Set-Top Internet Access Becoming Reality

Internet access via a set-top box is still a relatively new feature, especially in North America, but Cahners In-Stat predicts the market for Internet set-top boxes will grow from 6.9 million units in 2000 to more than 74 million in 2005.

According to In-Stat’s report “Set Top Box Internet Access: Planting Seeds for a Walled Garden“, as broadband penetration rates and consumer requests for iTV services increase, the market for set-top boxes will experience an overall five-year compound annual growth rate of 60.8 percent.

“Each segment of the market is attempting to find the best combination of hardware and software to provide added value to consumers and drive demand,” said Cindy Wolf, an In-Stat analyst. “Growth barriers include the need for consumer education, the need to modify the business models for services and the current downturn in the economy.”

Customers have yet to fully realize the value they receive from using these services because there are not many boxes with activated Internet access applications. But In-Stat believes digital cable boxes are the most realistic boxes to offer Internet access (at least in the North American market), because the cable transmission network is currently being used to provide high-speed data, and the box already supports streaming video, providing more of a natural fit than other boxes.

For satellite users, Internet access via the DBS set-top box will occur slowly primarily due to the lack of two-way access with the satellite. However, the multicasting abilities already utilized by DBS providers use the same bandwidth whether the data stream is sent to one user or 1,000 users, making it ideal for Webcasting.

The increases in capability and connectivity offered in video game consoles indicates that these boxes are evolving into living room entertainment gateways, offering interactive features such as Internet access and DVD players.

The number of digital set-top boxes worldwide is set to reach almost 400 million by 2007, according to Jon Peddie Associates (JPA), which means more opportunities for consumers to use technology and the Internet for their home entertainment. Digital set-top boxes encompass a growing number of stand-alone devices that sit in the home entertainment center. JPA’s forecast includes subscriber television boxes such as cable and satellite, and advanced set-top boxes including game consoles, DVD video players, Internet television, entertainment PCs and PVRs.

“The struggle between low cost and the increased capabilities of digital set-top boxes will continue to provide great challenges for the industry,” said Christine Arrington, JPA senior consumer media technology analyst. “However, technology will be integrated incrementally and the consumer will increasingly welcome new capabilities over the next five years.”

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