* Execs have "general malaise" towards Google
* Have previously clashed with Google on net neutrality
* Google has shown TV ambitions with Google TV
By Yinka Adegoke and Liana B. Baker
NEW YORK, Aug 16 The pay-TV industry is
nervously watching Google Inc's (GOOG.O) acquisition of
Motorola Mobility (MMI.N) -- the largest supplier of set-top
boxes to consumers' homes. [ID:nL3E7JF1LD]
While the mobile device business of Motorola Mobility has
naturally attracted most of the attention, cable executives
immediately noticed that for them the deal means working with a
company they have clashed with in the past on a range of issues
from so-called net neutrality to piracy.
"There's a general malaise towards Google with us and I'm
sure with the other cable companies," said one executive at a
large cable provider who asked not to be named as his company
would likely still have to deal with Google. "If this was HP
(HPQ.N) or Microsoft (MSFT.O) I'm sure we'd have been
Cable and phone companies have viewed Google suspiciously
ever since the No. 1 search engine used its muscle to get
regulators to back 'net neutrality' rules that would prevent
Internet service providers from rationing access to their
networks. The cable and ISPs wanted to be able to manage
congestion by blocking certain traffic or charging for passing
through their pipes, for example.
Pay-TV providers are also concerned about potential privacy
invasions since Google could theoretically use the set-top
boxes to mine subscribers' personal data to sell advertising.
"If they have a box in the majority of U.S. homes, there's
going to be a need to ensure that privacy isn't abused," said
another cable executive."
Comcast Corp (CMCSA.O) and Time Warner Cable TWC.N, the
two largest U.S. cable providers, among others, both use
Motorola boxes, meaning the deal now gives Google immediate
access to millions of living rooms across the country.
Though many analysts described Motorola's set-top box
business as an afterthought, Google has shown its desire to
enter the pay-TV business through last fall's launch of the
underwhelming Google TV set-top box made by Logitech LOGN.VX.
The company also acquired a small Web DVR software company
called Sage TV.
The proposing of business models on the part of technology
companies like Google, Apple Inc (AAPL.O) and Amazon.com
(AMZN.O) that could potentially unravel the cable's industry's
cozy $100 billion relationship with programmers is another
"Here's Google, the company most frequently mentioned as a
potential disrupter of the pay-TV ecosystem, suddenly finding
itself in the awkward position as one of the pay-TV industry's
largest suppliers," said Craig Moffett, analyst at Bernstein
If Google's technology ends up inside pay-TV customers'
living rooms that could give the technology giant some much
needed leverage in negotiations.
"They are highly scared of folks coming in and developing a
direct relationship with their subscribers and driving ad and
application revenue where the operator is not at the center of
that subscriber relationship," said a senior executive at
another supplier to the cable industry.
Cable insiders point out that the majority of Motorola's
set-top boxes in North America are designed to follow an
industrywide standard, so Google would not have as much freedom
as it seems to change the boxes.
"Google can't suddenly come in and say 'get rid of all that
software and use our software' because Motorola's customers
demand that Motorola follow the standards the cable industry
has set in place," said an executive at a set-top maker who did
not want to be named commenting publicly about a rival.
Not all cable insiders view Google's potential arrival as a
bad thing, however. Some insiders told Reuters that the search
giant's technology prowess could help accelerate updates to the
set-top box for a fast-changing pay-TV world which faces
competition from numerous online video rivals such as Netflix
Inc (NFLX.O) and Hulu.
But the cable industry's biggest hope -- and defense -- is
that the set-top box will eventually lose its relevance as more
functions are shifted online or into the computing "cloud".
New York-based Cablevision Systems Corp CVC.N has
released a remote storage digital video recorder which
completely gets rid of the need for a traditional DVR box made
by suppliers like Motorola. Time Warner Cable is likely to be
next and other cable companies will follow.
(Reporting by Yinka Adegoke, Editing by Peter Lauria and