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End to TV Set-Tops Clash Sought


Top executives from the consumer electronics and cable television industries are privately trying to strike a deal to end their long, bitter battle over set-top boxes.

Set manufacturers have sought for more than a decade to make TVs that could plug into any cable company's network without need for a set-top box, just as telephones and answering machines can plug directly into any phone company's lines. But ever since cable operators introduced digital cable service in the late 1990s, no sets have been truly "cable ready"--not even the latest digital TVs.

The dispute is complex, with the two sides battling to control on-screen program guides and other potentially lucrative services. Also at stake are consumers' ability to record certain shows and to watch premium high-definition television programs on older HDTV sets.

Pressure from Congress and regulators has improved prospects for a deal. And Wednesday, House Energy and Commerce Chairman W.J. "Billy" Tauzin (R-La.) circulated a draft bill that would enable TV sets to offer simple digital cable services without a set-top box.

Leaders of the talks have promised to strike a compromise by Oct. 10, or turn the problem over to federal regulators to solve. Officials on both sides confirmed the talks but declined to comment on the status of the negotiations, saying they had agreed to remain mum until the talks concluded.

"There are a number of complex technical and business issues on the table in discussions that involve multiple companies in the cable and consumer electronics industries," said Marc Osgoode Smith, a spokesman for the National Cable and Telecommunications Assn. "The exchange of views between industries has been constructive but because these private discussions are ongoing, we prefer not to comment further."

About two-thirds of all U.S. homes have cable TV, and about half of all cable customers have set-top boxes. That percentage rises dramatically in communities where cable operators have pushed digital cable service aggressively, such as Pasadena, where Charter Communications Inc. offers HBO and other premium channels only to digital cable subscribers.

Set-top boxes not only cost consumers an additional $3 to $6 per month, but they also interfere with some of the devices that consumer-electronics companies are eager to sell. For example, most set-top boxes disable a TV set's "picture-in-picture" feature, and many digital set-tops have trouble working with personal video recorders.

To solve the compatibility problems once and for all, set manufacturers need to add two things to their TVs: the circuitry required to tune in digital cable channels, and a plug-in security module that can unlock premium channels. Before they do so, however, manufacturers want the cable operators to drop some of the conditions their research-and-development arm, Cable Laboratories, has placed on the security module.

Top executives from the cable and consumer-electronics industries have held three meetings this summer, with a fourth scheduled for this month. Meanwhile, CableLabs officials continue to negotiate privately with individual set manufacturers, trying to satisfy their concerns over the security module.

According to sources close to the manufacturers, one of their main complaints is that the cable operators want to give Hollywood studios and other programmers too much power to block digital copying and downgrade HDTV signals through the most common connectors.

Cable executives say they simply want the flexibility to offer Hollywood the same protection it gets from satellite operators. And Hollywood studios say they need the option to downgrade some HDTV signals to guard against piracy.

Some manufacturers suspect the cable operators want to limit home recording, forcing consumers to rely on the video-on-demand and network-based recording services that the cable operators are introducing.

Giving consumers a taste of what the cable operators could do, Cablevision Systems Corp., the nation's seventh-largest operator, recently blocked digital copying of all programs on its digital-cable channels--a restriction the company blamed on a software bug.

Manufacturers also want to build digital-cable circuitry into their sets without many of the advanced features that CableLabs requires, such as support for video-on-demand. And they want to provide their own electronic program guides, a prime piece of on-screen real estate. Cable operators see the program guide as fertile ground for advertising, as well as a launching pad for fee-based services.

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