Nagra TVKey Looks To Eliminate Set-top Boxes Around The World

Swiss-based encryption-systems developer Nagra used last month’s CES 2017 to showcase a new conditional access (CA) platform that can eliminate the set-top box (STB) from the pay cable and satellite TV business paradigm, while bringing television manufacturers a potentially lucrative ancillary revenue stream.

The company demonstrated at the show its TVKey platform, which is being implemented through a joint venture with Samsung Electronics. Ironically, the system was introduced as the FCC under the Trump Administration effectively killed a proposal by former FCC Chairman Tom Wheeler to open up the cable box to third parties. Wheeler had hoped that by encouraging third-party cable boxes the resulting competition would help consumers eliminate burdensome hardware fees assessed by cable providers. Wheeler’s plan that would have made a pay TV provider’s programming available to third-party STB makers was controversial. It was likely that requirement would have forced the FCC to alter its proposal.

In addition, U.S. cable providers argued that regulatory action was unnecessary because the cable box would soon be going the way of the dodo bird. Almost as soon as Ajit Pai took over as the new FCC chairman, Wheeler’s cable box proposal vanished from items on circulation in front of the FCC, and for now, at least, it seems that cable boxes will remain on cable systems, kept alive by new initiatives like Comcast’s successful X1 platform.

But Nagra and other CA providers suspect that whether mandated by the FCC or occurring gradually over time by market forces, STBs and CA won’t necessarily be so tightly fused together in the U.S. Penetrating the U.S. CA market, due to the long STB and CA duopoly of Arris and Technicolor, has been nearly impossible for competing CA providers. But, Nagra recently announced it had signed a deal with Altice USA to be the cable operator’s primary content security provider.

How was this possible? Nagra had a pre-existing contract with Altice to provide content security in other regions of the world. When Altice acquired Cablevision, the third largest U.S. cable multi-system operator, it opened the door to the use of Nagra’s content security platform on former Cablevision systems, because Altice traditionally employs a cookie-cutter approach to standardizing its technology across regions.

Competing CA providers have been trying for years to cause cracks in the content security duopoly. All U.S. MSOs will now be closely watching Altice and Nagra and assessing whether there is enough flexibility in the market to choose different STBs and CA suppliers.

Initially, Nagra’s content security will be adapted to work with Altice STB, but Nagra believes that, in time, systems like TVKey will become an attractive and cost-effective upgrade. The most obvious savings come from the elimination of truck rolls and equipment costs, which may cover, in part, the loss of revenue traditionally generated by equipment leasing fees.

In contrast to the U.S. market, the most immediate trend in Europe and other parts of the world is the gradual elimination of cable hardware. TVKey is a CA security system that uses a USB key device, essentially another form of a Smart Card. Instead of being inserted into a STB CA slot, it is an unpowered USB key that plugs into the back of television set. It carries all of the decryption and de-scrambling required for a pay-tv operator.

In developing a collaboration with Samsung, Nagra convinced the TV (and cable box) manufacturing giant to place Nagra’s secret keys in a system-on-a-chip used by the TV set. This allows a TV equipped with the appropriate cable (or satellite) tuners to interact with the TVKey to unlock channels to which the TV owner has subscribed.

Under the business model, Samsung sells the right to the use of the TVKey to a cable or satellite provider, packages it with the TV and sells the TV to consumers. The TVKey becomes the property of the cable provider from that point forward, and gives the service a foot in the door to landing new subscribers through special promotional incentives tied to the TV purchase.

Initially, TVKey is rolling out on special Samsung 6000 series television sets equipped with tuners to receive satellite service through a German satellite TV provider. Unlike the U.S., it is not uncommon for European TVs (and other parts of the world) to have integrated terrestrial, satellite and cable tuners. In these cases, they lack only the encryption system to open their services up to viewers. Of course, Nagra hopes TVKey will be the solution.