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Were Cable MSOs Prepared for the OTT Disruption?

Why are the legacy U.S. cable service providers only now starting to address industry analyst concerns that they seem unprepared for the emerging alternative low-cost over-the-top (OTT) video offerings? Could this unfortunate scenario have been avoided, and did they have the means to counter this offensive?

Traditionally, the cable TV industry has relied upon MPEG-based technology to transport digital video signals. But there has also been a longstanding awareness of Internet Protocol (IP) video solutions, according to the latest market study by In-Stat.

There's three reasons that MSOs should have acted sooner: In comparison to MPEG, IP is considered to be less-expensive and more efficient. An integrated DOCSIS cable modem is a capable, and yet often underutilized, part of the digital cable set-top box. The availability and applications of IP video has expanded exponentially -- this ongoing transformation was apparent for several years. There's no mystery here.

"When it comes to IP transport, the cable modem is the perfect conduit of IPTV to the cable TV household," says Mike Paxton, Principal Analyst.

"In fact, cable modems are already performing this task in millions of households, just not through the digital set-top box to the TV set. Instead, this IP video is commonly being displayed on the PC."

Of course, IP video is also on more TV screens as a result of the agile upstart vendors, such as Roku, having the foresight to got direct-to-consumer -- by-passing the sedate legacy pay-TV service distributors.

In-Stat's latest market study reveals the following:

- The percentage of cable set-top boxes (STB) with integrated modems will double from 2009 to 2014.

- Worldwide legacy digital cable STB unit shipments are forecast to decline by 8 percent in 2010.

- Regional markets poised for growth include Europe, where the demand for high-definition (HD) cable STBs is fueling some growth.

- Revenue from digital cable STBs in Latin America will approach $200 million by 2014.

- The value of semiconductor components used in cable STB products was $2.8 billion in 2009, only fractionally higher than in 2008.

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