[itvt]: What are your responsibilities at Scientific-Atlanta?

Cistola: There are 2 groups here that work together on developing our products: the product management group, which is made up of product managers who are assigned to various products; and the development folks, our engineers. They work with our customers to define and develop new products. And I work with both to make sure that we've actually captured what the benefits of the various products are, that we've communicated inside of our company what the benefits are, what our sales strategy should be, how we go to market with the products. At the same time, I work with the cable operators to make sure we're developing marketing tools that will support their marketing efforts for the various services that they want tied to those products. I go out and listen to the operators, talk to the people at the field level and the corporate level about what their goals are, and what tools they might need in order to be successful with various products.

[itvt]: How did you end up at Scientific-Atlanta? Could you tell us a little about your background?

Cistola: I was born and raised in Redwood City, California. Then we moved to Atlanta, where I finished high school. I then went to Georgia Tech, where I studied industrial engineering. The year before I graduated, I went to work at Scientific-Atlanta, just for the summer. And then, when I graduated, I went back to work for them, working on the materials side and the industrial engineering/manufacturing side. I stayed with the company about 6 or 7 years. My husband and I decided we wanted to have children, and found out we were having twins. I stayed out for 2 years and then re-entered the workforce, working in production engineering for a company that sold medical equipment to hospitals. I did that for around 6 years, and it was there that I had the opportunity to move from the engineering side into product management, and I discovered I loved it. Then, after short stints at a couple of other companies, I came back to Scientific- Atlanta when they were just launching digital.

[itvt]: What did you do when you moved back to Scientific-Atlanta?

Cistola: I was hired as the hardware product-line manager, so I had responsibility for headend equipment and set-top boxes.

[itvt]: At what point did you understand what ITV was going to be? At what point did S-A communicate to you that they were moving in that direction?

Cistola: Actually, S-A had talked about it before I arrived on the scene, that's for sure. In fact, since the very beginning, our position had always been that our platform was the best because it supported ITV applications and that's what it was designed for.

[itvt]: How long ago was that? How long ago were they aware as a company that that was the direction they were going to go in?

Cistola: I'd have to ask the architects. If you look at the design cycle, it was probably at least 10 years ago.

[itvt]: What are your top priorities right now?

Cistola: My top priority really ties back to the Explorer 8000. We've got a product that consumers really want, but we're in an industry whose financial situation--like that of the economy in general--is not the best right now. So the key is to figure out how do we make a business case that works, so that the industry as a whole doesn't pass by what we consider this huge opportunity. And, as you know, it's much more difficult to do that when there's not as much growth, and when the financial constraints are what they are today. So that's really what I see as my challenge.

[itvt]: What makes you think that the 8000 boxes are a product that the consumer wants?

Cistola: Well, partly because of general industry research, where they've looked at consumer acceptance of the TiVo and Replay products, and partly from the research that we've done directly with consumers. For example, I just came back from interviewing employees at one customer site. I interviewed them one-on-one on camera, and when you look these people in the eye, and you ask them questions--they're not being paid to answer these questions any particular way--it's obvious that the product is right, that they want control of their TV, that they want to control the programming when they watch it, and that this product offers that to them. And I think what this kind of product has been missing for so long--I'm talking about standalone DVR's--is value for the consumer. If a consumer has to go and buy a piece of equipment for a few hundred dollars, and then pay for the service on a monthly basis, it's not that attractive. Whereas if you look at how the cable industry could offer the same kinds of capabilities to consumers, it's a much better value. For $9.95 I could get this product in my home, and I have no risk as a consumer if I change my mind. And, once consumers get this kind of technology, they don't want to give it back. So I think all of the right things are in place. And, as for programmers' concerns about protecting their content, the cable platform is very secure, and there are more controls that make it harder to make copies of programming, send them to friends, and that sort of thing.

[itvt]: So I take it you have no intention of offering anything similar to Replay TV's "send show" feature.

Cistola: No, we are not pursuing anything that would allow consumers to take studio content and send it to their friends. Part of the reason is that to create that programming costs a fortune. And if you set up your product to allow the kind of sharing of copyrighted content that's happening over the Internet, the whole industry loses value. Our focus is simply that consumers will pay for convenience. And we owe it not only to the cable operators, but also to the programmers, to protect the value of their investment in their content.

On the other hand, if you're talking about sharing content between different rooms within one household, we're definitely interested in enabling legitimate personal use of content.

[itvt]: You seem very sensitive to the concerns of programmers. Do you have a lot of interaction with them? What sort of things interest them from among the various technologies you're working on?

Cistola: Most of our interactions are with the operators. However, I would say the whole Nielsen issue is something that's going to come up more. Because if you have free-on-demand services, certainly broadcasters want Nielsen ratings to provide an accurate picture of how viewers are responding to them--so that's a new area we're looking at and trying to figure out how we can support it.

[itvt]: How is the 8000 box doing in the marketplace, and who are your competitors?

Cistola: We're actually doing really well. The product didn't even become available until August, and we had shipped 90,000 at the end of the last quarter. So that was a pretty quick uptake. For this product, we're competing against TiVo and Replay, not against our traditional competitors.

[itvt]: Motorola are working on a similar product, aren't they?

Cistola: They don't have one yet. We're hearing from customers that they're being told it will be about 9 months before Motorola has a similar product.

[itvt]: Who did you ship those 90,000 boxes to?

Cistola: A variety of operators. If you look at where we shipped them, the bulk of them did go to Time Warner, it's safe to say. Time Warner is already deploying them.

[itvt]: Are you getting any statistics back from these deployments?

Cistola: Yes, we're working with Time Warner on focus groups, and doing some quantitative research as well. At one location where we had a focus group, we sat in the room with the local Time Warner folks, and the folks from Time Warner corporate, and at the end of the session we just looked at each other and our jaws dropped. We were expecting to hear good things, but not as positive as what we heard from these consumers. And these were high-end subs, too. I'm not saying that every consumer's going to react the same way, but it was pretty exciting.

[itvt]: What kinds of things are they asking for that you haven't enabled on the box yet?

Cistola: They're pretty consistent in wanting HD on the box, and they are also interested in networking the product. So that you could have one 8000 in the home, and then have baby boxes in other rooms that could access that one server.

[itvt]: Turning to the cable operators: what do you find their priorities are when you speak to them?

Cistola: I think it depends on which operator you're talking to.

[itvt]: Comcast, for example?

Cistola: Well I think, from an overall perspective, VOD and DVR service are complementary offerings. What we find is that the operators all have a different idea of what the mix of the 2 offerings should be. I think with Comcast, they're definitely more on the VOD side, and less interested--at least today--in DVR.

[itvt]: Scientific-Atlanta also enables headend VOD for Comcast, right?

Cistola: We do. And, as I said, we feel that VOD and DVR are complementary offerings: that VOD is important because of all of the newer release movies, and that type of thing, that people want to view. But we think DVR is important because it enables similar functionality--but across all programming. It appeals to a broader audience. So, we think operators need to offer both.

[itvt]: And what about Time Warner?

Cistola: They really look at those offerings as being complementary as well. They're very bullish, in my opinion, on their DVR product, and they're very aggressive with VOD. Time Warner has always understood it's all about entertainment, and they're doing some very exciting things.

[itvt] What about Cox?

Cistola: Cox are very much into their triple play offering, and I think they've had great success with that. They're very diligent about understanding the business model behind anything they go for, and always want to be sure the technology they deploy is at a point that makes sense for their consumers. They have spent a lot of money and time developing their own labs, and do a lot of testing. We work with Cox a lot since their corporate headquarters are here in Atlanta, and actually a lot of ex-S-A people work at Cox.

[itvt]: And what about Charter?

Cistola: Yes, Charter is interesting…

[itvt]: They have a strong relationship with Motorola, right?

Cistola: Well, we certainly have had a relationship with Charter for a long time as well. I think Paul Allen has a lot to do with the culture shift you've seen at Charter over the past 3 or 4 years. Charter actually was one of the most aggressive companies with VOD, deploying it widely. They believed in VOD and they took it into the field. Initially it was with DIVA, and then they switched over to nCUBE. And I think they've done a tremendous job on the operations side, making all of that happen very quickly.

[itvt]: How's your ongoing relationship with them?

Cistola: With Charter? Good. We partner with Digeo as well. Charter isn't a stagnant target for us: it's always changing on different fronts, and we're engaging with new people all the time.

[itvt]: Can you talk about your new Cablevision relationship? How aggressive are they being with deployment? What are they asking from you, where do they want to go?

Cistola: I'm a little removed from the Cablevision relationship, but they seem very, very aggressive. And somewhat similar to Time Warner in that they're very focused on the consumer, on finding out what the consumer wants. They are actually investing a lot of their own dollars into creating the products that they believe the consumer wants. And they're so great on the ITV side, too. They really believed in that and have done great things with it.

[itvt]: Speaking of ITV, cable operators seem to be categorizing ITV as one type of experience, VOD as another, and DVR as another. It seems to me that they see all these technologies in a segmented way rather than as part of an ITV continuum? Why do you think this is?

Cistola: I think over the next 6 months they will see all those things as ITV. I think how we've defined ITV has changed in the past few months. People used to categorize VOD as being one kind of offering, with DVR maybe being an offshoot of that, and ITV always meaning Wink. But I think ITV is really being redefined, and I think operators in general will follow that definition. ITV incorporates all of these things, not just being able to click an icon on a screen.

[itvt]: Why do you think it changed in the past few months?

Cistola: I think the industry is just evolving and maturing. Instead of all these fragmented pieces, it's starting to come together.

[itvt]: Comcast recently announced that they would be investing over a billion dollars in upgrading their systems and networks. Are they calling you?

Cistola: Yes. We're calling them too. What a surprise!

[itvt]: What kinds of things do you think they want to roll out first? What kinds of boxes? What are you pitching to them?

Cistola: Well, we are definitely pitching the 8000. We're just getting started with having some meaningful conversations with Comcast about that. But Comcast also--if we go back a few years--seemed to talk a lot more about telephony than ITV applications. Initially it sounded like they didn't support VOD at all, and then in a matter of months it seemed like all of a sudden they were huge on VOD. So I think Comcast is an operator that really wants to understand the facts, and understand the finances--and then, when it's time to execute, they put everything behind it. So, we're just trying to share with them the facts that we have. With VOD, we did the same thing.

[itvt]: Taking a long-term perspective: at some point, everyone will have some kind of digital set-top box or DTV-ready TV set. What will the set-top box companies do then? How will they evolve their business model?

Cistola: Well, once you have that hardware in the field, you can update it: it's all about making the hardware more functional--so it's about adding software. And the bulk of where we spend our R&D dollars is not on the hardware side anyway, it is on the software side.

[itvt]: So what kinds of things are you working on in your R&D?

Cistola: Well, in the immediate future, I guess it would be HD capability on the 8000--although that's a hardware-oriented feature for sure, because storing HD content would require a lot larger hard drive. Also, we're working on networked DVR--there's a lot of software development involved with that. From what we're hearing, home networking, especially wireless home networking, is going to be a pretty hot technology going forward.

[itvt]: What about your EPG business? You just won a number of legal victories against Gemstar. What direction is the EPG market going in, and how will EPG's work with the next generation of set-top boxes?

Cistola: The EPG is key because that's where the consumer interacts. To make it easier to use, at the same time as you're adding on new services or interactive apps, that's really the goal. It keeps evolving, but hopefully it's getting less complex to the consumer. That's basically our focus.

[itvt]: Could you tell us about what S-A is doing internationally? Are you bringing your DVR boxes to the international market?

Cistola: You know, we're talking to customers in the international market, just because we're so sold on the product domestically. I've met with some of the international customers, and--no doubt because of the current financial situation of the cable operators in Europe--they say, "Well, you know, we don't know that we want to spend that much on a box, and you know, we're all about information-on-demand, not VOD and not DVR." It seems like in Europe the bulk of the customers we talk to are interested in games, ticketing, banking, and some of those apps that we haven't talked about much in the US in the past couple of years. So while we continue to meet and talk to international customers, and to provide them with the information that we're seeing here, we're not meeting with a huge "oh-I-get-it, I-have-to-have-it" response to our DVR technology in Europe.

[itvt]: On the other hand, DVR may well take off in Europe next year. In the UK, for example, Sky has already begun offering a DVR, the Sky+.

Cistola: I agree. We have to keep our finger on the pulse of what's going on over there. I think the more of this type of product gets in people's hands, the more we're going to start hearing our international customers ask questions about it. I think one factor in why DVR technology is more successful in the US than over there is that we have many more channels than they do, while they have many fewer commercials. For example, in Germany they're only allowed to have 2 ads in an hour-long program.

[itvt]: Do you have any plans for making inroads into the satellite-TV industry?

Cistola: We always have to do the math! We do look at the consumer satellite industry [note: Scientific-Atlanta sells a satellite receiver that is used by the US military to enable its personnel to receive programming from back home. The company also sells satellite receivers that are used by cable operators to receive programming at the headend], because certainly there are similarities to the business we're in. However, our allegiance has always been to the cable operators. We just understand that business, and we develop our products based on what cable operators tell us and what we hear together from consumers. And we think it could alienate our primary customers if we were to start supporting satellite. We do look at the possibility of doing so--as a public company you're always exploring your options--but I don't think that's in the near future.

[itvt]: Is Scientific-Atlanta exploring offering its boxes in retail?

Cistola: We're actively pursuing retail. We're working, for example, with Cox in Phoenix. They're already selling our HD set-top boxes through the retail channel.

[itvt]: Is Scientific-Atlanta a supporter of OCAP?

Cistola: Absolutely, we believe in OCAP. We even have an OCAP-capable box.

[itvt]: What conditions do you think need to be in place for ITV to really take off in the US?

Cistola: Hopefully, the industry will be able to develop some consistent messaging. The messaging on the value of ITV products and their benefits is still fairly fragmented today. One of the things we often talk about is whether we need some national communication on what ITV is all about, so that there is a consistent message. I think we're starting to move in that direction in the cable industry in terms of on-demand. Trying to answer the questions, what is on-demand? VOD? SVOD? CTAM has facilitated the beginnings of the process, and I think that it will go further. It would be a good idea to fund the development of consumer materials that can be used by multiple operators. Say, a video showing you how to use DVR, or the top 3 features of DVR.

[itvt]: It could be argued that, in order to communicate effectively about something, you have to truly believe in what you're trying to communicate. In general, do the higher-ups at S-A communicate effectively about the importance of ITV? Would you say that they believe in it, or is this just a business to them?

Cistola: It's not just a business to them. They live and breathe it. If you sat in some of our strategy sessions, you would see it. Jim McDonald, our CEO, is one of the biggest proponents of ITV--whether it's DVR, VOD, or email. That's why it's an exciting place to work: because it's not just business, it's really…I mean, let's face it, these guys have made enough money. They don't have to work. They love this business.

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