Intel (NASDAQ: INTC) apparently wants to build a set-top box. The company has started conversations with TV networks and studios. Intel may be among the largest tech companies in the U.S. and have an almost universally recognized brand. But the tops of the TVs owned by most Americans already have enough boxes to make the frame of the screen collapse under their weight. Intel is far too late to a business that even the most adroit technology companies have tackled without success.

The cable box is now three decades old. Cable was first build for rural areas that could not get broadcast signals. It quickly moved to cities as pay-TV channels like HBO were created. The cable box has not been pushed out of most homes, despite the efforts of companies like Tivo (NASDAQ: TIVO), Apple (NASDAQ: AAPL) and telecom firms with fiber to the home. These fiber products have been championed by the likes of AT&T (NYSE: T) and Verizon (NYSE: VZ), which have had a place in American homes where they have provided telephone service for years. Even that presence has not helped them much.

The only industry that can fairly claim it has dislodged cable in many cases is satellite TV. Dish Network (NASDAQ: DISH) and DirecTV (NASDAQ: DTV) each have millions of subscribers. But satellite TV firms were early in the video-to-home business, offering service not long after cable companies did.

The attraction of the home living room has been a magnet to the world’s largest tech companies for years, because it is a multibillion-dollar business. Microsoft (NASDAQ: MSFT) tried to establish its own home entertainment system, which was Windows based. The project, begun in the early 2000s, was still-born. Microsoft found that consumers did not view TVs as they did PCs. And it had the same problem competing with the nearly universal adoption of cable and satellite. One more service made the living room too crowded.

Video service providers like Netflix (NASDAQ: NFLX) have had success in the living room, but Netflix does not replace the cable box. It complements it. Netflix may compete with cable VOD, but its does so over broadband and is not the primary signal to the television set. Some cable companies fear that Netflix will create a de facto cable system. That would be difficult. Netfilx would have to set relationships with content providers as disparate as local TV stations and MTV. There is a tiny chance Netflix could do that, but the process would take years. Cable TV operators established those relationships years ago.

Intel, which may create a new set-top service, will be unable to convince consumers that it should be the third, fourth or fifth entertainment and information product in the living room.

Douglas A. McIntyre

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