Cisco, Hitachi to dive into set-top boxes

Cisco Systems, known for its high-end networking gear, is now tackling the home market.

Cisco and Hitachi will demonstrate a low-cost TV set-top box offering high-speed Internet access and a host of Web and video features this week at the Consumer Electronics Show in Las Vegas, according to one of their development partners.

Cisco and Hitachi have developed a reference design for a sub-$500 set-top device capable of offering video-on-demand, voice-over-cable, high-speed Web surfing, and digital cable. It runs on Microsoft's Windows CE operating system, according to Oak Technology, which is providing the graphics and audio technology for the device.

Cisco's presence in the home will not be limited to set-top boxes: Also today, Cisco debuted its long-awaited plan to tap the nascent market for home networking equipment, which could link everything from TV sets to furnaces into an integrated household system.

The company announced plans to build a high-speed network using existing cable lines with General Instrument for AT&T and customers of cable television giant Tele-Communications Incorporated (TCI), which AT&T plans to acquire. Additionally, cable modems with the Cisco brand will start rolling out.

The set-top introduction will be a bold departure for Cisco, known for high-end equipment far from the consumer realm.

Such consumer devices symbolize the force of converging digital technologies, which urges even big and successful corporations to compete in untested fields. In particular, low-cost set-top boxes providing enhanced television and Internet services are expected to be a major source of revenue for cable operators as the mass market for low-end Web devices takes off.

The Cisco-Hitachi set-top will be shown off at Cisco's trade show booth, according to Tony Rodrigues, senior marketing manager for Oak Technology. The Sunnyvale, California-based company is providing the MPEG decoder for digital cable and pay-per-view technology.

"This is a reference platform right now, but all the technology in it is proven," Rodrigues said. "It's a very modular platform."

Cisco and Hitachi announced a design partnership last September, ostensibly for purposes of developing low-cost data and voice communications tools for use with the Net. In fact, the set-top box will offer IP-over-cable and high-speed cable modems from Cisco and a Hitachi SH4 processor, according to Rodrigues.

A Hitachi spokesman declined to comment on the product's specifics. Cisco could not be reached for comment.

The reference design has been shown to manufacturers, including Scientific-Atlanta and General-Instrument, Rodrigues said. The finished product may be sold to cable operators or directly to consumers through the retail channel.

"This has been shown to all the major cable set-top box manufacturers. Our primary targets are people who want to get into digital cable systems," he said. "But Hitachi does have a retail outlet."

The device is expected to retail for around $500, although Rodrigues noted that many of the video functions carried out by separate chipsets in the reference design could be integrated in future versions, lowering total manufacturing costs.

"[In] the next generation towards the end of the year, the cost will be reduced," he said. "You would see more integration of the functions--digital television functionality could easily be built in," he said, referring to over-the-air digital television broadcasting. The current reference design supports digital cable broadcasts.

Set-top boxes based on the Windows CE operating system have already been announced from various manufacturers and are expected to be distributed by cable operators like TCI to their subscribers this year.

Separately, a similar set-top device will be announced today by WebTV, which offers an online service for its set-top boxes, and EchoStar Communications, which offers satellite TV receivers. That product is expected to offer Web browsing and interactive television services.

PC maker Gateway will incorporate a version of the EchoStar box to bring satellite transmission capabilities to its Destination line, according to sources.

Bloomberg contributed to this report.