By John Walko EETimes Supply Network (05/09/2007 12:54 PM EST)

LONDON — Sales of set top boxes (STBs) are expected to grow at an annual rate of 13 percent to 120 million units by 2011, according to market research group Understanding & Solutions. Last year, 65 million cable, satellite and digital IPTV boxes were shipped, the researchers say.

The figures exclude Digital Terrestrial Adapters and Free-To-Air (FTA) satellite receivers, which together helped drive the total worldwide STB market to 115 million units in 2006. Understanding & Solutions (Dunstable, England) suggests this sector will further drive growth over the next few years as analog switch-over to digital gathers pace in most markets.

The researchers say the pay-TV STB market will be driven by the upgrade of the maturing digital satellite market, high growth for digital cable — largely driven by the conversion of analog customers — and new market growth from IPTV as telcos and other broadband service providers drive into "triple play" and digital video services.

"The growth of Online TV and Video is both threat and opportunity to the STB industry," says Andrew Carroll, consultant at Understanding & Solutions. "Broadband may possibly impact the need for dedicated digital TV infrastructure long term, but, for the next 2 to 3 years at least, subscription service providers actually see the STB as a way to network and integrate broadcast and IP services into one seamless 'any content, any screen' proposition for customers."

Some of the challenges highlighted by the researchers are security and Quality of Service, with perhaps the biggest challenge being the drive towards open systems such as interactive CableCard in the U.S. This allow consumer electronics products like TV receivers to interface to subscription networks by the addition of a simple Conditional Access Module (CAM).

However, Understanding & Solutions suggests that the impact of this will be limited, at least for the next two to three years, when "operators are likely to continue to use STBs as competitive levers in the battle to acquire and retain subscribers."