Link Your House

June 22 (Bloomberg) -- TiVo Inc., armed with a federal court ruling backing the company’s digital-recording patent, plans to elbow its way onto every U.S. pay-television system to attract millions of new subscribers.

The Alviso, California-based DVR pioneer is in talks with pay-TV providers to sell its recording and playback service to more of the industry’s 103 million U.S. customers or license its technology, according to two people with knowledge of the plans.

“They will leverage this to become a much bigger player,” said Anthony Shaw, a partner and intellectual property litigator at Dewey & LeBoeuf LLP in Washington. “They don’t want to be a patent-holding company.”

The June 2 ruling against Dish Network Corp., the second- largest satellite TV service, gives TiVo a chance to boost revenue by adding to its 3.2 million subscribers. The company, which has struggled to make money, may also become a buyout target for Dish or the larger DirecTV Group Inc. as the satellite companies seek an advantage over each other, said Chris Marangi, an analyst with Gabelli & Co. in Rye, New York.

For $12.95 a month, TiVo subscribers can record, pause and replay shows in progress, and access thousands of movie rentals online from Amazon.com Inc., Netflix Inc. and Blockbuster Inc., all from the living-room TV. That dwarfs the video-on-demand offerings of pay-TV. The company also sells DVRs and provides software in cable and satellite set-top boxes.

Time Warner Talks

TiVo is in talks to provide service through Time Warner Cable Inc., the second-largest U.S. cable-TV provider, Landel Hobbs, the New York-based pay-TV service’s chief operating officer, said on a June 11 conference call. TiVo already has deals with Comcast Corp. and DirecTV, the largest U.S. pay-TV companies.

TiVo declined to comment on its discussions with pay-TV companies, said Mike Boccio, an outside spokesman. Time Warner Cable, which has 13.1 million video customers, wouldn’t elaborate on Hobbs’s comments.

DirecTV declined to discuss TiVo, said Darris Gringeri, a spokesman. Dish, based in Englewood, Colorado, also declined comment, said spokeswoman Kathie Gonzalez.

A federal judge in Texas ruled that Dish and satellite- equipment provider EchoStar Corp., both controlled by Charles Ergen, violated TiVo’s patent on technology that allows viewers to record and play back video at the same time.

‘Come to Terms’

TiVo “can go around to everyone and say, ‘You have to come to terms with us, we have already taken on Dish and our patents withstood,’” said Shaw, who has represented Intel Corp. and Samsung Electronics Co. “If there was an easy way around the patent, Dish would have already adopted one.”

The court ordered Dish to disable offending players and provide notice before attempting a workaround. Dish and EchoStar were ordered to pay $103 million to cover royalties while they continued to provide their DVR product. Both are appealing and have told the court they are developing a DVR that won’t use TiVo technology.

TiVo leapt 53 percent after the ruling. The shares fell 55 cents to $10.50 today in Nasdaq Stock Market trading, giving the company a market value of $1.1 billion. DirecTV, based in El Segundo, California, slid 11 cents to $23.57 on the New York Stock Exchange. Dish declined 66 cents to $14.52.

The legal victories haven’t yet translated into sustainable profit. With about $250 million in annual sales, TiVo lacks the heft of larger pay-TV providers. The company spent more building and marketing its digital-recording devices last year than it received in hardware sales.

TiVo reported its first annual profit of $104 million in March, the result of damages paid earlier by Dish and EchoStar, also based in Englewood. In May, the company recorded a fiscal first-quarter loss of $4.13 million as sales slid 9.7 percent to $54.9 million. Subscribers fell 16 percent.

Litigation ‘Not Preferred’

In a June 8 report, Mark Argento, an analyst at Craig- Hallum Capital Group LLC in Minneapolis, also identified Amazon, Apple Inc., Cisco Systems Inc., Microsoft Corp. and Netflix as possible TiVo suitors. Officials at Seattle-based Amazon and Los Gatos, California-based Netflix declined to comment.

“We do not anticipate any changes in our current working relationship with TiVo,” Terry Alberstein, a spokesman for San Jose, California-based Cisco, said in an e-mail. The company makes set-top boxes and DVRs.

Apple, based in Cupertino, California, and Redmond, Washington-based Microsoft, which operate services that sell movies, music and video games, also declined to comment.

TiVo wants pay-TV companies to let subscribers choose between DVR services, said the people, who declined to be named because the company’s deliberations are private. Alternatively, TiVo may seek licensing or other revenue, they said.

Comcast, DirecTV

Other pay-TV operators may also be infringing, Chief Executive Officer Tom Rogers said on a May 28 conference call.

“Is it certainly possible that we will find ourselves unable, in certain cases, to establish a commercial relationship,” Rogers said. “In those cases, will we consider litigation? Obviously, but that’s not our preferred approach.”

DirecTV plans to offer high-definition TiVo in 2010. The company has more than 18 million U.S. subscribers and could gain an edge over Dish with an exclusive accord with TiVo, Craig Moffett, an analyst at Sanford C. Bernstein & Co., wrote in a June 3 report.

Dish would probably have to pay more than DirecTV or Comcast in a settlement with TiVo, said Marangi. Gabelli held 56,000 TiVo shares as of March 31, according to data compiled by Bloomberg. Philadelphia-based Comcast, with 24.1 million cable subscribers, offers DVRs with TiVo in the Boston area and is expanding the service to Chicago.

‘War Chest’

Spokesman for Verizon Communications Inc. and AT&T Inc. said their TV services don’t infringe TiVo patents. Atlanta- based Cox Communications Inc. has an agreement with TiVo. Bethpage, New York-based Cablevision Systems Corp., which is developing a remote recording system, and Charter Communications Inc., based in St. Louis, declined to comment.

“TiVo is putting a war chest together in case they have to go after other providers in court,” Shaw said. “They probably expect some other providers will put up a fight, too.”

By Andy Fixmer

ATLANTA -- Imagine if you could use the internet anywhere in the city of Atlanta. Imagine no more -- the reality is that Atlanta is now the largest WiFi hotspot in the United States.

It would take you about an hour to drive through it; and it provides internet speeds that play streaming high definition video.

Carol Luther brought her laptop to the Starbucks in Ansley Mall to use their WiFi to get on the internet because a tree took out a phone line at her house.

"In my neighborhood, there are like 3 billion trees," Luther said. "Like they just cut out enough space for the house, okay. So every storm, something's out."

If she had a new WiFi service that will be unveiled in Atlanta on Tuesday, she wouldn't have to worry about where she is. No more being tied to her home for internet.

"Then I want to go to my mother's house and kick it with her, she's 80 years old so you know I'd like to just hang out, but then I can't do anything," she said.

Clearwire Communications has brought wireless internet to the city of Atlanta. For about $40 a month, you can get the internet at three times the speed of phone cards, anywhere within a 1,200 square mile radius.

"It would be like speeds that you get at home or at work. So instead of having to go home or go to use the internet and get those super fast speeds, you get that anywhere you go," said Clearwire GM Marc Brachman.

Clear wireless and its WiMax technology have created the largest hotspot in the United States -- and all it takes to connect is a small USB modem.

Imagine sitting in the back of your car, driving from Cherokee County through Atlanta on the Downtown Connector, all the way to Stockbridge, and having seamless internet on your laptop.

Kids today are increasingly savvy at using things like computers and cell phones—this much is no surprise. But, according to a new report from the NPD Group, children's use of tech is growing exponentially and is changing over time to reflect their parents' changes in technology usage. There are differences between genders when it comes to different devices, too, and more kids than ever are getting their own laptops, cell phones, and other electronics.

NPD sampled 3,212 US households with children between the ages of 4 to 14 who have used at least one electronic device. The firm found that TVs and computers remained in the top two devices used by kids, though there has been a shift away from standard-definition TVs to HDTVs and from desktops to laptops. Of course, this is because adults are also shifting to HDTVs and laptops—therefore, that's what's available in the house. Still, NPD notes that there's an increase in kids who have their own laptops, suggesting that parents are buying them specifically for the child's use.

In fact, households with kids already have an average of 11 consumer electronics devices, and a third of parents reported that they planned to buy a device specifically for their kids over the next year. Predictably, younger children will be the recipients of educational toys while older kids will get things like digital cameras and cell phones. Thirty percent of kids in the survey had their own digital music player, while 37 percent had their own gaming handheld, and 26 percent of kids had their own console.

NPD added that kids' usage of things like music players, laptops, and digital cameras has grown at an "impressive" rate—37 percent this year, compared to only 6 percent in 2005. And, when it comes to things like text messaging, nearly half of all kids with cell phones are using it. They're also moving away from using cell phones as verbal communication devices altogether and only communicating over text... as most parents with teenagers will tell you.

Finally, it turns out that girls are more likely to use laptops and cell phones in general, though NPD did not note by how much. The findings fall in line with traditional stereotypes where girls are more likely to want to communicate with others—now via laptop and cell phone.

Either way, it's clear that kids are being exposed to new technologies earlier as various devices become integral to our daily lives. Not only that, but parents are beginning to adopt their children's preferred communications methods in order to stay in touch with them—a report from AT&T last October indicated that 76 percent of parents feel like they can keep up with their kids' activities through text messaging better than any other method.

By Jacqui Cheng

As cable companies move toward their own digital transition, your tricked-out home theater setup could lose favorite TV channels and functionality.

For months, you've been hearing about the impending digital TV transition now scheduled to happen on June 12; in fact, you probably prepared for it long ago. This transition marks the time when over-the-air broadcast stations will finally make the switch from analog to digital.

Meanwhile, however, a second, much-less-discussed digital transition is already under way among the nation's cable providers. This separate upgrade may cause you to lose TV channels that you've come to expect, or to pay more in monthly equipment fees to your cable provider to get the TV -- or it may render useless some of your precious home-entertainment setup.

Read on for a detailed breakdown of what's happening, why it's happening, how the cable operators are dealing with the situation, and how all of it affects you. Let's start by looking at how to tell whether you'll be affected by the change.

Warning signs that you're in cable trouble

People tend to assume that they are completely set for the digital TV transition if they have a cable subscription. And that's true -- but only for the broadcast channels (ABC, CBS, Fox, NBC and a clutch of others).

But have you tuned into a cable TV station recently and noticed a message announcing that it's no longer available? Or have you read marketing material from your cable provider that says you'll need a cable box on each of your TVs in order to view your favorite channels? Both are indicators that analog stations you know and love could cease to be available to you.

This less-publicized cable digital upgrade by some cable companies is already affecting the range of popular cable channels that typically fall between channels 20 and 90, including TV addict essentials such as AMC, CNBC, CNN Headline News, ESPN, History, MSNBC, MTV, Spike TV, TNT and the USA Network. Depending on your cable company, these channels may be available only if you have a cable box.

Prior to the digital upgrade, such channels usually did not require viewers to rent an extra-cost cable box in order to view shows. Instead, you could plug your coaxial cable from the wall directly into any of the following:

• An analog or digital television
• An older digital video recorder such as a Replay or TiVo (Series1 and Series2)
• A DVD recorder (or, gasp, a VCR)
• A Microsoft Windows Media Center PC
• A PC equipped with a TV tuner

In some cases, you'll simply be inconvenienced: You'll now need to have a cable box and an IR blaster attached to it in order for your device to communicate with the box to change channels, but you'll still be able to view and record analog video.

In other cases, though, you may be out of luck. You might not be able to record or even view your channels. However, companies like TiVo are working closely with Comcast -- the cable provider deploying the digital upgrade most widely -- to make its legacy devices as compatible as possible.

For example, if you're a single-tuner TiVo Series2 subscriber, you'll need to put a cable box between your wall connection and your TV. But since TiVo has updated its IR blaster database to control Comcast's equipment, you can tune the cable box via the far superior TiVo remote. If you're a Series 2 dual-tuner customer, however, some of those dual-tuner channels will no longer be viewable. This is because you have only one input on the TiVo, which means you aren't allowed to have more than one cable box connected. (Lost your IR blaster accessory for TiVo? The company will sell you a new one for $7.)

Cable's digital migration: Why it's happening

As cable companies push to achieve an all-digital world, the analog versions of existing channels are fast disappearing on some cable systems. This is happening because the cable operators are aggressively seeking ways to free up bandwidth for high-definition broadcasts and for additional programming channels. They are also interested in finding more bandwidth for services such as games, voice communications and interactivity. In the end, consumers will gain more access to digital services -- and cable companies will have more services to offer to consumers.

It's not all bad news: Customers who have a single TV in their home, set up in a straightforward, traditional arrangement, might (depending on the service) even get a little more for their dollar in the switch to digital. But enthusiasts who have complicated entertainment setups -- and people whose homes contain multiple TVs -- will feel the pinch.

Cable companies are pursuing two main strategies for freeing up bandwidth. Whether you're affected by either of these depends on a mix of where you live and what company provides your cable.

The first approach involves eliminating the analog feed for cable channels. Cable companies that take this approach -- Cablevision and Comcast -- are doing so with channels that they are also broadcasting in a digital format.

Approach No. 2 is termed switched digital video. In this situation, channels are on a system that includes a switch, so they get piped into your house only if your cable box requests them. The arrangement works similarly to the way video on demand does. Say you want Channel 132: You request it using your remote, after which the cable company sends the signal to your cable box. Before companies instituted this switch system, all signals were continuously broadcast through the pipe, and all you had to do was tune in to the station you wanted.

Switched digital works only with a set-top box, however. If you use a CableCard -- which some cable companies supply in place of a box, and which users can slip into newer TVs or digital video recorders (like TiVo's Series3 boxes) -- you'll find that the card can't communicate back to the cable provider. As a result, you won't be able to record channels on the switch. The next generation of CableCard, which supports Tru2way, will correct this deficiency. Tru2way allows interactive communication between the card and the cable company; unfortunately, as yet it remains a rarity.

Time Warner Cable has deployed switched digital in some markets; only two Time Warner markets -- New York and Los Angeles -- have gone all-digital (and even there, only in some areas). Cox Communications is using switched digital technology in Arizona, Northern Virginia and Orange County, Calif., and it plans to roll out the technology in other markets this year.

Our survey of the top five cable operators -- Cablevision, Charter, Comcast, Cox Communications and Time Warner Cable -- indicates that Cablevision and Comcast customers will be most affected by this transition.

Here's the full story.

Cablevision: Cablevision will be the first major cable provider to offer new customers digital-only service for its expanded basic channels. Broadcast and local channels will continue to be simulcast in analog for the foreseeable future. Many expanded basic channels will continue in analog as well (45 channels currently), but Cablevision has begun eliminating various duplicate analog feeds of stations that it carries in digital format. The affected channels include ABC Family, AMC, BET, CNN Headline News, CSPAN, FUSE, Galavision, History, Lifetime, MSNBC, MTV, MTV2, Spike TV, TV Land, VH1 and WE. To receive these channels, you must attach a cable box to each television you plan on using, at a cost of $6.75 per box per month.

The company says that more than 91 percent of its 3.1 million customers have digital service, but a representative acknowledges that this figure doesn't distinguish between subscribers with all-digital setups and subscribers who have one cable box in the home for digital service but additional TVs set up for analog service. (For example, a subscriber may have a cable box connected to a 55-inch plasma HDTV in the den, but no such arrangement for TVs in the bedroom, kitchen and basement -- and yet with analog service the subscriber can currently receive MSNBC on all four TVs.) Cablevision is offering its analog-only customers the option of accepting a free digital set-top box and free digital navigation for one year. If you have multiple TVs, however, you get no additional break.

Charter: Charter will offer an analog simulcast of broadcast stations. According to the company, some regions have migrated to the digital tier, but as yet it has no plans to go all-digital systemwide. Charter says that it's treating the digital migration as a gradual process. A representative notes that only a handful of channels have gone from analog to digital in expanded basic, but eventually all of them will migrate. "We have tried not to make any sweeping changes for our customers," the representative says.

Comcast: Comcast is pursuing in its migration to digital full-throttle: The company began what it calls "Project Cavalry" back in 2005 (some markets, including Chicago and Philadelphia, have already undergone the transition). Once the migration is complete, customers must have a set-top box for every TV in the house (either a fully interactive box or what Comcast refers to as a "digital TV adapter") to receive Comcast's cable channels.

Comcast doesn't expect to complete its systemwide transition until the end of 2010, and probably on into 2011. "It's a complete coincidence that the government picked a [DTV transition] date that happened to be in the midst of our Project Cavalry," says Derek Harrar, general manager of video services for Comcast. Comcast's digital transition does not affect the 20 to 30 channels of broadcast and local programming, which is "why we're comfortable with saying there's no impact, because [this project] has no impact on the broadcast channels."

Comcast isn't charging extra for customers to go to an all-digital starter level of service. Existing analog customers making the switch will get a free set-top box, with video-on-demand and two-way communication between the box and Comcast (additional boxes will rent for $7 a month). A bonus for subscribers with multiple televisions in the home: All customers, including existing digital-cable customers, are eligible to receive two free one-way converter boxes. Called a Digital Transport Adapter, the box transforms digital signals into analog. The DTA thus does for expanded basic cable channels what a DTV converter box does for over-the-air broadcast channels.

Cox Communications: Cox isn't going all-digital at this time. The company will continue to offer a strong lineup of analog channels, which means minimal to no impact on your current setup if you don't have a cable box. A representative says that Cox believes such a lineup will help sharply differentiate it from competing cable companies. According to Cox, the signal will actually be down-converted from its digital format, meaning that consumers will receive both over-the-air digital programming and some digital cable programming in analog format. On Cox.com, the company states its position explicitly: "For at least three years after the June 12, 2009, deadline, Cox will continue to offer analog broadcast signals to customers who do not receive Cox's digital services."

Time Warner Cable: Time Warner plans to use switched digital to free up bandwidth. A representative notes, "We are generally migrating only a couple of our markets to all-digital (New York and Los Angeles), and in some cases only parts of those markets. At this time, we don't have any plans to migrate the rest of the country." But the representative adds, "It's not hard to see a world where everybody would be all-digital." Sixty-seven percent of Time Warner's customers are already are subscribing to digital packages; the company didn't say what number of those customers already have boxes. Time Warner charges $7 to $9 per month for its set-top boxes, depending on the customer's location and on the type of box. If you live in an area where Time Warner has gone all-digital, you'll need a box.

By Melissa J. Perenson, PC World