The U.S. cable industry, hoping to revive innovation and beat back the emergence of online video, is turning for ideas to Silicon Valley.
Leading players from Time Warner Cable to Comcast Corp will next year set up a showpiece research center in the heart of a region that has spawned recent momentous trends, from social networking to the mobile revolution.
Spearheaded by Louisville, Colorado-based CableLabs, a nonprofit research and development consortium established by the industry, the center hopes to work on projects with startups and established firms; hire engineers; and engage leading universities such as Stanford in experimenting on new tech.
The industry needs to "get re-energized," said Jerald Kent, chief executive of Cequel Communications and co-founder of Charter Communications. "Part of the message is this is not your grandmother's cable business."
The cable industry is grappling with a persistently poor service reputation while fending off stiff competition from Internet-based services like Netflix Inc and Hulu.
Hundreds of thousands of American homes have already dropped their cable or satellite subscriptions this year, hurt by high unemployment and a weak housing market, not to mention regular programming blackouts due to contract disputes.
The cable industry still generated $97.6 billion in revenue last year, with more than 57 million video customers in the U.S., according to research firm SNL Kagan. But steady customer losses have spurred speculation that households will increasingly cut the cord and drop the expense of paying for TV altogether.
The new research facility will look into these trends and explore how it can engage the technology community to overcome some of the issues and challenges facing the industry.
The new facility, which will mainly house engineers, will open in mid-2013 and consolidate CableLabs' current office in San Francisco. It will create "an innovation funnel," Phil McKinney, CableLabs' CEO, said in a news briefing last week.
McKinney, who joined CableLabs in June after having spent over nine years at Silicon Valley giant Hewlett-Packard in various leadership roles, wants developers and other startups to consider cable as a powerful platform for their services and offerings.
CableLabs - whose board members include Time Warner Cable CEO Glenn Britt, Comcast Cable CEO Neil Smit and Cablevision Systems CEO Jim Dolan - will also closely work with its members who have a presence in the area, including Comcast.
CableLabs, which has 175 employees in total of which 100 are engineers, will also forge deeper connections with universities in the Bay Area such as Stanford University, McKinney said.
The group will establish "co-innovation labs" and aim to work with both companies and universities around specific projects, he said, adding that CableLabs will be hiring engineers in the Valley for the new facility and transferring some staff from its Colorado office.
The upcoming expanded presence in San Francisco Bay Area is expected to help the industry get closer to large technology companies, some of which are looking to disrupt the space by attempting to deliver video on demand and on any device.
The cable industry will be able to learn from fast-growing Silicon Valley tech companies on how to serve the younger demographic better, some of the members of CableLabs said.
The proliferation of smartphones and tablets have added to the complexity of the changing nature of people's viewing habits but Comcast's Smit said the company and the industry sees the popularity of mobile devices as an opportunity.
"Mobile is growing and we want to provide our services in mobile format," Smit said, adding that providing wireless internet is also becoming an important area for the company. "Wi-fi is a very important part of our business, both indoor and outdoor aspects of it."
(Reporting by Poornima Gupta; Additional reporting by Liana Baker in New York; Editing by Tim Dobbyn)