The traditional notion of the cable set-top box (STB) is being radically redefined. The STB, the primary cable component inside millions of US homes, is morphing, expanding, and extending with new features and functionality. STBs are shrinking into small devices that turn digital signals into analog, growing into intelligent boxes that can handle multiple types of video, and extending their capabilities through home networks, mobile smartphones, and broadband-connected devices such as the iPad.

Never before have cable multiple system operators (MSOs) had so many options from which to choose for their in-home customer premises equipment (CPE) at the same time as they are seeking to reduce capex and STB inventory, according to a new Heavy Reading Cable Industry Insider, “Set-Tops Gone Wild: iPads & IP Revolutionize Cable Devices.”

Depending on the needs of a particular household, cable operators can deploy multi-room HD DVRs, digital terminal adapters (DTAs), next-generation STBs, digital gateways, smart remotes, or applications for connected devices. They can support interactive TV, IPTV, or even 3DTV.

Never before have cable multiple system operators (MSOs) had so many options from which to choose for their in-home customer premises equipment (CPE) at the same time as they are seeking to reduce capex and STB inventory

Most connected devices, including the recently reintroduced Apple TV and Android-fueled Google TV, are regarded as competitive to cable because they support over-the-top (OTT) video. However, as the report explains, Comcast Corp. (Nasdaq: CMCSA, CMCSK) demonstrated how the unique characteristics of a connected device can be complementary to cable when the company introduced its iPad application during the 2010 Cable Show. In a landmark demo, Brian Roberts, chairman and CEO of Comcast, showed how the iPad could be used to extend STB capability and become a remote control for Comcast’s Xfinity video services.

Many service providers are now developing iPad apps. Simultaneously, cable is exploring the advantages of providing customer access to more services that exist “in the cloud” of cable and Internet networks. Cable is seeking to add IP video support to STBs and add video support to cable modems, blurring the line between the two units, the report says. The Federal Communications Commission (FCC) is proposing its own solution, called AllVid, that could result in a broadband-connected retail device by the end of 2012.

Meanwhile, major MSOs plan to reduce their overall inventory of leased STBs and rein in related capex. Next-generation network architecture and the range of available devices enable operators to tailor customer offerings using an inventory mix of thick intelligent boxes, thin clients, and retail devices.

The report takes a high-level view of cable’s strategic options with STBs and related video devices, and it profiles 12 leading companies in the STB market. The increasing options for cable CPE reflect the ongoing redefinition of what cable is and how the industry will deliver its services.

— Craig Leddy, Contributing Analyst, Heavy Reading Cable Industry Insider

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