI 1.4 you run into a problem switching between regular and 3D. Assuming that speed of technology is there, you can your cable guy and you start having what you require to do 3DTV.

FC: OK, so the set-top's there. Does it become something you buy at retail-another piece of consumer electronics for the home entertainment center?

MC: I don't think it goes retail but I absolutely view it as a piece of consumer electronics equipment although it might not fit in the strict definition.

FC: How about the entertainment center? How does it fit there?

MP: It becomes the glue. It's a converged device that becomes the glue. People aren't swapping out their flat panel TVs every year but people absolutely could switch out set-top boxes whenever they want. They could call up the cable company and say 'I want this' and odds are that they'll have it.

FC: Odds are also that they'll have a fight with the cable operator first since no cable operator wants to invest in still more technology that's given--even with a lease--to end users. When does cable give up on this subsidization model?

MP: I can't speak for the cable guys and their paybacks and all those things. I don't want to say they're used to it but my guess is it's so ingrained today in their financials, if they could get rid of it, I guess they would, but they haven't so they see some value in it.