TiVo’s Letter to the FCC and Will Microsoft Lose the Comcast HDTV Deal?

Through an anonymous comment on my blog, and originally sourced through TiVo Community, I was pointed to this letter that was submitted a few days ago to Michael Powell’s office at the FCC by TiVo’s General Council Michael Zinn.

This letter is available as a public record through the FCC’s website where all correspondence to the FCC gets posted for public viewing.

Although much of the content of the letter should not come as a surprise to people, the letter really does show how much at odds TiVo appears to be with the cable operators and that TiVo believes that the cable companies are merely paying lip service to the idea of the CableCARD and have no intention, to TiVo’s detriment, of really promoting it.

“It is abundantly clear that cable?s ?support? of CableCARD fundamentally conflicts with cable?s own market imperatives. Cable simply has no economic incentive to enable consumer electronics companies to provide consumers with CableCARD boxes that are in any way competitive with operator-supplied integrated set-top boxes.”

“Cable?s objective of controlling the look, feel, and operation of all set-top boxes, whether leased or purchased, was clearly articulated last week at the Smith Barney Citigroup Global Entertainment, Media & Telecommunications conference in Arizona. According to news reports, Comcast?s CEO is quoted as saying: “As we move more and more into an Internet-type feeling on your television in a digital world ?we know that the navigation system is critical. And whether it’s video navigation with lots of screens and multiple choices … or whether it’s someday voice navigation, we want to be in control of the consumer’s experience, not be using a third party.”

TiVo is especially concerned that while a multi stream cable card has been developed, cable operators have no intention of using it as it would give companies like TiVo more of an opportunity in the marketplace at their expense. Instead cable operators plan on using a more limited functionality cable card which would not allow TiVo the opportunity to implement some of their proposed upcoming features as easily like a dual tuner.

“In a good faith show of support for CableCARD, at last week?s Consumer Electronics Show, TiVo announced its intention to build such a device, but TiVo has little confidence that such a product would be supported adequately by cable operators or find acceptance among cable subscribers. It would be an expensive and unwieldy device with increased hardware costs, increased customer costs resulting from the need to lease two CableCARDs, and a host of complexities resulting from the fact that dual tuner functionality was not designed to be provided by two CableCARDs.”

The letter also attaches a news article pulled from thestreet.com that references a new deal between Comcast and ailing software company Liberate. The article seems to imply that even as Microsoft/Comcast are rolling out their Foundation project in Washington for the public, Comcast views Microsoft as more of a competitor in this space than a partner and that Liberate might be developing a new version of of set top box software for Comcast.

“In contrast to IBM’s legendary strategic misstep of ceding the onscreen personal computer experience to Microsoft, Comcast CEO Roberts reiterated Monday — in both word and deed — that the cable operator will jealously guard and guide the onscreen gateway to the world of advanced television and other services.

While Microsoft is a supplier of set top-box software to Comcast, Roberts’ comments served to demonstrate that in the world of TV, Microsoft is just another supplicant pleading for the attention of the nation’s largest operator of cable TV systems. More evidence came in the form of a newly announced transaction with the ailing TV software supplier Liberate Technologies (LBRT:OTC BB).

Though a Microsoft executive doesn’t see any particular danger to Microsoft from Liberate, one analyst does. “Liberate had basically fallen off the face of the earth as a competitive threat,” says Josh Bernoff, principal analyst at Forrester Research. But on Monday, says Bernoff, “it suddenly became a whole lot more important.” At issue is the software enabling customers of Comcast and other cable operators to receive, and to navigate through, various advanced services.”

This letter is a very interesting read and gives more visibility into TiVo’s thinking than we are typically allowed to see. Thanks to whoever pointed this letter out to me.