## RULEMAKING OVERVIEW AND PRELIMINARY MARK ET

AND TECHNOLOGY ASSES SMENT:

ENERGY EFFICIENCY PROGRAM FOR CONSUMER

PRODUCTS:

Set

- top Boxes and Network Equipment

January 2012

U.S. Department of Energy Assistant Secretary Office of Energy Efficiency and Renewable Energy Building Technologies Program Appliances and Commercial Equipment Standards Washington, DC 20585This Document was prepared for the Department of Energy by staff members of

Lawren ce Berkeley National Laboratory1

- i CHAPTER 1. INTRODUCTION

TABLE OF CO NTENTS

1.1 SCOPE AND PURPOSE OF DOCUMENT ................................................................... 1-1

1.2 STRUCTURE OF DOCUMEN T .................................................................................... 1-21

- ii LIST OF ACRONYMS

ACA American Cable Association

APD Auto Power Down

CA Conditional Access

CEA Consumer Electronics Association

CO 2 Carbon dioxide

DIF Digital Interoperability Forum

DOCSIS Data Over Cable Service Interface Specification

DOE Department of Energy

DSL Digital Subscriber Line

DTA Digital Transport Adapter

DVR Digital Video Recorder

EPA Environmental Protection Agency

FCC Federal Communications Commission

FM Frequency Modulation

HD High Definition

HD

- DVR High

- Definition Digital Video Recorder

HEVC High E fficiency Video Coding

HomePNA Home Phoneline Networking Alliance

IP Internet Protocol

IPTV Internet Protocol Television

kWh Kilowatt -hours

MoCA Multimedia over Coax Alliance

MSTV Association for Maximum Service Television

NAB National Association of Broa dcasters

NCTA National Cable and Tel ecommunications Association

OTA Over the Air

OTT Over -the-top

RUI Remote User Interface

SBCA Satellite Broadcasting and Communication Association

SD Standard Definition

SD

- DVR Standard Definition Digital Video Record

S TB Set -Top Box

TEC Total Energy Consumption (kWh/year)

TWh Terawatt -hours (equal to 1 billion kWh)

UEC Unit Energy Consumption1

- 1 CHAPTER 1. INTRODUCTION

1.1 SCOPE AND PURPOSE OF DOCUMENT

The United States (U.S.) Department of Energy (DOE) Appliances and Commercial Equipment Standards Program, within the Office of Energy Efficiency and Renewable Energy (EERE)’s Building Technologies Program (BT), develops and promulgates test procedures and energy conservation standards for consumer appliances and commercial equipment. As a general matter, the process for developing standards involves analysis, public notice, and consultation with interested parties.

Title III of the Energy Policy and Conservation Act (EPCA), as amended (42 U.S.C. 6291 et

seq. ), sets forth various provisions designed to improve energy efficiency. Part A of Title III of EPCA (42 U.S.C. 6291–6309) established the Energy Conservation Program for Consumer Products Other Than Automobiles,” which covers consumer products and certain commercial products (referred to as “covered products”) a . In addition to specifying a list of covered residential and commercial products, EPCA contains provisions that enable the Secretary of Energy t o classify additional types of consumer products as covered products.

DOE recently published a Notice of Proposed Determination (76 FR 34914, June 15, 2011) (hereafter referred to as “proposed determination”) that preliminarily determined that set -top
b oxes (STBs) and network equipment meet the criteria for covered products because classifying products of such type as covered products is necessary or appropriate to carry out the purposes of EPCA, and the average U.S. household energy use for STBs and network equipment is likely to exceed 100 kilowatt-hours (kWh) per year. As a result, DOE has initiated test procedure and energy conservation standards rulemaking activities for STBs and network equipment. DOE may prescribe energy conservation standards if t he product meets certain additional criteria, such as “average per household energy use within the United States” in excess of 150 kWh and “aggregate household energy use” in excess of 4.2 billion kWh, for any prior 12-month period. (42 U.S.C. 6295(l)(1))

This document is a stand-alone report that provides an overview of the rulemaking process for the benefit of interested parties, and provides a preliminary market and technology assessment
for STBs

. The preliminary assessments are subject to revision in fu ture phases of the r ulemaking

process , and do not constitute a final assessment by DOE.

a For editorial reasons, upon codification in the U.S. Code, Part B was re

- designated Part A.1

- 2 1.2 STRUCTURE OF DOCUMEN T

The document is structured as follows:

• Chapter 1: Introduction.

• Chapter 2: Rulemaking and Analytical Overview. This chapter details the rulemaking process and how DOE generally seeks input from interested parties over the course of the rulemaking activity. This chapter also outlines all the stages of the analysis that DOE typically performs in support of energy conservation standards.

• Chap ter 3: Preliminary Market Assessment. This chapter provides an initial overview of the current STB market, including major manufacturers, major service providers, annual shipments, installed base, average prices, and existing mandatory and voluntary regula tory programs.

• Chapter 4: Preliminary Technology Assessment. This chapter provides an initial overview of the current technology used in STBs, unit and national energy consumption, and opportunities for energy reduction. The chapter also discuss es potential product

evolution in the near future.

• Appendix. The appendix provides a list of definitions relevant to STBs.2

- i CHAPTER 2. RULEMAKING AND ANALYTICAL OVERVIEW

TABLE OF CO NTENTS

2.1 INTRODUCTION ........................................................................................................... 2-1

2.2 RULEMAKING PROCESS AND STAKEHOLDER PARTICIPATION ..................... 2-4

2.2.1 Notice of Proposed Rulemaking ...................................................................................... 2-5

2.2.2 Final Rule ......................................................................................................................... 2-6

2.3 MARKET AND TECHNOLOG Y ASSESSMENT ........................................................ 2-6

2.3.1 Market Assessment .......................................................................................................... 2-6

2.3.2 Technology Assessment

................................ ................................ ................................... 2-7

2.4 SCREENING ANALYSIS .............................................................................................. 2-7

2.5 ENGINEERING ANALYSIS .......................................................................................... 2-7

2.6 MARKUPS ANALYSIS ................................................................................................. 2-8

2.7 ENERGY USE ANALYSIS ............................................................................................ 2-9

2.8 LIFE

- CYCLE COST AND PAYBACK PERIOD ANALYSIS ..................................... 2-9

2.9 SHIPMENTS ANALYSIS ............................................................................................ 2-10

2.10 NATIONAL IMPACT ANAL YSIS .............................................................................. 2-10

2.10.1 National Energy Savings

................................ ................................ ................................ 2-11

2.10.2 Net Present Value of Consumer Benefit ........................................................................ 2-11

2.11 CONSUMER SUBGROUP AN ALYSIS ...................................................................... 2-12

2.12 MANUFACTURER IMPACT ANALYSIS

................................ .................................. 2-12

2.13 EMPLOYMENT IMPACT AN ALYSIS ....................................................................... 2-12

2.14 UTILITY IMPACT ANALY SIS ................................................................................... 2-13

2.15 EMISSIONS ANALYSIS .............................................................................................. 2-13

2.16 MONETIZING CARBON DIOXIDE AND OTHER EMIS SIONS IMPACTS ........... 2-15

2.16.1 Social Cost of Carbon .................................................................................................... 2-15

2.16.1.1 Monetizing Carbon Dioxide Emissions ....................................................... 2-15

2.16.1.2 Social Cost of Carbon Values Used in Past Regulatory Analyses ............... 2-17

2.16.1.3 Current Approach and Key Assumptions .................................................... 2-18

2.16.2 Valuation of Other Emissions Reductions ..................................................................... 2-20

2.17 REGULATORY IMPACT AN ALYSIS ....................................................................... 2-20

LIST OF FIGURES

Figure 2.1.1 Flow Diagram of Analyses for the Rulemaking Process ..................................... 2-22

- 1 CHAPTER 2. RULEMAKING AND ANALYTICAL OVERVIEW

2.1 INTRODUCTION

The purpose of this chapter is to provide an overview of the rulemaking process and to describe the procedural and analytical approaches that DOE anticipates using to evaluate energy conservation standards for STBs and network equipment. This chapter is also intended to inform interested parties of the process of th e standards rulemaking for STBs and network equipment and to encourage and facilitate stakeholder input during the rulemaking. It should be noted that this chapter is merely the starting point for developing standards and is not a definitive statement

with respect to any issue to be determined in the rulemaking.

Section 6295(o)(2)(A) of 42 U.S.C. requires DOE to set forth energy conservation standards that are technologically feasible and economically justified and would result in significant additional energy conservation. The analytical framework is a description of the methodology, the analytical tools, and relationships among the various analyses that are part of this rulemaking. This chapter discusses the analysis DOE intends to conduct to fulfill the statutory requirements and guidance for this standards rulemaking. For example, the methodology that addre sses the statutory requirement for economic justification includ es analyses of life

- cycle cost; economic impact on manufacturers and users; national benefits; impacts, if any, on utility companies; and impacts, if any, from lessening competition among manu facturers. Information regarding this rulemaking will be maintained on the DOE website at: http://www.eere.energy.gov/buildings/appliance_standards/

Figure 2. 1.1 summarizes the analytical components of the standards-setting process. The focus of this figure is the center column, identified as “Analyses.” The columns labeled “Key Inputs” and “Key Outputs” show how the analyses fit into the rulemaking process, and how the analyses relate to each other. Key inputs are the types of data and information that the analyses require. Some key inputs exist in public databases; DOE collects other inputs from stakeholders or persons with special knowledge. Key outputs are analytical results that feed directly into the standards-setting process. Lines connecting analyses show types of information that feed from one analysis to another. In general, the key outp uts of each stage of the analysis become key inputs for the subsequent stages of analysis.2

- 2 Figure 2.1.1 Flow Diagram of Analyses for the Rulemaking

Process2

- 3 The an alyses performed and reported as part of the rulemaking process include:

• A market and technology assessment to characterize the relevant markets and existing technology options, including prototype designs.

• A screening analysis to review each technology option to decide whether it is technologically feasible; is practicable to manufacture, install, and service; would adversely affect product utility or product availability ; or would have adverse impacts on health and safety.

• An engineering analysis to develop cost- efficiency relationships that indicate the

manufacturer’s co st of achieving increased efficiency.

• A markups analysis to develop distribution channel markups that relate the manufacturer production cost (MPC) to the cost to the consumer.

• An analysis of the annual energy use of the considered products.

• Life

- cycle cost ( LCC ) and payback period (PBP) analyses to calculate, at the consumer level, the savings in operating costs (minus maintenance and repair costs) throughout the estimated average lifetime of the considered products , compared to any increase in purchase and installation cost likely to result from increased energy efficiency

.

• A shipments analysis to forecast shipments of the considered products, which are then used to calculate the national impacts of standards on energy and net present value (NPV).

• A national impact analysis (NIA) to assess aggregate impacts at the national level of potential energy conservation standards for the considered products, as measured by the national energy savings (NES) and net present value (NPV) of total consume r economic impacts.

• A manufacturer impact analysis (MIA) to assess the potential impacts of energy conservation standards on manufacturers’ capital conversion expenditures, marketing costs, shipments, and research and development costs.

• An environmental assessment (EA) to analyze the potential reduction in power plant

emissions of CO 2 , NO X and Hg resulting from reduced consumption of electricity associated with energy savings from the considered products.

• A monetization of emissions reduction benefits to estimate the monetary value of benefits resulting from reduced emissions of CO 2 and NO X

.

Section 2.2 provides an overview of the rulemaking process. The analyses are described in more

detail in sections 2.3 to 2.17

.2

- 4 2.2 RULEMAKING PROCESS AND STAKEHOLDER PARTI CIPATION

When DOE evaluates any new or amended energy conservation standard for “covered products”

under EPCA, the statute, as amended, specifies that any standard DOE prescribes for consumer products shall be designed to “achieve the maximum improvement in energy efficiency. . . which the Secretary [of Energy] determines is technologically feasible and econo mically justified.” (42 U.S.C. 6295(o)(2)(A)) Moreover, EPCA states that the Secretary may not establish an amended standard if such standard would not result in “significant conservation of energy,” or “is not technologically feasible or economically just ified.” (42 U.S.C. 6295(o)(3)(B)) In determining whether a standard is economically justified, DOE considers, to the greatest extent practicable, the following seven factors:

1) The economic impact of the standard on the manufacturers and on the consumers of the products subject to such standard; 2) The savings in operating costs throughout the estimated average life of the covered products in the type (or class) compared to any increase in the price, or in the initial charges for, or maintenance expenses of the covered products which are likely to result from the imposition of the standard; 3) The total projected amount of energy (or as applicable, water) savings likely to result directly from the imposition of the standard; 4) Any lessening of the utility or the perf ormance of the covered products likely to result from the imposition of the standard; 5) The impact of any lessening of competition, as determined in writing by the Attorney General, that is likely to result from the imposition of the standard; 6) The need for national energy and water conservation; and 7) Other factors the Secretary considers relevant. (42 U.S.C. 6295(o)(2)(B)(i) and 42 U.S.C. 6316(a))

Additional statutory requirements for prescribing new or amended standards are set forth in 42 U.S.C. 6295(o)(1)– (2)(A), (2)(B)(ii)(iii), and (3) –(5); 42 U.S.C. 6316(a).

The process for developing efficiency standards involves analysis, public notice, and consultation with interested parties. Such parties (collectively referred to as stakeholders) generally include manufacturers, consumers, energy conservation and environmental advocates, State and Federal agencies, and any other groups or individuals with an interest in energy conservation standards and test procedures. DOE considers stakeholder participation to be a very important part of the rulemaking process. Accordingly, DOE actively encourages the participation and interaction of all stakeholders during the comment period provided at each stage of the rulemaking. The broad array of stakeholders who routinely provide comments promotes a balanced discussion of critical information required to conduct the standards rulemaking.

In conducting the test procedure rulemakings and the energy (and water) conservation standards rulemakings, DOE involves stakeholders through a variety of means, including formal public notifications ( i.e. , Federal Register notices) and public meetings. As discussed in further detail2

- 5 below, DOE anticipates the standards rulemaking process for STBs and network equipment to involve two major public notices, which will be published in the Federal Register:

• Notice of proposed rulemaking (NOPR). The NOPR will present: (a) a discussion of select comments received in response to any Request for Information (RFI); (b) the analysis of the impacts of standards on consumers, manufacturers, and the nation; (c) DOE’s weighting of the impacts; and (d) the proposed standard levels for public

comment.

• Final rule (see section 1.5). The final rule will present: (a) a discussion of comments received in response to the NOPR; (b) the revised analysis of the impacts of standards; (c) DOE’s weighting of the impacts; and (d) the standard levels DOE is adopting. The final rule also establishes the compliance dates of the standards.

In addition, DOE will publish in t he Federal Register a final determination of STBs and network equipment as a covered consumer product. The final determination will present: (a) a final definition of the covered products; and (b) responses to comments received from the proposed

determ in at ion (76 FR 34914, June 15, 2011).

2.2.1 Notice of Proposed Rulemaking

In developing the NOPR, DOE will first review and consider all the comments it received in response to any prior RFI. DOE will conduct complete engineering, economic, and environmental impact analyses at this stage of the rulemaking. These analyses generally include a consumer LCC subgroup analysis, a complete manufacturer impact analysis, a utility impact analysis, an employment impact analysis, an environmental assessment, and a regulatory impact analysis. See below for a description of these analyses.

DOE will describe the methodology used and make the results of all the analyses available on its website for review and comments. Based on comments by stakeholders, further revisions to the

ana lysis may be undertaken. This analytical process ends with the selection of proposed standard levels (if any) that DOE will present in the NOPR. DOE selects the proposed standard levels from the trial standard levels (TSLs) analyzed during the NOPR phase of the rulemaking. The NOPR, published in the Federal Register, will document the evaluation and selection of any proposed standards levels, along with a discussion of other TSLs considered but not selected (and the reasons for not selecting them).

The sel ection process for proposed efficiency standards generally runs as follows. For each product class, DOE will identify the maximum improvement in energy efficiency or maximum reduction in energy use that is technologically feasible. If DOE proposes a level that is below this maxtech level, it will sequentially explain the reasons for eliminating higher levels, beginning with the highest level considered. DOE will present the analysis results in the NOPR, with the details of the analysis provided in an accompanying Technical Support Document (TSD).2

- 6 DOE considers many factors in selecting proposed standards, as described above in section 2.2

. These factors and criteria are established by EPCA and take into account the many benefits, costs, and impacts of energy conservation standards. Additionally, DOE encourages stakeholders to develop joint recommendations for standard levels. DOE will carefully consider

such recommen dations in its decision process.

When DOE publishes the NOPR, it will provide the U.S. Department of Justice (DOJ) with a copy of the NOPR and TSD, in order to solicit feedback on the impact of the proposed standard levels on competition. DOJ will review these standard levels in light of any lessening of competition that is likely to result from the impo sition of standards. (42 U.S.C. 6295(o)(2)(B)(i)(V) and (B)(ii)) DOE will consider DOJ’s determination on the impacts of the proposed standard on competition in preparing the final rule. The NOPR is followed by a public comment period that includes one public meeting. DOE anticipates the comment period to be 50 days for STBs and network equipment.

2.2.2 Final Rule

After the publication of the NOPR, DOE will consid er public comments it receives on the proposal (including TSLs) and accompanying analyses. On the basis of the public comments, DOE will review the engineering and economic impact analyses and proposed standards and make modifications as necessary. In addi tion, before it issues the final rule, DOE will consider DOJ’s comments on the NOPR relating to the impacts of the proposed standard levels on competition, to determine whether changes to these standard levels are needed.

The standards rulemaking will conclude with the publication of the final rule. DOE will select the final standard levels based on the complete record of the standards rulemaking. The final rule will promulgate the final standard levels and their compliance date and explain the basis fo r their selection. The final rule will be accompanied by a final TSD.

2.3 MARKET AND TECHNOLOG Y ASSESSMENT

The market and technology assessment characterizes the relevant product markets and existing technology options, including prototype designs, for STBs and network equipment.

2.3.1 Market Assessment

When initiating a standards rulemaking, DOE develops information on the present and past industry structure and market characteristics for the products concerned. This activity assesses the industry and products, both quantitatively and qualitatively, based on publicly available information. As such, for the considered products, DOE will address the following: (1) manufacturer market share and characteristics; (2) existing regulatory and non -regulatory product efficien cy improvement initiatives; and (3) trends in product characteristics and retail markets. This information serves as resource material throughout the rulemaking.2

- 7 DOE reviews existing literature and interview manufacturers to get an overall picture of the markets for the considered products in the United States. Industry publications and trade journals, market research firms, government agencies, and trade organizations provide the bulk of the information, including information on: (1) manufacturers and the ir market share; (2) shipments by capacity; and (3) market saturation. DOE uses the most reliable and accurate data available at the time of each analysis in the rulemaking. All data will be available for public

review.

2.3.2 Technology Assessment

DOE typically uses information relating to existing and past technology options and prototype designs as inputs to determine what technologies manufacturers use to attain higher performance levels. In consultation with stakeholders, DOE develops a list and description of technologies for consideration for possible increases in energy efficiency of future products. Initially, these technologies encompass all those DOE believes are technologically feasible.

DOE also develops its list of technologically feasible design o ptions through consultation with industry analysts and manufacturers of components and systems, and from trade publications and technical papers. Since many options for improving product efficiency are available in existing units, product literature and direct examination provide additional information.

2.4 SCREENING ANALYSIS

The screening analysis examines various technologies as to whether they: ( 1 ) are technologically feasible; ( 2 ) are practicable to manufacture, install, and service; ( 3 ) have an adverse impact on product utility or availability; and ( 4 ) have adverse impacts on health and safety. As described in

section 2.3.2 above, DOE develops a n initial list of efficiency -enhancement options from the technologies identified as technologically feasible in the technology assessment. Then DOE , in

consultation with interested parties, review s the list to determine if these options are practicable to manufacture, install, and service, would adversely affect product utility or availability, or would have adverse impacts on health and safety. In addition, DOE removes from the list technology options that lack energy consumption data as well as technology options whose energy consumption cannot be adequately measured by existing DOE test procedures. In the engineering analysis, DOE further consider s efficiency enhancement options that it did not screen out in the screening analysis.

2.5 ENGINEERING ANALYSI S

The engineering analysis establishes the relationship between the manufacturing production cost (MPC) and the efficiency for each class of STB and network equipment. This relationship serves

as the basis for cost/benefit calculations in terms of individu al consumers, manufacturers, and the nation. The engineering analysis discusses the product classes DOE analyzes, the representative baseline units, the incremental efficiency levels, the methodology DOE uses to develop the2

- 8 manufacturing production costs, the cost

- efficiency curves, the projected impact of efficiency improvements on the considered products, and the methodology DOE uses to extend the analysis to low-shipment-volume product classes.

In the engineering analysis, DOE evaluates a range of product efficiency levels and their associated manufacturing costs. The purpose of the analysis is to estimate the incremental MPCs for a product that would result from increasing efficiency levels above the level of the baseline model in each product class. Th e engineering analysis considers technologies not eliminated in the screening analysis, although certain technologies are not analyzed due to negligible incremental efficiency improvements or the inability of existing DOE test procedures to measure any red uction in energy use. DOE considers the remaining technologies, designated as design options, in developing the cost-efficiency curves, which are subsequently used for the LCC and PBP analyses.

DOE typically structures its engineering analysis around one of three methodologies: (1) the design -option approach, which calculates the incremental costs of adding specific design options to a baseline model; (2) the efficiency

- level approach, which calculates the relative costs of achieving increases in energy ef ficiency levels without regard to the particular design options used to achieve such increases; and/or (3) the reverse

- engineering or cost -assessment approach, which involves a “bottom-up” manufacturing cost assessment based on a detailed bill of

materials derived from tear-downs of the product being analyzed.

Combinations of these approaches involve physically disassembling commercially available products, consulting with outside experts, reviewing publicly available cost and performance information, and modeling equipment cost. The efficiency levels that DOE considers in the engineering analysis are attainable using technologies currently available on the market or have been demonstrated in working prototypes. In addition, DOE associates some of the effic iency levels with specific technologies that manufacturers might use to provide interested parties with additional transparency of assumptions and results and the ability to perform independent analyses for verification.

2.6 MARKUPS ANALYSIS

DOE use s markups to convert the manufacturer costs estimated in the engineering analysis to consumer prices, which are then used in the LCC and PBP, and manufacturer impact analyses. To develop markups, DOE identifies how the products are distributed from the manufacturer to the customer. DOE calculates markups for baseline products (baseline markups) and for more efficient products (incremental markups). The incremental markup relates the change in the manufacturer sales price of higher

- efficiency models (the incremental cost increase) to the change in the retailer or distributor sales price.2

- 9 2.7 ENERGY USE ANALYSIS

The energy use analysis, which assesses the energy savings potential from higher efficiency levels, provides the basis for the energy savings values used in the LCC and subsequent analyses. The goal of the energy use analysis is to generate a range of energy use values that reflects actual product use in American homes. The analysis uses information on use of actual products in the field to estimate the energy that w ould be used by new products at various efficiency levels.

Measurements of field energy use often vary considerably from the rated usage as determined by the DOE test procedure. To determine the field energy use by products that would meet possible energy efficiency standards, DOE generally uses data for a wide ra nge of households. An example of such data might include a national sample survey of housing units that collects statistical information on the consumption of and expenditures for energy in housing units along with data on energy- related characteristics of the housing units and occupants.

2.8 LIFE

- CYCLE COST AND PAYBA CK PERIOD ANALYSIS

New energy conservation standards affect products’ operating expenses

— usually decreasing

them —and consumer prices for the products— usually increasing them. DOE analyzes the effec t of imposing standards on consumers by evaluating changes in the LCC of owning and operating the product. To evaluate the change in LCC, DOE uses the cost -efficiency relationship derived in the engineering analysis, along with the usage derived from the energy use analysis. Inputs to the LCC calculation include the purchase price of a product, energy expenses associated with operating the product, the lifetime of the unit, and a discount rate.

Because the installed cost of a product typically increases wh ile operating cost typically decreases in response to new standards, there is a time in the life of products having higher- than

baseline efficiency when the net operating

- cost benefit (in dollars) since the time of purchase is equal to the incremental firs t cost of purchasing the higher-efficiency product. The length of time required for products to reach this cost-equivalence point is known as the payback period (PBP).

Recognizing that several inputs to the determination of consumer LCC and PBP are either

variable or uncertai n, DOE conducts the LCC and PBP analysis by modeling both the uncertainty and variability in the inputs using Monte Carlo simulation and probability distributions. DOE develops LCC and PBP spreadsheet models incorporating both Monte Ca rlo simulation and probability distributions by using Microsoft Excel spreadsheets combined with Crystal Ball (a commercially available add

- in program).

As described above in section 2.7 , DOE develops samples of individual households that use the considered product . DOE is able to perform the LCC and PBP calculations for each household to account for the variability in energy consumption and electricity price assoc iated with actual users of the considered product . DOE identifies several other input values for estimating the LCC, including retail prices, discount rates, and product lifetime. DOE characterizes discount rates and product lifetime with probability distr ibutions.2

- 10 DOE develops discount rates for residential consumers from estimates of the interest rate, or finance cost, applied to purchases of residential products. Following accepted principles of financial theory, the finance cost of raising funds to purchase such products can be interpreted as: (1) the financial cost of any debt incurred to purchase products, principally interest charges on debt; or (2) the opportunity cost of any equity used to purchase products, principally interest earnings on household equity.

DOE considers installation, maintenance and repair costs for the efficiency levels considered in a rulemaking. Typically, small incremental changes in energy efficiency produce no, or only minor, changes in repair and maintenance costs over baseline efficiency products. Products having efficiencies that are significantly greater than baseline models can incur increased repair and maintenance costs, as they are more likely to incorporate technologies that are new to the industry.

2.9 SHIPMENTS ANA LYSIS

Forecasts of product shipments are needed to calculate the national impacts of standards on energy use and NPV, and future manufacturer cash flows. DOE deve lops shipment forecasts based on an analysis of key market drivers for each considered product . In DOE’s shipments model, shipments of products are driven by new housing construction, stock replacements, and other types of purchases.

The shipments models take an accounting approach, tracking market shares of each product class and the vintage of units in the existing stock. Stock accounting uses product shipments as inputs to estimate the age distribution of in -service product stocks for all years. The age distribution of

in -service product stocks is a key input to calculations of both the NES and NPV, because operating costs for any year depend on the age distribution of the stock.

DOE also considers the impacts on shipments from changes in product purchase price and operating cost associated with higher energy efficiency levels.

2.10 NATIONAL IMPACT ANALYSIS

The national impact analysis assesses the aggregate impacts at the national level of potential energy conservation standards for the considered products , as measured by the NPV of total consumer economic impacts and the NES. DOE determines the NPV and NES for the efficiency levels considered for each of the product classes analyzed. To make the analysis more accessible and transparent to all interested parties, DOE prepares a Microsoft Excel spreadsheet model to forecast NES and the national consumer economic costs and savings resulting from new standards. The spreadsheet model uses typical values as inputs (as opposed to probability distributions). To assess the effect of input uncertainty on NES and NPV results, DOE may conduct sensitivity analyses by running scenarios on specific input variables.2

- 11 Several of the inputs for determining NES and NPV depend on the forecast trends in product energy efficiency. For the base case (which presumes no standards), DOE uses the efficiency

distributions develo ped for the LCC analysis, and assumes some rate of change over the forecast period. DOE typically uses a roll -up scenario in developing its forecasts of efficiency trends after

standards take effect. Under a roll -up scenario, all products that perform at l evels below a prospective standard are moved, or rolled-up, to the minimum performance level allowed under

the standard. Product efficiencies above the standard level under consideration would remain the

same as before the standard takes effect.

2.10.1 National Energy Savings

The inputs for determining the NES for each product analyzed are: (1) annual energy consumption per unit; (2) shipments; (3) product stock; (4) national energy consumption; and (5)

site

- to

- full

- fuel -c ycle conversion factors. DOE calculate s the national energy consumption by multiplying the number of units, or stock, of each product (by vintage, or age) by the unit energy consumption (also by vintage). DOE calculates annual NES based on the difference in national energy consumption for the base case (without new efficiency standards) and for each higher efficiency standard. DOE estimate s energy consumption and savings based on site energy, and

converts the electricity consumption and savings to full

- fuel cycle energy. Cumulative energy saving s are the sum of the NES for each year in the forecast period.

2.10.2 Net Present Value of Consumer Benefit

The inputs for determining NPV of the total costs and benefits experienced by consumers of the considered products are: (1) total annual installed cost; (2) total annual savings in operating costs; (3) a discount factor; (4) present value of costs; and (5) present value of savings. DOE

calculates net savings each year as the difference between the base case and each standards case in total savings in operating costs and total increases in installed costs. DOE calculate s savings over the life of each product. NPV is the difference between the present value of operating cost savings and the present value of total installed costs. DOE typically uses a discount factor based on real discount rates of 3% and 7% to discount future costs and savings to present values.

DOE calculate s increases in total installed costs as the difference in total installed cost between the base case and standards case ( i.e ., once the standards take effect). Because the more efficient products bought in the standards case usually cost more than products bought in the base case, cost increases appear as negative values in the NPV. DOE expresses savi ngs in operating costs as decreases associated with the lower energy consumption of products bought in the standards case compared to the base efficiency case. Total savings in operating costs are the product of savings per unit and the number of units of each vintage that survive in a given year.

In addition to calculating the NPV of consumer benefit, DOE calculates a benefit that combines the NPV of the consumer savings, calculated for each efficiency level using 3% and 7% discount rates, with the presen t value of the potential economic benefits resulting from reduced CO 2 and

NO X emissions. See sections 2.15 and 2.16 for a discussion of the emissions analysis and

monetization of emissions reduction.2

- 12 2.11 CONSUMER SUBGROUP AN ALYSIS

The consumer subgroup analysis evaluates economic impacts on selected groups of consumers who might be adversely affected by a change in the national energy conservation standards for the considered products. DOE evaluates impacts on particular subgroups of consumers primarily by analyzing the LCC impacts and PBP fo r those particular consumers using the LCC spreadsheet model.

DOE typically analyzes the following subgroups: (1) low-income households; and (2) households solely occupied by senior citizens.

2.12 MANUFACTURER IMPACT ANALYSIS

The MIA assesses the impacts of ne w energy conservation standards on manufacturers of the considered products. Potential impacts include financial effects, both quantitative and qualitative, that might lead to changes in the manufacturing practices for these products. DOE identifies

these potential impacts through interviews with manufacturers and other interested parties.

DOE typically conducts the MIA in three phases, and further tailors the analytical framework based on interested parties’ comments. In Phase I, an industry profile is cr eated to characterize the industry, and a preliminary MIA is conducted to identify important issues that require consideration. In Phase II, an industry cash flow model and an interview questionnaire are prepared to guide subsequent discussions. In Phase I II, manufacturers are interviewed, and the impacts of standards are assessed both quantitatively and qualitatively. Industry and subgroup cash flow and NPV are assessed through use of the Government Regulatory Impact Model (GRIM). Then impacts on competition, manufacturing capacity, employment, and cumulative regulatory burden are assessed based on manufacturer interview feedback and discussions.

2.13 EMPLOYMENT IMPACT AN ALYSIS

New energy conservation standards can impact employment both directly and indirectly . Direct employment impacts are changes in the number of employees at the plants that produce the covered products, and at the affiliated distribution and service companies, resulting from the adoption of new standards. DOE evaluates direct employment impacts in the MIA. Indirect employment impacts may result from expenditures shifting between goods (the substitution effect) and changes in income and overall expenditure levels (the income effect) that occur due to the adoption of standards.

DOE typically i nvestigates the combined direct and indirect employment impacts of standards using the Pacific Northwest National Laboratory (PNNL)’s “Impact of Sector Energy Technologies” (ImSET) model. The ImSET model, which was developed for DOE’s Office of Planning, B udget, and Analysis, estimates the employment and income effects energy

- saving technologies produced in buildings, industry, and transportation. In comparison with simple2

- 13 economic multiplier approaches, ImSET allows for more complete and automated analysis of the economic impacts of energy conservation investments.

2.14 UTILITY IMPACT ANALY SIS

The utility impact analysis estimates the effects of energy conservation standards on installed electricity generation capacity and electricity generation. DOE typically a dapts NEMS, which is a large multi

- sectoral, partial -equilibrium model of the U.S. energy sector that the Energy Information Administration (EIA) has developed throughout the past decade, primarily for preparing EIA’s Annual Energy Outlook (AEO). In previous rulemakings, a variant of NEMS (currently termed NEMS -BT, BT referring to DOE’s Building Technologies Program), was developed to better address the specific impacts of an energy conservation standard. NEMS, which is available in the public domain, produ ces a widely recognized baseline energy forecast for the United States. The typical NEMS outputs include forecasts of electricity and natural gas sales, prices, and electric generating capacity.

DOE conducts the utility impact analysis as a scenario that departs from the latest AEO reference case. In other words, the energy savings impacts from amended energy conservation standards are modeled using NEMS

- BT to generate forecasts that deviate from the AEO reference case.

2.15 EMISSIONS ANALYSIS

In the e missions analysis, DOE estimates the reduction in power sector emissions of carbon dioxide (CO 2 ), nitrogen oxides (NO X ), and mercury (Hg) from potential energy conservation

standards . DOE uses the NEMS

- BT computer model, which is run similarly to the AEO NEMS

model , except that product energy use is reduced by the amount of energy saved (by fuel type) at each TSL. The inputs of national energy savings come from the NIA spreadsheet model, while the output is the forecasted physical emissions. The net benefit of each TSL is the difference between the forecasted emissions estimated by NEMS

- BT at each TSL and the AEO Reference

Case. NEMS

- BT tracks CO 2 emissions using a detailed module that provides results with broad coverage of all sectors and inclusion of interactive e ffects. For the NOPR, DOE intends to use

the version of NEMS- BT based on latest AEO release, which incorporates projected effects of all emissions regulations promulgated as of its release date . For the final rule, DOE intends to revise the emissions analy sis , if necessary, using the most current version of NEMS- BT.

SO 2 emissions from affected electric generating units (EGUs) are subject to nationwide and regional emissions cap -and- trade programs, and DOE has preliminarily determined that these

programs cr eate uncertainty about the impact of potential energy conservation standards on SO 2 emissions. Title IV of the Clean Air Act sets an annual emissions cap on SO 2 for affected EGUs in the 48 contiguous States and the District of Columbia (D.C.). SO 2 emission s from 28 eastern States and D.C. are also limited under the Clean Air Interstate Rule (CAIR; 70 FR 25162 (May 12, 2005)), which created an allowance-based trading program. Although CAIR was remanded to EPA by the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) (see

North Carolina v. EPA , 550 F.3d 1176 (D.C. Cir. 2008)), it remained in effect temporarily,2

- 14 consistent with the D.C. Circuit’s earlier opinion in North Carolina v. EPA , 531 F.3d 896 (D.C. Cir. 2008). On July 6, 2010, EPA issued the Transport Rule proposal, a replacement for CAIR. 75 FR 45210 (Aug. 2, 2010). On July 6, 2011 EPA issued the final Transport Rule, titled the

Cross -State Air Pollution Rule. 76 FR 48208 (August 8, 2011). (See http://www.epa.gov/crossstaterule/ ). AEO 2011 NEMS assumes the implementation of CAIR, although future iterations of the NEMS- BT model will incorporate any changes necessitated by

issuance of the Transport Rule.

The attainment of emissions caps is typically flexible among EGUs and is enforced through the use of emissions allowances and tradable permits. Under existing EPA regulations, any excess

SO 2 emissions allowances resulting from the l ower electricity demand caused by the imposition of an efficiency standard could be used to permit offsetting increases in SO 2 emissions by any regulated EGU. However, if potential energy conservation standards resulted in a permanent increase in the quant ity of unused emissions allowances, there would be an overall reduction in

SO 2 emissions from the standards. While there remains some uncertainty about the ultimate effects of efficiency standards on SO 2 emissions covered by the existing cap

- and

- trade system,

the NEMS -BT modeling system that DOE uses to forecast emissions reductions currently indicates that no physical reductions in power sector emissions would occur for SO 2

.

As discussed above, the AEO 2011 NEMS assumes the implementation of CAIR , which established a cap on NO X emissions in 28 eastern States and the District of Columbia. With CAIR in effect, energy conservation standards are typically expected to have little or no physical

effect on NO X emissions in those States covered by CAIR, for the s ame reasons that they may

have little effect on SO 2 emissions. However, potential energy conservation standards would be expected to reduce NO X emissions in the 22 States not affected by CAIR. For these 22 States,

DOE uses the NEMS

- BT to estimate NO X emis sions reductions from potential energy

conservation standards.

Similar to emissions of SO 2 and NO X , future emissions of Hg would have been subject to emissions caps. In May 2005, EPA issued the Clean Air Mercury Rule (CAMR). 70 FR 28606 (May 18, 2005). CAMR would have permanently capped emissions of mercury for new and existing coal -fired power plants in all states by 2010. However, on February 8, 2008, the D.C.

Circuit issued a decision in New Jersey v. Environmental Protection Agency , 517 F.3d 574 (D.C. Cir. 2008), in which it vacated CAMR. EPA has decided to develop emissions standards for power plants under Section 112 of the Clean Air Act, consistent with the DC Circuit’s opinion

on CAMR. See http://www.epa.gov/air/mercuryrule/pdfs/certpetition_withdrawal.pdf . Pending EPA’s forthcoming revisions to the rule, DOE is excluding CAMR from its emissions assessment. In the absence of CAMR, a potential energy conservation standard would likely reduce Hg emissions and DOE uses NEMS -BT to estimate these reductions. However, DOE continues to review the impact of rules that reduce energy consumption on Hg emissions, and may revise its assessment of Hg emiss ion reductions in the future.2

- 15 2.16 MONETIZING CARBON DI OXIDE AND OTHER EMIS SIONS IMPACT S

As part of the development of a potential energy conservation standard, DOE considers the estimated monetary benefits likely to result from the reduced emissions of CO 2 and NO X that are expected to result from each of the TSLs considered. In order to make this calculation similar to the calculation of the NPV of consumer benefit, DOE considers the reduced emissions expected to result over the lifetime of products shipped in the forecast period for each TSL. This section summarizes the basis for the monetary values used for each of these emissions.

DOE relies on a set of values for the social cost of carbon (SCC) that was developed by an interagency process. A summary of the basis for these values is provided below.

2.16.1 Social Cost of Carbon

Under section 1(b) of Executive Order 12866, agencies must, to the extent permitted by law, “assess both the costs and the benefits of the intended regulation and, recognizing that some

costs and benefits are difficult to quantify, propose or adopt a regulation only upon a reasoned determination that the benefits of the intended regulation justify its costs.” The purpose of the SCC estimates presented here is to allow agencies to incorporate the monetized social benefits of reducing CO 2 emissions into cost- benefit analyses of regulatory actions that have small, or “marginal,” impacts on cumulative global emissions. The estimates are presented with an acknowledgement of the many uncertainties inv olved and with a clear understanding that they should be updated over time to reflect increasing knowledge of the science and economics of climate impacts.

As part of the interagency process that developed these SCC estimates, technical experts from numerous agencies met on a regular basis to consider public comments, explore the technical literature in relevant fields, and discuss key model inputs and assumptions. The main objective of this process was to develop a range of SCC values using a defensible s et of input assumptions grounded in the existing scientific and economic literatures. In this way, key uncertainties and model differences transparently and consistently inform the range of SCC estimates used in the rulemaking process.

2.16.1.1 Monetizing Carbon Di oxide Emissions

The SCC is an estimate of the monetized damages associated with an incremental increase in carbon emissions in a given year. It is intended to include (but is not limited to) changes in net agricultural productivity, human health, property damages from increased flood risk, and the value of ecosystem services. Estimates of the SCC are provided in dollars per metric ton of

carbon dioxide.

When attempting to assess the incremental economic impacts of carbon dioxide emissions, the analyst fa ces a number of serious challenges. A recent report from the National Research2

- 16 Council a points out that any assessment will suffer from uncertainty, speculation, and lack of information about (1) future emissions of greenhouse gases, (2) the effects of past and future emissions on the climate system, (3) the impact of changes in climate on the physical and biological environment, and (4) the translation of these environmental impacts into economic damages. As a result, any effort to quantify and monetize th e harms associated with climate change will raise serious questions of science, economics, and ethics and should be viewed as provisional.

Despite the serious limits of both quantification and monetization, SCC estimates can be useful in estimating the s ocial benefits of reducing carbon dioxide emissions. Consistent with the directive in Executive Order 12866 quoted above, the purpose of the SCC estimates presented here is to make it possible for Federal agencies to incorporate the social benefits from reducing carbon dioxide emissions into cost-benefit analyses of regulatory actions that have small, or “marginal,” impacts on cumulative global emissions. Most Federal regulatory actions can be expected to have marginal impacts on global emissions.

For such policies, the agency can estimate the benefits from reduced (or costs from increased) emissions in any future year by multiplying the change in emissions in that year by the SCC value appropriate for that year. The net present value of the benefits can then be calculated by multiplying each of these future benefits by an appropriate discount factor and summing across all affected years. This approach assumes that the marginal damages from increased emissions are constant for small departures from the basel ine emissions path, an approximation that is reasonable for policies that have effects on emissions that are small relative to cumulative global carbon dioxide emissions. For policies that have a large (non- marginal) impact on global cumulative emissions, there is a separate question of whether the SCC is an appropriate tool for calculating the benefits of reduced emissions. This concern is not applicable in general to energy conservation standards, and DOE does not attempt to answer that question here.

At the time of the preparation of this document , the most recent interagency estimates of the potential global benefits resulting from reduced CO 2 emissions in 2010, expressed in 2010$, were $4.9, $22.3, $36.5, and $67.6 per metric ton avoided. For emissions reductions that occur in later years, these values grow in real terms over time. Additionally, the interagency group determined that a range of values from 7 percent to 23 percent should be used to adjust the global

SCC to calculate domestic effects, b alt hough preference is given to consideration of the global benefits of reducing CO 2 emissions.

It is important to emphasize that the interagency process is committed to updating these estimates as the science and economic understanding of climate change an d its impacts on society improves over time. Specifically, the interagency group has set a preliminary goal of revisiting the SCC values within 2 years or at such time as substantially updated models become available, and to continue to support research in this area. In the meantime, the interagency group

a National Research Council. Hidden Costs of Energy: Unpriced Consequences of Energy Production and Use. National Academies Press: Washington, DC (2009).

b It is recognized that this calculation for domestic values is approximate, provisional, and highly speculative. There

is no a priori reason why domestic benefits should be a constant fraction of net global damages over time.2

- 17 will continue to explore the issues raised by this analysis and consider public comments as part of the ongoing interagency process.

2.16.1.2 Social Cost of Carbon Values Used in Past Regulatory Analyses

To date, economic analyses for Federal regulations have used a wide range of values to estimate the benefits associated with reducing carbon dioxide emissions. In the final model year 2011 CAFE rule, the U.S. Department of Transportation (DOT) used both a “domestic ” SCC value of $2 per ton of CO 2 and a “global” SCC value of $33 per ton of CO 2 for 2007 emission reductions (in 2007$), increasing both values at 2.4 percent per year. c DOT also included a sensitivity analysis at $80 per ton of CO 2 . See Average Fuel Econo my Standards Passenger Cars and Light

Trucks Model Year 2011 , 74 FR 14196 (March 30, 2009) (Final Rule); Final Environmental Impact Statement Corporate Average Fuel Economy Standards, Passenger Cars and Light Trucks, Model Years 2011-2015 at 3-90 (Oct. 200 8) (Available at: http://www.nhtsa.gov/fueleconomy ). A domestic SCC value is meant to reflect the value of damages in the United States resulting from a unit change in carbon dioxide emissions, while a global SCC value is meant to reflect the value of damages worldwide.

A 2008 regulation proposed by DOT assumed a domestic SCC value of $7 per ton of CO 2 (in 2006$) for 2011 emission reductions (with a range of $0−$14 for sensitivity analysis), also increasing at 2.4 percent per year. See Average Fuel Economy Standards, Passenger Cars and Light Trucks, Model Years 2011-2015 , 73 FR 24352 (May 2, 2008) (Proposed Rule); Draft Environmental Impact Statement Corporate Average Fuel Economy Standards, Passenger Ca rs and Light Trucks, Model Years 2011-2015 at 3-58 (June 2008) (Available at: http://www.nhtsa.gov/fuel-economy ). A regulation for packaged terminal air conditioners and packaged terminal heat pumps finalized by DOE in October of 2008 used a domestic SCC range of $0 to $20 per ton CO 2 for 2007 emission reductions (in 2007$). 73 FR 58772, 58814 (Oct. 7, 2008) In addition, EPA’s 2008 Advance Notice of Proposed Rulemaking on Regulating

Greenhouse Gas Emissions Un der the Clean Air Act identified what it described as “very preliminary” SCC estimates subject to revision. 73 FR 44354 (July 30, 2008). EPA’s global mean values were $68 and $40 per ton CO 2 for discount rates of approximately 2 percent and 3

percent, resp ectively (in 2006$ for 2007 emissions).

In 2009, an interagency process was initiated to offer a preliminary assessment of how best to quantify the benefits from reducing carbon dioxide emissions. To ensure consistency in how

benefits are evaluated across agencies, the Administration sought to develop a transparent and defensible method, specifically designed for the rulemaking process, to quantify avoided climate change damages from reduced CO 2 emissions. The interagency group did not undertake any original analysis. Instead, it combined SCC estimates from the existing literature to use as interim values until a more comprehensive analysis could be conducted. The outcome of the preliminary assessment by the interagency group was a set of five interim values: global SCC estimates for 2007 (in 2006$) of $55, $33, $19, $10, and $5 per ton of CO 2 . These interim values represent the first sustained interagen cy effort within the U.S. Government to develop an SCC for use in regulatory analysis. The results of this preliminary effort were presented in several

c Throughout this section, references to tons of CO2 refer to metric tons.2

- 18 proposed and final rules and were offered for public comment in connection with proposed rules, including the joint EPA-DOT fuel economy and CO 2 tailpipe emission proposed rules.

2.16.1.3 Current Approach and Key Assump tions

Since the release of the interim values, the interagency group reconvened on a regular basis to generate improved SCC estimates. Specifically, the group considered public comments and further explored the technical literature in relevant fields. The interagency group relied on three integrated assessment models (IAMs) commonly used to estimate the SCC: the FUND, DICE, and PAGE models. These models are frequently cited in the peer- reviewed literature and were used in the last assessment of the Intergo vernmental Panel on Climate Change. Each model was given equal weight in the SCC values that were developed.

Each model takes a slightly different approach to model how changes in emissions result in changes in economic damages. A key objective of the in teragency process was to enable a consistent exploration of the three models while respecting the different approaches to quantifying damages taken by the key modelers in the field. An extensive review of the literature

was conducted to select three sets o f input parameters for these models: climate sensitivity,

socio -economic and emissions trajectories, and discount rates. A probability distribution for climate sensitivity was specified as an input into all three models. In addition, the interagency

group used a range of scenarios for the socio

- economic parameters and a range of values for the discount rate. All other model features were left unchanged, relying on the model developers’ best estimates and judgments.

The interagency group selected four SCC v alues for use in regulatory analyses. Three values are based on the average SCC from three integrated assessment models, at discount rates of 2.5, 3, and 5 percent. The fourth value, which represents the 95th percentile SCC estimate across all

three models at a 3 -percent discount rate, is included to represent higher- than

- expected impacts from temperature change further out in the tails of the SCC distribution. For emissions (or emission reductions) that occur in later years, these values grow in real terms over time, as depicted in Table 2.16.1

.2

- 19 Table 2.16.1 Social Cost of CO 2 , 2010–2050 (in 2007 doll ars per metric ton )

Discount Rate

5% 3% 2.5% 3%

Avg Avg Avg 95th

2010 4.7 21.4 35.1 64.9

2015 5.7 23.8 38.4 72.8

2020 6.8 26.3 41.7 80.7

2025 8.2 29.6 45.9 90.4

2030 9.7 32.8 50.0 100.0

2035 11.2 36.0 54.2 109.7

2040 12.7 39.2 58.4 119.3

2045 14.2 42.1 61.7 127.8

2050 15.7 44.9 65.0 136.2

It is important to recognize that a number of key uncertainties remain, and that current SCC estimates should be treated as provisional and revisable since they will evolve with improved scientific and economic understanding. The interagency group also recognizes that the ex isting models are imperfect and incomplete. The National Research Council report mentioned above points out that there is tension between the goal of producing quantified estimates of the economic damages from an incremental ton of carbon and the limits of existing efforts to model these effects. There are a number of concerns and problems that should be addressed by the research community, including research programs housed in many of the Federal agencies participating in the interagency process to estimat e the SCC.

DOE recognizes the uncertainties embedded in the estimates of the SCC used for cost- benefit analyses. As such, DOE and others in the U.S. Government intend to periodically review and reconsider those estimates to reflect increasing knowledge of the science and economics of climate impacts, as well as improvements in modeling. In this context, statements recognizing the limitations of the analysis and calling for further research take on exceptional significance.

In summary, in considering the p otential global benefits resulting from reduced CO 2 emissions, DOE uses the most recent values identified by the interagency process, adjusted to current dollars using the GDP price deflator. For each of the four cases specified, the values used for

emissi ons in 2010 are $4.9, $22.3, $36.5, and $67.6 per metric ton avoided (values expressed in 2010$). To monetize the CO 2 emissions reductions expected to result from new OR amended energy conservation standards, DOE uses the values identified in Table A1 of the “Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866,” d appropriately adjusted to current dollars. To calculate a present value of the stream of monetary values, DOE discounts the values in each of the four cases using the specific discount rate that had been used to obtain

the SCC values in each case.

d Table A1 presents SCC values through 2050. For DOE’s calculation s, it derives values after 2050 using the 3

- percent per year escalation rate used by the interagency group.2

- 20 2.16.2 Valuation of Other Emissions Reductions

DOE investigates the potential monetary benefit of reduced NO X emissions from the TSLs it considers. As noted above, DOE takes into account how new OR amended energy conservation

standards would reduce NO X emissions in those 22 S tates not affected by the CAIR . DOE

estimates the monetized value of NO X emissions reductions resulting from each of the TSLs

considered based on environmental da mage estimates found in the relevant scientific literature. Available estimates suggest a very wide range of monetary values, ranging from $370 per ton to $3,800 per ton of NO X from stationary sources, measured in 2001$ (equivalent to a range of $450 to $4,623 per ton in 2010$). e In accordance with OMB guidance, DOE conducts two calculations of the monetary benefits derived using each of the economic values used for NO X , one using a real discount rate of 3 percent and another using a real discount rate of 7 percent. f

DOE is aware of multiple agency efforts to determine the appropriate range of values used in evaluating the potential economic benefits of reduced Hg emissions. DOE has decided to await further guidance regarding consistent valuation and reporting of Hg emissions before it once again monetizes Hg emissions in its rulemakings.

2.17 REGULATORY IMPACT AN ALYSIS

DOE prepares a regulatory impact analysis (RIA) under Executive Order 12866, “Regulatory Planning and Review,” 58 FR 51735, October 4, 1993, which is subject to review under the Executive Order by the Office of Information and Regulatory Affairs (OIRA) at the Office of Management and Budget. The RIA evaluates non- regulatory alternatives to standards, in terms of their ability to achieve s ignificant energy savings in the considered products at a reasonable cost, and compares the effectiveness of each one to the effectiveness of the adopted standards.

DOE recognizes that voluntary or other non- regulatory efforts by manufacturers, utilities, and other interested parties can result in substantial improvements to energy efficiency or reductions in energy consumption. DOE considers the likely effects of non-regulatory initiatives on product energy use, consumer utility, and LCC. DOE bases its as sessment on the actual impacts of any such initiatives to date, but also considers information presented regarding the impacts that any existing initiative might have in the future.

e For additional information, refer to U.S. Office of Management and Budget, Office of Information and Regulatory
Affairs, 2006 Report to Congress on the Costs and Benefits of Federal Regulations and Unfunded Mandates on
State, Local, and Tribal Entities , Washington, DC.

f OMB, Circular A

- 4: Regulatory Analysis (Sept. 17, 2003).3

- i CHAPTER 3. PRELIMINARY MARKET ASSESSMENT

TABLE OF CO NTENTS

3.1 INTRODUCTION ........................................................................................................... 3-1

3.2 CATEGORIZING SET

- TOP BOXES ............................................................................. 3-1

3.3 MARKET OVERVIEW .................................................................................................. 3-2

3.4 MAJOR MANUFACTURERS ........................................................................................ 3-4

3.5 MAJOR SERVICE P ROVIDERS ................................................................................... 3-4

3.6 INDUSTRY TRADE GROUPS AND ASSOCIATIONS ............................................... 3-5

3.7 ANNUAL SHIPMENTS, INSTALLED BASE, AND AV ERAGE PRICES ................. 3-7

3.8 RELEVANT CONSUMER ISSUES ............................................................................... 3-8

3.8.1 Principal Agent Problem .................................................................................................. 3-8

3.8.2 Other Issues ...................................................................................................................... 3-8

3.9 OVER

- THE

- TOP OPTIONS ........................................................................................... 3-9

3.10 STAND

- ALONE DVRS AND DTAS

................................ ........................................... 3-10

3.11 EXISTING REGULATORY AND VOLUNTARY PROGRA MS .............................. 3-11

3.11.1 ENERGY STAR ............................................................................................................ 3-11

3.11.2 Federal Communications Commission .......................................................................... 3-13

3.11.3 Summary of International Programs .............................................................................. 3-13

3.11.4 European Union Voluntary Agreement on Set-Top Boxes ........................................... 3-14

3.12 EXISTING TEST PROCED URES

................................ ................................................ 3-15

LIST OF TABLES

Table 3.2.1 Pay

- TV STB Categories ...................................................................................... 3-1

Table 3.4.1 Major Pay -TV STB Manufacturers (2010) .......................................................... 3-4

Table 3.5.1 Major Pay -TV Service Providers (2011) ............................................................. 3-5

Table 3.5.2 Estimated Purchases of STBs by Major Pay -TV Service Providers (2010, in thousands) ........................................................................................................ 3-5

Table 3.7.1 Estimated and Projected Shipments of Pay-TV STBs in the U.S. by Base Type and Feature Cla ss (in thousands) ................................................................ 3-7

Table 3.7.2 Estimated and Projected Installed Base of Pay -TV STBs in the U.S. by Base Type (in thousands) ..................................................................................... 3-7

Ta ble 3.7.3 Average Estimated and Projected Prices of Pay -TV STBs in the U.S. by Base Type

................................ ................................ ............................................. 3-8

Table 3.9.1 Select Over -the-Top STBs ................................................................................... 3-9

Table 3.9.2 Select Over -the- Top Services. ........................................................................... 3-10

Table 3.11.1 ENERGY STAR Requirements for STBs ......................................................... 3-12

Table 3.11.2 Select International P olicy Pertaining to STBs .................................................. 3-13

Table 3.11.3 U.S. ENERGY STAR and EU Voluntary Agreement Total Energy Allowances (in kWh) ......................................................................................... 3-143

- ii LIST OF FIGURE S

Figure 3.3.1 U.S. Pay-TV and Broadband Market Trends ....................................................... 3-3 Figure 3.3.2 STB Distribution Channel.................................................................................... 3-33

- 1 CHAPTER 3. PRELIMINARY MARKET A SSESSMENT

3.1 INTRODUCTION

This chapter provides a preliminary assessment of the STB market in the United States. The assessment includes categories and potential product classes, major manufacturers, major service providers, relevant trade associations, annual shipments, the installed base, market trends, and emerging or niche market segments. This chapter also discusses existing mandatory and voluntary regulatory programs.

3.2 CATEGORIZING SET

- TOP BOXES

A STB can be generically defined as a device whose primary function is to receive television or video signals and deliver them to a consumer display or recording device (see Appendix for a complete list of definitions). Market analysts and service providers categorize pay

- TV STBs into three base types and four feature classes, resulting in 12 unique groups of pay- TV STBs ( Table

3.2.1 ). This form of categorization distinguishes between: (1) what type of service provider ( i.e.

, base type) a consumer is c hoosing from, and (2) what pay- TV STB feature class a consumer is selecting for their home. In addition, there are over-the-top options (OTT) and other STBs that do not provide conditional access (see sections 3.9 and 3.10 ).

Table 3.2.1 Pay- TV STB Categories

Base Types

Cable

Satellite

Internet Protocol Television (IPTV)

Feature Classes

Standard definition (SD) receiver

High definition (HD) receiver

Standard definition digital video record er (SD- DVR)

High definition digital video recorder (HD

- DVR)

In addition, STBs without a DVR can have 1- way or 2

- way communication with the service provider. 2-way communication allows for pay-per-view and video-on-demand functionality, although a DVR is necessary for such content to be stored locally. STBs with a DVR have 2

- way communication. STBs with only 1- way communication currently represent a relatively small percentage of the market, and are losing market share in favor of 2

- way STBs. 1

- way cable STBs can be used, however, as an expensive way to connect secondary TVs with cable service in a home (as opposed to using simpler thin clients).

In general, market data for pay -TV STBs are presented in this format (and perhaps include a few additional feature classes). Existing STB energy efficiency policies, however, categorize STBs3

- 2 slightly differently. While the market segment ( e.g. , Cable, Satellite, IPTV) of a STB remains a key distinction, feature class ( e.g. , SD, HD, SD

- DVR, HD

- DVR) has not been used as a specific way of grouping STBs for existing standards purposes. HD and DVR capability are instead considered additional functionalities, not specific types of STBs, among many other types of additional functionalities ( e.g. , advanced video processing, home network interface, multistream, multi -room, removable media player/recorder ). A base functionality, determined by the market segment, combines with a set of additional functionalities (which can be used with any base type). Thi s is the approach adopted by ENERGY STAR and with the European voluntary agreement, where the base functionality and additional functionalities determine the total energy consumption allowance for a given STB. When necessary, DOE divides covered products into product classes by the type of energy used, the capacity of the product, and any other performance

- related feature that justifies different standard levels, such as features affecting consumer utility. (42 U.S.C. 6295(q)) As part of this rulemaking pro ceeding, DOE will evaluate the market for STBs and potentially separate covered products into product classes based on the

criteria described above.

3.3 MARKET OVERVIEW

The current STB market has developed into a complex mix of deployed devices and service

off erings. Over 80 percent of U.S. homes subscribe to pay- TV provided by their cable, satellite or phone company ( Figure 3.3.1 ), resulting in over 160 million installed pay -TV STBs in U.S.

homes. 1 In recent years, however, viewers hip has declined as consumers moved to streaming online content only. Cable TV, in particular, lost over 2 million video subscribers in 2010, a bigger loss than the 1.5 million customers in 2009. 2 Nevertheless, pay- TV remains the biggest piece of the media consumption market. Some consumers are replacing their pay- TV service with broadband-based services using OTT options (including both hardware and software options), such as AppleTV , Netflix, and Roku. Traditional pay-TV service includes a monthly subscription fee with additional pay- per -view options ( e.g ., live events, movies), whereas OTT options include pay- per -view only ( e.g. , AppleTV, Amazon Instant Video) or a monthly subscription for unlimited content ( e.g. , Netflix, Hulu). Pay-TV service providers are now offering similar features on their STBs. This assessment focuses on the pay- TV STB market specifically in the following sections ( 3.4 to 3.8 ), but provides an overview of the separate
market for over -the-top options in section 3.9 and stand-alone devices in section 3.10

.3

- 3 Figure 3.3.1 U.S. Pay- TV and Broadband Market Trends

Source: Hardy and Swofford (2011). 1 Figure based on U.S. Census (www.tvb.org; OECD; and other public data). 3

Reprinted with permission.

Pay

- TV STB market actors fall into four main categories: (1) chip manufacturers, (2) middleware developers, (3) STB manufacturer s and (4) service providers ( Figure 3.3.2 ). This

market assessment focuses on STB manufacturers and service providers as these two groups have the most influence on the energy consumption of pay- TV STBs . Hardware manufacturers design and produce STBs based on the demand and requirements of service providers. Service providers purchase a large number of STBs from these manufacturers

. 4 The largest pay

- TV service providers ( e.g. , DirecTV and Comcast; see section 3.5 ) ultimately decide on the chipset, middleware, and features offered for a deployed STB . They then present these product offerings to smaller service providers as off -the-shelf designs to reduce development costs. After procurement, service pr oviders control box deployment, configuration, maintenance, and refurbishment. All service providers own the STBs and supply them to the consumer as part of a service agreement

. 4 As a result, any potential chan ges in STB design and operation require the involvement of all actors in this supply chain and distribution system, including the service providers. Figure 3.3.2 outlines the components in the STB distribution channel chain

Figure 3.3.2 STB Distribution Channel

Middleware

Programmer Manufacturer Pay-TV Subscriber Service Provider

STBs Build Specs TV Programming

$$$ Components Chipset

Manufacturer3

- 4 3.4 MAJOR MANUFACTURERS

Service providers purchase their STBs through a bidding process that multiple manufacturers compete in to meet requested specifications at the lowest cost. 4 For example, a large service provider might specify a box including high definition video capability, MoCA networking capability, six tuners, and a DVR. Currently, Motorola, Cisco, Pace, and EchoStar own the majority of the STB manufactur ing market in the U.S. (see Table 3.4.1 ). The development timeline for STB hardware is similar regardless of service provider type, typically ranging from 6 to 18 months for motherboard and system design and three to five years for silicon design. The 6 to18 month lead-time refers to the development of the motherboard and system based on available silicon technology.

Table 3.4.1 Major Pay

- TV STB Manufacturers (2010)

Company Market Share Cable Satellite IPTV

Motorola 35% x x

Cisco 18% x x

Pace 18% x x

EchoStar 12% x

Other 18% N/A

Note: These market shares are for U.S. STBs only.

Source: IMS Research. 5

3.5 MAJOR SERVICE PROVID ERS

In the U.S., service providers supply the majority of STBs to the consumer. Major service providers have considerable influence over the manufacturer in terms of choice of middleware, content protection features, applications and other functionalities. The pay- TV STB market is different from the markets for most other consumer electronics devices, in that consu mers have little influence on the type of STB installed in their home. Service providers use STBs to store the latest user information, electronic program guide data and security codes to ensure only paid

subscribers have access to content. 4 These data are frequently updated ( e.g. , dynamic channel allocation, dynamic security codes), which is one reason why some STBs require a relatively long time to wake -up from a deep sleep. Table 3 .5.1 lists the top ten U.S. pay- TV service providers by number of subscribers. Table 3.5.2 shows STB purchases by service providers in

2010.3

- 5 Table 3.5.1 Major Pay -TV Service Providers (2011)

Service Provider Segment Pay- TV Subscribers

Comcast Cable 22,525,000

DirecTV Satellite 19,433,000

Dish Network Satellite 14,056,000

Time Warner Cable Cable 12,235,000

Cox Communications Cable 4,838,000

Charter Communications Cable 4,413,000

Verizon (FiOS) Communications Cable † 3,848,000

AT& T IPTV 3,407,000

Cablevision Systems Cable 3,284,000

Bright House Networks Cable 2,139,000

† Verizon FiOS provides TV on a fiber optic backbone, using cable network technology inside the home. AT&T

U- Verse uses IPTV technology to deliver content v ia high speed DSL.

Source: National Cable Telecommunications Association

. 6

Table 3.5.2 Estimated Purchases of STBs by Major Pay- TV Service Providers (2010, in thousands)

Service Provider Grand Total

Comcast 16,430

DirecTV 7,413

Dish Network 5,293

AT&T 3,456

Ver izon (FiOS) Communications 3,153

Time Warner Cable 2,293

Cox Communications 1,263

Charter Communications 1,048

Bright House Networks 793

Cablevision Systems 687

Other 904

Source: IMS Research. 5

3.6 INDUSTRY TRADE GROUPS AND ASS OCIATIONS

STB manufacturers and service providers are typically associated with the following groups (descriptions are adapted from group websites):

American Cable Association (ACA)

. ACA’s membership comprises of cable, phone, and fib er

to -the-home operators and municipalities, who deliver basic and advanced services, such as high definition television, next generation Internet access and digital phone, to more than 7 million3

- 6 households and businesses, some of whom have no other means of receiving these services. http://www.americancable.org/

Association for Maximum Service Television (MSTV)

. Trade organization focused on overthe-air broadcast technology and policy issues. http://www.mstv.org/

CableLabs. Cable Television Laboratories, Inc. (CableLabs®) is a non- profit research and development consortium that is dedicated to pursuing new cable telecommunications technologies and to helping its cable operator members integrate those technical advancements into their business objectives. http://www.cablelabs.com/

Consumer Electronics Association (CEA). CEA is a standards and trade organization for the consumer electronics industry in the United States. http://www.ce.org/

Digital Living Network Alliance (DLNA). A collection of various companies, the DLNA has developed interoperability guidelines that outline standards for device communication and content sharing among various devices within the home. http://www.dlna.org/

Multimedia over Coax Alliance (MoCA). MoCA is an open, international technology standard body promoting networking of multiple streams of high definition video around the home using the existing coaxial cabling. The MoCA standard uses the existing coax cabling in the home for connecting devices such as STBs, PVRs, home gateways, wireless access point and game

co nsoles, among others. http://www.mocalliance.org/

National Association of Broadcasters (NAB). NAB is a trade organization for radio and television broadcasters, serving its members’ interests in federal governmen t, industry and public affairs; improving the quality and profitability of broadcasting; encouraging content and technology innovation; and identifying ways stations serve their communities. http://www.nab.org/

National Cable and Telecommunications Association (NCTA). The National Cable and Telecommunications Association, formerly the National Cable Television Association, is the principal trade association of the cable industry in the United States. http://www.ncta.com/

RVU Alliance. The RVU Alliance is a consortium of leading content service provider, semiconductor and consumer electronics companies gathered to advance the use of Remote User Interface (RUI) technology for home networked television entertainment, ensuring interoperability among devices implementing RVU's RUI technology, and educating the market about RVU technology. http://www.rvualliance.org/3

- 7 Satellite Broadcasting and Communications Association (SBCA). The Satellite Broadcasting and Communications Association is the national trade organization representing all segments of the consumer satellite industry. http://www.sbca.com/

3.7 ANNUAL SHIPM ENTS, INSTALLED BASE , AND AVERAGE PRICES

Table 3.7.1 to Table 3.7.3 provide additional market data and forecasts for annual shipments, the installed base, and average prices of STBs. The average prices span all STB product classes ( e.g. , SD, HD, DVR, thin client, etc.) estimated to be sold that year. Cable remains the most prominent form of pay -TV, but increased popularity of both satellite and IPTV service offerings may change the landscape over the next few years. In terms of feature classes, the HD -DVR box is gaining significant share across all three market segments.

Table 3.7.1 Estimated and Projected Shipments of Pay

- TV STBs in the U.S. by Base Type and Feature Class (in thousands)

2009 2010 **2011 2012**  **2013 2014**  **2015**

Cable 23,803 25,607 25,007 26,867 21,474 19,693 18,874

Satellite 12,563 13,348 13,465 14,338 14,123 13,774 13,767

IPTV 3,461 3,598 3,753 4,527 4,483 4,767 5,109

Total DVR 11,975 14,929 16,656 19,934 18,099 17,734 16,876

Total non

- DVR 27,8 52 27,624 25,569 25,798 21,981 20,500 20,874

Source: IMS Research. 7

Table 3.7.2 Estimated and Projected Installed Base of Pay

- TV STBs in the U.S. by Base Type (in thousands)

2009 2010 **2011 2012**  **2013 2014**  **2015**

Cable 80

, 228 95

, 206 103,550 113,349 116,383 116,151 113 ,309

Satellite 57

, 859 59

, 782 62,147 62,138 60,353 57,347 54,125

IPTV 5, 997 8, 508 10,959 13,713 16,185 18,620 20,648

Source: IMS Research. 73

- 8 Table 3.7.3 Average Estimated and Projected Prices of Pay

- TV STBs in the U.S . by Base Type

2009 2010 **2011 2012**  **2013 2014**  **2015**

Cable $61

- $223 $56

- $218 $52

- $214 $48

- $210 $44

- $195 $41

- $189 $38

- $183

Satellite $60

- $190 $55

- $180 $51

- $171 $47

- $163 $44

- $154 $41

- $147 $40

- $140

IPTV $94

- $192 $132

- $182 $123

- $173 $115

- $165 $106

- $156 $46

- $149 $43

- $141

Source: IMS Research. 7

3.8 RELEVANT CONSUMER IS SUES

3.8.1 Principal Agent Problem

Pay

- TV STBs differ from other consumer electronics devices because the service provider owns the STB, not the consumer. Therefore, even though the consumer pays the electricity bill, it is the service provider that decides what STB is used and how much energy it uses. 1 This situation, where one entity pays the first cost but another pays the operating cost, is known as a principal agent problem. 8 The principal agent problem is most evident when service providers include the STB hardware as part of a rental agreement. 9 This service agreement, including leased equipment, is the most common arrangement in the U.S. pay-TV market today. The principal agent problem offers only limited incentive for service providers to deploy more costly energy efficient STBs, beyond any efficiency required for increased utility. Although STB manufacturers are capable of b uilding more efficient STBs, they only build to the service provider specifications, which is largely cost and quality-of-service driven. This situation is potentially the most significant barrier to reducing the national energy consumption of STBs in

the U.S.

3.8.2 Other Issues

Other key consumer issues include the following:

• Long Start -up Times. When a STB is powered off, it often takes two to five minutes to start (or “boot”) up and resume full functionality. This is why most STBs do not power down. This lead time is necessary for the STB to communicate with the service provider, download the latest electronic programming guide, check subscription entitlements, and enable all the appropriate conditional access.

• Limited Customization/Choice. Customers have l imited choice of what type of STB their service provider deploys to their home. In addition, the middleware installed by the service provider often gives little to no options for customization ( e.g. , view options, channel filtering, etc.). This is related to the principle agent problem.

• IPTV Limitations. Currently, IPTV technology is not widely deployed across the United States. Due to bandwidth constraints, the video feed is compressed, resulting in minor artifacting and/or inferior picture quality. It is unclear, however, if this is widely3

- 9 perceived by consumers. In addition, it is very expensive to deploy fiber- to -the-home or high -speed digital subscriber lines in order to carry a pure IPTV signal to a large percentage of homes.

3.9 OVER

- THE

- TOP OPTIONS

Cons umers are increasingly utilizing media on demand to accommodate their lifestyles. Many viewers prefer sports , news, and season finales in real time, whereas TV series and movies can be recorded and watched at a later time. Consumers are watching content on a variety of different media ( e.g. , TV, tablet, laptop, cell phone) depending on their circumstances and location. Pay-TV service providers are working quickly to offer growing video on demand libraries, DVRs, multi -room functionality, and tablet PC streaming. Consumers can now access, however, a large amount of content outside the pay-TV spectrum. As a result, a growing numberof consumers are canceling pay-TV subscriptions. Devices that access content outside the payTV spectrum are referred to as “over

- the -top” (OTT) because they go “over-the-top” of a payTV subscription. Both hardware like AppleTV and software like Netflix supplement the video on demand library offered by the pay- TV provider. These devices are well -suited to watching older movies, sports highlights, and past TV episodes. The most recent content, however, is typically delayed anywhere from a day to a month, making OTTs a limited substitute for new broadcast content. OTTs are generally divided into three groups:

OTT STBs

. These include the hardware and software necessary to stream video content to a display. Like a pay

- TV STB , these devices generally sit in close proximity to a television. What

hinders OTT STBs is their lack of content. Without a number of the latest shows and live sport s or news content, these options still offer only a portion of the content that the pay-TV industry provides. Examples of OTT STBs are included in Table 3.9.1

.

Table 3.9.1 Select Over

- the

- Top STBs

Name Company Description Comments

AppleT V Apple Hardware with installed

software that offers video library (ITunes Store) Over 1 million units sold in

2010

Boxee Box Boxee Hardware with installed software (named Boxee) that offers video library and additional applications Boxee Inc. startup c ompany supported by various venture capital firms; collaborated

with D

- Link in developing

Boxee Box device

Roku Roku Hardware with installed

software that offers video library (Roku Channel Store) Private consumer electronics firm in CA, USA

WD TV

Live Hub Western Digital STB device with additional storage capability Computer hard drive

manufacturer

OTT Services. These are the services that can be installed on a host to make video streaming possible. They include online video libraries, video subscription services, and media player3

- 10 software. Note that some OTT set -top manufacturers also provide OTT service ( e.g. , Apple, Boxee). Examples of OTT services are included in Table 3.9.2

.

Table 3.9.2 Select Over

- the

- Top Services.

Name Compa ny Description Comments

Boxee Boxee Software (cross platform freeware media player) Boxee Inc. startup company supported by various venture capital firms; collaborated

with D

- Link in developing

Boxee Box device
Google TV Google Software built into CE

p roducts ( e.g.

, Sony TV, Logitech STB ) Expected to partner with

more CE makers in 2011

Hulu Hulu Website and OTT subscription service Hulu launched in the U.S. in

2008 and has become a popular OTT option

iTunes Apple Software that offers video library (a nd other media) across Apple’s devices First introduced by Apple in

2001 and has become the most popular music library
software
Kylo Kylo Software (open source

television

- based Internet browser) Hillcrest Labs introduced Kylo in Spring 2010

Netflix Netf lix Content subscription service Offers on

- demand streaming and rental by mail service

SlingBox Sling Preinstalled place shifting

software installed on

traditional STBs Acquired by EchoStar in 2007 for approximately $380

million

Vudu HDX,

VuduBox Vudu Software built into products

from various television and

blu

- ray player
manufacturers. Acquired by Walmart in 2010 for approximately $100

million

OTT Hosts. These include consumer electronics that offer OTT services as a secondary function. For example, the primary use of a video game console is to play video games, but some game consoles are also capable of streaming Netflix movies. OTT hosts are not the focus of this assessment. Examples of OTT hosts include the following:

• Video game consoles

• Personal computers

• Blu

- ray players

• Internet- enabled TVs

• Cell Phones

• Tablets

3.10 STAND

- ALONE DVRS AND DTAS

Other types of STBs not associated with service providers include stand-alone DVRs and digital transport adaptors (DTAs, also known as simple STBs in Europe). St and

- alone DVRs can be3

- 11 purchased through retail, whereas DTAs are primarily used in the U.S. to convert digital signals to analog signals for use with older analog televisions.

TiVo provides the only known stand-alone DVR in the U.S. Today’s TiVo boxes ar e typically configured as cable STB by adding a CableCARD (to enable conditional access). Most TiVo customers use their TiVo DVR to replace their cable DVR. The standard TiVo costs $100 and requires a $20 monthly service fee. Instead of leasing a DVR from the cable service provider, the consumer would lease a CableCARD from the service provider and install it in the TiVo. The benefit of the TiVo is a robust user interface, electronic channel guide, OTT content, and a lower cable bill (if the cable service provider has a separate fee for a DVR rental). TiVo cannot display, however, video on demand programming from the service provider. Due to the CableCARD access, the TiVo STB is generally considered a cable STB.

TiVo can also be connected to a digital antenna and used as a DVR for free

- to -air content for households that do not subscribe to pay-TV. This likely represents only a very small fraction of TiVo users, however. Furthermore, with the advent of Internet

- enabled TVs and game consoles that can access the same OTT content as TiVo, there is only a marginal benefit associated with having the streaming functionality integrated into the same user interface as broadcast TV. In the coming months, TiVo will be working with DirecTV to manufacture a TiVo DVR that will be sold through DirecTV and not retail 10 ; this STB would be classified as a satellite STB.

Stand

- alone DVRs and DTAs represent a very small market share. Furthermore, the market share is declining as consumers opt for pay-TV service or other OTT options, and as consumers purchase newer televisions capable of digital input. As a result, these devices are not the focus of

this assessment.

3.11 EXISTING REGULATORY AND VOLUNTARY PROGRA MS

3.11.1 ENERGY STAR

ENERGY STAR’s Version 1.0 STB product specification went into effect on January 1, 2001. Tier 1 energy efficiency criteria took effect immediately, and more stringent Tier 2 criteria were expected to become effective on January 1, 2004. However, in June 2003, the EPA extended the Tier 1 criteria indefinitely based o n input from stakeholders. On December 16, 2004, the EPA notified stakeholders of its intent to suspend the STB specification effective February 2, 2005. In March 2007, the EPA announced its intention to re- open the process to revise the ENERGY STAR progra m for STBs.

Version 2.0 Tier 1 came into effect on January 1, 2009. Version 2.0 qualification requirements were based on a total energy consumption (TEC) allowance for (i) base functionality and (ii) additional functionalities. The TEC approach assumes a typical duty cycle for each mode. The current specification is Version 3.0, which came into effect on September 1, 2011. Version 4.0 is scheduled to come into effect on July 1, 2013. Both Version 3.0 and 4.0 use the same TEC allowance approach, in addition to defining general criteria for external power supplies,3

- 12 maintenance activities, auto power down (APD) and deep sleep. EPA finalized both Version 3.0 and 4.0 on January 21, 2011. See Table 3.11.1 for ENERGY STAR requirements for STB s.

Table 3.11.1 ENERGY STAR Requirements for STBs

STB Type Version 3.0 (kWh/yr) Version 4.0 (kWh/yr)

Base Functionality

Cable 60 45

Satellite 70 50

IPTV 50 25

Cable DTA 35 25

Terrestrial 22 18

Thin Client /

Remote 35 20

Additional Functionality

Advanced Video Processing 12 8

CableCARD 15 15

DVR 45 36

DOCSIS 20 15

HD 25 16

Home Network

Interface 10 8

Multi

- room 40 30

Multi

- stream (cable / satellite) 16 8

Multi

- stream (Terrestrial / IP) 8 6

Removable Media Player 8 8

Removable Media Play er / Recorder 10 10

Source: EPA. 11

, 12

As of October 17, 2011, there are 40 ENERGY STAR qualified STB models. 13 They include the following:

• 10 cable STBs, including HD, HD multi-room, and HD- DVR multi -room models.

• 10 satellite STBs, including SD, HD, HD multi -room, and HD- DVR multi -room models.

• 19 IPTV STBs, including HD, HD- DVR, HD multi -room, and HD- DVR multi -room models.

• 1 thin client STB. This is a HD model.3

- 13 3.11.2 Federal Communications Commission

The U.S. Federal Communications Commission (FCC) has attemp ted to separate proprietary security from hardware in the U.S. cable industry via the mandatory CableCARD requirement. CableCARD allows any cable STB to be compatible with all service providers. The initialimplementation of CableCARD did not, however, support electronic program guide, video-ondemand or pay- per -view features. As a result, although all cable STBs must have CableCARD, the majority of cable service providers also utilize additional proprietary security protocols to

enable 2 -way communication functionality such as video-on-demand.

The FCC’s recently published National Broadband Plan details another path to achieve separable security in a second attempt to increase competition in the U.S. market. The FCC now recommends an approach where the service providers can own the home’s gateway device. The device would require an internal TV tuner and conditional access capability and the ability to stream video in a standard format. This would allow third party STBs and display devices that are interoperable with all service providers ( i.e. , cable, satellite, and IPTV) to be sold through retail channels. The new initiative, named AllVid, is currently in the notice of inquiry stage. 14 If the FCC decides that AllVid is viable and receives sufficient industry support, the notice of inquiry may become a notice of proposed rulemaking.

3.11.3 Summary of International Programs

Several policy initiatives related to STBs, both in development and currently in effect, exist at the international level ( Table 3.11.2 ). The following subsection section focuses on the recent European voluntary industry agreement.

Table 3.11.2 Select International Policy Pertaining to STBs

Jurisdiction Equipment

Addressed Policy Approach Advantages Disadvantages

Australia and

N ew Zealand complex

STBs Maximum Platform Allowance (MPA) power level for active standby and on mode that is dependent on the type of STB Simple and easy to implement No incentive for multi

- room or thin clients

Canada Complex

STBs Minimum energy performanc e standard (draft). Total energy consumption (TEC) approach with base type +

functional adders Simple and easy to implement ; harmonized with

ENERGY STAR and Europe Covers only cable and

satellite STBs. No incentive

for multi

- room or thin clients

China simp le and complex

STBs Endorsement label Covers all modes of operation Varying definitions of simple vs. complex STBs and operation modes when compared to U.S. and Europe
China simple and complex

STBs Draft regulation (in process); Modal power (On and Standby Modes) plus

functional adder Would cover all

STBs sold in China No expected incentive for

multi

- room or thin clients3

- 14 European

Union Voluntary Agreement complex

STBs Total energy consumption (TEC) approach with base type + functional adders Approach supp orted by EU service providers; can frequently update Does not cover 100% of

STBs in Europe

Japan

- Top

Runner Program DVD

recorders

with tuners Total energy consumption (TEC) approach with base type + functional adders Simple and easy to implement HDD cap acity as metric;

does not address auto

- power down

South Korea

- e-Standby Program simple and complex

STBs Targets standby power

limits for “active” and “passive” standby modes. Simple and easy to implement Does not regulate On mode; little flexibility for manufacturers to pursue comprehensive energy efficiency across all modes

Switzerland simple and complex

STBs Endorsement label Harmonized with EU’s TEC approach

from Code of

Conduct Must revise functional

adders as new features

become available

3.11.4 Europea n Union Voluntary Agreement on Set -Top Boxes

European industry, together with energy efficiency stakeholders, worked to develop a voluntary agreement for STBs, formally the “Industry Voluntary Agreement to improve the energy consumption of Complex Set Top Boxes,” as an alternative to a mandatory requirement. The agreement was designed as a self -regulatory instrument, and came into effect July 1, 2010. 15

The European voluntary agreement employs a total energy consumption approach to evaluating STB energy sa vings, similar to ENEGRY STAR. The calculation is based on the assumption that a STB will be in on mode for 9 hours and in standby for 15 hours per day. For devices that support auto-power down, an additional allowance is made, and it is assumed that auto-power down will result in the device being in on mode for only 4.5 hours per day.

The total energy allowance methodology incorporates an allowance for base functionality, plus allowances for specific, additional functionalities present across a duty cycl e. Different STB types have different base allowances and additional allowances are given for DVRs, Advanced Video and High Definition processing, and additional tuners. Table 3.11.3 compares the total energy allowances for bas e functionality and additional functionality, for both ENERGY STAR and the EU voluntary agreement.

Table 3.11.3 U.S. ENERGY STAR and EU Voluntary Agreement Total Energy Allowances (in kWh)

Base Functionality ENERGY STAR 2.0 EU Voluntary Agreement **(Tier 1)** ENERGY STA R 3.0 **(effective September 1, 2011)** 

Duty Cycle 14 On, 10 Stby

- or - 7 On, 7 APD, 10 Stby 9 On, 15 Stby

- or - 4.5 On, 19.5 Stby

(APD enabled) 14 On, 10 Stby

- or - 7 On, 7 APD, 10 Stby

Cable 70 45 60

Satellite 88 45 703

- 15 IP 45 40 50

Additional Functi onality

Additional Tuners / Multi

- stream 53 20 16

Advanced Video Processing 18 20 12

DVR 60 20 45

High Definition 35 20 25

Multi- room 44 38 40

DOCSIS / Return Path for EU 20 60 20

Source: EPA and DIF. 11

, 15

3.12 EXISTING TEST PROCED URES

Released in January 2011, the most recent ENERGY STAR test procedure revision requires power measurements for several different types of activities. This version came into effect at the

same tim e Version 3.0 program requirements did, in September 2011. The test procedure requirements include measurements for watching Live TV, recording Live TV to DVR, playing back recorded TV from DVR, recording Live TV to removable media and playing back recorded TV from removable media. Measurements are typically taken in three different reference channels: network TV, live sports, and live news. Measurements are also required for STBs that have a sleep mode, auto power down feature and deep sleep state, as well as multi -room and thin

client STBs.

Other relevant test procedures include the Canadian Standards Association’s (CSA) test procedure C380-08 16 , the Consumer Electronics Association’s (CEA) industry s tandards CEA

2013 17 and CEA-2022 18 , and the International Electrotechnical Commission’s (IEC) industry

standard IEC -62087 19 . The IEC test procedure uses a simplified ENERGY STAR test procedure methodology, with less required activity measurements (no reference channels) and slightly different operating mode defin itions. ENERGY STAR may potentially modify its test procedure approach in future versions to better harmonize with the IEC. While the ENERGY STAR and IEC test methods use different terminology, the CSA test procedure C380-11, currently in public review, ex plains how IEC terminology maps to ENERGY STAR terms such that IEC STB test measurements can be used in conjunction with the energy allowance equations documented in the ENERGY STAR program requirements to determine product qualification status.3

- 16 REFERENC ES

1 Hardy, G., and J. Swofford. 2011. Better Viewing, Lower Energy Bills, and Less Pollution: Improving the Efficiency of Television Set-top Boxes . Edited by N. Horowitz: Prepared by Ecos Consulting for the Natural Resources Defense Council.

2 http://www.investors.com/NewsAndAnalysis/Article/566402/201103171842/CableSubscriber- Losses -Mount.htm

3 http://www.oecd.org/document/54/0,3343,en_2649_34225_38690102_1_1_1_1,00.html

4 Peters, J.S., M. Frank, J. Van Clock, and A. Armstrong. 2010. Elec tronics and Energy Efficiency: A Plug Load Characterization Study . Prepared by Research Into Action, Inc. for

Southern California Edison. http://www.calmac.org/publications/BCE_FINAL.pdf

5 IMS Research. 2010. US 2010 Set-top Box Share. Custom report prepared for Lawrence Berkeley National Laboratory.

6 NCTA

. Top 25 Multichannel Video Programming Distributors as of June 2011

. National

Cable Telecommunications Association

. http://www.ncta.com/Stats/TopMSOs.aspx (accessed November 4, 2011)

7 IMS Research. Online Set -top Box and iDTV Database. Posted August 18, 2011. (accessed November 4, 2011).

8 Charles, D. 2009. Leaping the Efficien cy Gap . Science 325 (5942): 804-811.

9 IEA. 2009. Chapter 7: Set-Top Boxes. In Gadgets and Gigawatts: Policies for Energy

Efficient Electronics. International Energy Agency. Paris, France: IEA Publications.

10 DirectTV Website. Will DirectTV offer a T iVo DVR? http://support.directv.com/app/answers/detail/a_id/77/~/directv -relationship- with

- tivo

--- newhd-dvr (accessed November 28, 2011)

11 EPA. 2011. ENERGY STAR Program Requirements Product Specification for Set-top Boxes:

Version 3.0 . Environmental Protection Agency. http://www.energystar.gov/ia/partners/prod_development/revisions/downloads/settop_boxes/ ENERGY_STAR_STB_Final_Version_3_Specification.pdf

12 EPA. 2011. ENERGY STAR Program Requirements Product Specification for Set-top Boxes : Version 4.0 . Environmental Protection Agency. http://www.energystar.gov/ia/partners/prod_development/revisions/downloads/settop_boxes/ ENERGY_STAR_STB_Final_Version_4_Specification.pdf3

- 17 13 EPA. 2011. ENERGY STAR Set-top Box Qualified Product List. Posted October 17, 2011. Environmental Protection Agency. (accessed November 4, 2011)

14 FCC. 2010. FCC 10-60. Notice of Inquiry. Federal Communications Commission

15 Digital Interoperability Forum. 2009. DIF Q&A: On the Industry Voluntary Agreement to improve the energy consumption of Complex Set Top Boxes

. http://www.difgroup.com/uploads/DocsAndMediaManager/documents/DIF%20Q&A%20- %20On%20the%20Industry%20Voluntary%20Agreement.pdf

16 C380-08: Test Procedure for the Measuremen t of Energy Consumption of Set-Top Boxes (2008). Canadian Standards Association.

17 CEA -2013- A: Digital Set -Top Box Background Power Consumption (2007). Consumer

Electronics Association.

18 CEA -2022: Digital Set -Top Box Active Power Consumption Measurem ent (2007). Consumer

Electronics Association.

19 IEC -62087: Methods of measurement for the power consumption of audio, video and related
equipmen t. Edition 3 (2011) Section 8. International Electrotechnical Commission.4

- i CHAPTER 4. PRELIMINARY TECHNOLOGY ASSESSMENT

TABLE OF CO NTENTS

4.1 TECHNOLOGY OVERVIEW ........................................................................................ 4-1

4.2 MARKET SEGMENT INFRA STRUCTURE ................................................................ 4-1

4.2.1 Cable ................................................................................................................................ 4-1

4.2.2 Satellite ............................................................................................................................ 4-2

4.2.3 Internet Protocol Television (IPTV) ................................................................................ 4-2

4.3 COMPONENTS .............................................................................................................. 4-2

4.4 SELECT FUNCTIONALITY AND FEATURES ........................................................... 4-3

4.4.1 Digital Video Recorder (DVR) ........................................................................................ 4-4

4.4.2 High Definition (HD) ....................................................................................................... 4-4

4.4.3 Multi -room Technology ................................................................................................... 4-4

4.4.4 Middleware ...................................................................................................................... 4-4

4.4.5 Content Protection ........................................................................................................... 4-5

4.4.6 Content Availability ......................................................................................................... 4-5

4.5 ENERGY CONSUMPTION ........................................................................................... 4-5

4.5.1 National Energy Use of ST Bs .......................................................................................... 4-5

4.5.2 Unit Energy Consumption of STBs ................................................................................. 4-7

4.6 POTENTIAL ENERGY EFFICIENCY MEASURES .................................................. 4-10

4.6.2 Power Management ....................................................................................................... 4-12

4.6.3 Multi -Room Technology ............................................................................................... 4-13

4.7 ASSESSMENT OF FUTURE PRODUCT EVOLUTION ............................................ 4-15

4.7.1 Blending Content and Device Consolidation. ................................................................ 4-15

4.7.2 Placeshifting ................................................................................................................... 4-16

4.7.3 Advanced Video Functionality ...................................................................................... 4-16

LIST OF TABLES

Table 4.5.1 U.S. Annual Residential Electricity Consumption by End Use (2011) ............... 4-6

Table 4.5.2 STB Power Use by Segment and Technology Type ............................................ 4-7

Table 4.5.3 Estimated Power Use Breakdown for Cable and Satellite Pay

- TV STBs ......... 4-10

Table 4.6.1 Energy

- Saving Strategies for STBs ................................................................... 4-114

- ii LIST OF FIGURE S

Figure 4.3.1 Example of STB Internal Components ................................................................ 4-3 Figure 4.5.1 Projected Energy Use of STBs ............................................................................ 4-6 Figure 4.5.2 STB Power Demand, Measured from 58 Pay- TV STBs ..................................... 4-8 Figure 4.5.3 Recent ENERGY

- STAR -qualified STB Power Demand .................................... 4-9 Figure 4.6.1 Deep Sleep Warning from Sky Broadcasting .................................................... 4-12 Figure 4.6.2 Schematic Deep Sleep Power Consumption Profile .......................................... 4-13 Figure 4.6.3 Example Multi

- Room Configuration ................................................................. 4-144

- 1 CHAPTER 4. PRELIMINARY TECHNOLOGY ASSESSMENT

4.1 TECHNOLOGY OVERVIEW

Television signals in the U.S. have evolved from analog to digital signals. Recent regulatory mandates have shut off analog television signals, in order for wireless broadband providers to use that portion of the wireless spectrum. In the U.S., satellite, cable, and telecommunication service providers transmit their television signals digitally. While local channels are available to any cable -ready TV, video-on-demand, premium channels, and electronic channel guides all require some type of STB to protect the content streaming into the home.

In its simplest form, a STB is a digital transport adapter that receives television signals from a service provider and delivers them to a consumer display and/or recording device. 1 These simplest STBs may include an e lectronic program guide and the ability to view premium channels, but offer no video on demand or pay per view options. More advanced STBs offer multiple tuners and have two-way communication with the service provider, making it possible to request customized content, such as video-on-demand. Advanced STBs with the ability to record and timeshift content are called digital video recorders (DVRs). The newest STB form factor is a home gateway. These devices connect to multiple thin clients, which are low powe red

STBs that can only communicate within the home. The home gateways include up to fourteen tuners, process the video signals for all the attached thin clients, and can act as an Internet modem as well. Regardless of complexity, each STB is specific to th e delivery technology, be it cable, satellite, or IPTV.

4.2 MARKET SEGMENT INFRA STRUCTURE

The types of STBs in households generally depend on the type of service provider, given that each type of service provider has a different video delivery approach ( i.e.

, infrastructure technology). Each of the three main infrastructure technologies (cable, satellite, and IPTV) use varying amounts of energy. Field study power measurements of select STBs are provided in

section 4.5

.

4.2.1 Cable

Cable television has historically dominated the U.S. pay- TV landscape. U.S. cable service providers operate regionally as well as nationally, and rarely compete against one another. Today’s cable TV infrastructure is a hybrid between fiber optic and coaxia l cable, allowing for a larger throughput of data than either satellite or IPTV’s systems. The service provider sends every available channel to the STB , where the TV tuner picks the desired channel. Additional services, such as frequency modulation (FM) radio programming, high- speed Internet , and telephone are sent through the same cable, but using different frequencies.4

- 2 4.2.2 Satellite

Television satellites are geosynchronous, meaning they orbit in sync with the earth and stay in the same position above the g round at all times. This makes it possible for a satellite dish to transmit data without readjusting its position. Satellite service providers broadcast, or uplink, signals to a satellite that they either own or lease for channel space. A transponder on th e satellite receives the uplinked signals, converts the signal, and relays it to home satellite dishes. Each satellite occupies a particular location in orbit, and transmits signals across frequency bands assigned by the Federal Communications Commission ( FCC). Satellite service providers deploy

their STBs as part of a subscription package.

4.2.3 Internet Protocol Television (IPTV)

IPTV is the newest pay

- TV market segment. The concept first gained market share in France in the 1990s, but it was not until 2006 that the United States had an IPTV service provider (AT&T). IPTV provides television via the Internet. Cable and satellite function by sending every channel directly to the STB in the home and allowing the user to tune in to the channel(s) they want to

watc h. With IPTV, the service provider sends only the requested channel(s) to a home gateway, which routes the channel(s) to the corresponding STB . This is similar to how a network router sends a requested website to the corresponding computer. a Similar to cable and satellite pay

- TV, IPTV provides a channel guide, live broadcasting, time-shifted content ( i.e. , content recorded via a DVR), and video on demand content. IPTV service providers deploy their STBs as part of a subscription package.

4.3 COMPONENTS

Simila r to a computer, a STB has a variety of components, as shown below in Figure 4.3.1 :

1) Basic Components. These include typical interfaces (including an IR receiver for a remote control), digital displays ( e.g. , timer, channel display, internal power supply, and a primary tuner and demodulator. In the case of satellite STBs , the power supply also powers the low noise block-downconverter on the dish (this power consumption is not measured as part of any current efficiency policy). 2) Conditional Access Module. The CA module ( e.g. , CableCARD) is placed before the demultiplexer and is used for descrambling the encrypted signal, and also provides a smart card interface for various security features. 3) Digital Decoder (a.k.a. Demultiplexer). A digital decoder receives the signal given by the demodulator, and then demultiplexes & decompresses the video requested by the

us er. 4) CPU (Processor). As in a regular PC, the CPU takes care of interactions between all the hardware peripherals and software modules inside a STB

.

a While many boxes can be connected like a computer using Cat5E Etherne t wire, many AT&T installations use the HomePNA protocol over coax or phoneline.4

- 3 5) DRAM (Dynamic Random Access Memory). DRAM is used to store volatile data for

all software needs. 6) Video DRAM

. Video DRAM is used in a STB for storing the decoded video image that is being output to the television or video recorder. 7) NVRAM (Non -Volatile Random Access Memory). NVRAM is needed for persistent memory needs for the STB . Generally, STB configurations a re written into NVRAM to keep the settings persistent during power cycles and to provide a consistent user experience. 8) Hard Disk Drive (HDD). This component is for STBs with digital video recorder (DVR) functionality, used to save and store video content for later viewing. The HDD is also sometimes used by the service provider to store electronic program guide information. 9) High Definition (HD) Functionality. High definition is an additional functionality not normally categorized as a component itself. It r equires a STB that includes additional graphics processing, along with an HD-enabled TV and subscription to HD-content. 10) Data Modem. This is the data tuner necessary to provide two- way data communication with the service provider, to allow for features such as video on demand and provide accurate billing for viewed programs. Two

- way data communication is sometimes referred to as return path functionality. 11) Second TV Tuner. Allows the STB to handle two channel feeds simultaneously, enabling picture- in -picture viewing or recording one show while watching another (recording is only available for STBs with a DVR).

Figure 4.3.1 Example of STB Internal Components

Source: Mudgal, Schischke, and Iyama (2008). 2 Reprinted with permission.

4.4 SELECT FUNCTIONALITY AND FEATURES

This section reviews select functionality and features available in STBs. ENERGY STAR uses an approach giving a total energy consumption (in kWh) allowance to many of these functionalities/features, applied to a base allowance. Additional functionality not described4

- 4 below includes advanced video processing, push video, home network interface, multi- stream, and removable media player/recorder. The Appendix includes information regarding these

functionalities.

4.4.1 Digital Video Recorder (DVR)

DVRs are STBs with t he ability to save shows for later viewing or to pause/fast-forward live TV. The term DVR is often used two ways: one referencing the functionality ( e.g. , a STB with DVR functionality) and the other as the type of STB ( e.g. , HD

- DVR). Because one tuner is r equired for each channel the user “tunes in” to, DVRs typically have multiple tuners, so the user can record a show while watching live TV.

4.4.2 High Definition (HD)

Similar to the rise of DVR functionality, the capability to output high definition (HD) content has become a very popular functionality of STBs . For a viewer to be able to watch content in HD, they need: (1) an HD-enabled STB , (2) an HD-enabled TV, and (3) access to HD- content as part of their pay-TV subscription. ENERGY STAR defines HD as the cap ability to transmit or display video signals with resolution greater than or equal to 720p. 1 720p refers to a resolution of

1280 x 720.

4.4.3 Multi

- room Technology

The pay-TV industry is moving toward multi-room solutions. As an example, instead of deploying three DVRs in a home, one for each TV, a user would have one DVR that acts as a

server and two thin clients. The server DVR includes all the tuners and performs all the transcoding, so thin clients no longer need to communicate with the service provider, only the server DVR within the home. This enables the consumer to schedule recordings on a central DVR and view these recordings and live TV from any TV in the home. “Networked STBs that

facilitate whole -home DVR functionality are becoming more common, and pay- TV service providers are looking to these solutions to provide differentiation, increased customer satisfaction, and ultimately new revenue stre ams”. 3

By definition, multi -room is the capability to provide independent audio/video content to multiple devices within a single -family dwelling. This definition does not include the capability to manage gateway services for multi -subscriber scenarios. 1

4.4.4 Middleware

Middleware is software that can communicate between the service provider head -end and network equipment. The term head

- end generally r efers to a pay

- TV service provider’s local transmission facility. Middleware is similar to an operating system in a computer, although the customer does not see it. The customer sees the service provider applications software, such as a channel guide and v ideo on demand. Several cable operators have adopted tru2way/OCAP4

- 5 specifications as the standard for their middleware. b IPTV stakeholders, on the other hand, have yet to come to a clear consensus on any standardized middleware platform. DirecTV was a

fou nding member of the RVU Alliance, which is a middleware solution created for DVR server/thin client networks, and functions with cable or satellite.

4.4.5 Content Protection

STBs typically contain some type of encryption that ensures customers only have access to the services that they have paid for. Conditional access is a term that refers to the encryption, decryption and authorization techniques employed to protect content from unauthorized viewing. 1 Before the FCC

- mandated CableCARD, each STB was proprietary to the service provider and included propriety conditional access protocols. In efforts to bring STBs to retail, the FCC mandated all service providers provide their customers with a CableCARD, which is a separable form of conditional access. Shortly thereafter, video-on- demand became very popular and could only be accessed through proprietary service provider STBs since CableCARD does not support vi deo -on-demand. This development drove consumers to lease STBs from their service providers.

4.4.6 Content Availability

There is a growing consumer demand to access content on a variety of consumer electronic devices. “Consumers expect to have multiple options for consuming content, but content owners fear that once content is on the network, it is vulnerable to misuse and piracy”. 3 The Digital Living Ne twork Alliance (DLNA) has developed interoperability guidelines which outline standards for device communication and content sharing among various devices within the

home. 4

4.5 ENERGY CONSUMPTION

4.5.1 National Energy Use of STBs

Residential electricity consumption in the U.S. totals over 1,300 billion kilowatt-hours (kWh) annually ( Table 4.5.1 ). C onsumer electronics devices are becoming more commonplace in the U.S., and their resulting electricity consumption is growing relative to other end uses . STBs are a contributor to that energy use. Previous studies have estimated total U.S. STB energy consumption at approximately 20 billion kWh per year and 23 billion kWh per year. 5

, 6 Other

work has estimated national STB energy consumption as high as 27 billion kWh per year, or even higher. 7

, 8 These estimates suggest STBs consume approximately 2 percent of total residential electricity consumption

. Most experts agree that STB energy us e is project to increase significantly, both domestically and internationally ( Figure 4.5.1 ). At 27 billion kWh per year, this results in approximately 16 million metric tons of carbon dioxide (CO 2 ) emissions annually. 9

b See http://www.tru2way.com/ and http://www.cablelabs.com/opencable/ for more information.4

- 6 Table 4.5.1 U.S. Annual Residential Electricity Consumption by End Use (20 11)

End

- Use Quadrillion Btu Billion kWh Share of Total

Space Cooling 0.8 0 2 34 17.3 %

Lighting 0.7 0 20 5 15.1 %

Water Heating 0.4 4 12 9 9.5 %

Space Heating a 0.42 12 3 9.1%

Refrigeration 0.3 6 10 6 7.8 %

Televisions and Set

- Top Boxes 0.34 100 7.3 %

Clothes Dryers 0.1 8 53 3.9 %

Computers and Related Equipment 0.18 5 3 3.9 %

Cooking 0.11 3 2 2.4 %

Dishwashers b 0.09 26 2.0%

Freezers 0.08 23 1.9 %

Clothes Washers b 0.03 9 0.6 %

Other

— Miscellaneous Uses 0.8 9 2 61 19.2 %

Total 4.6 3 1,3 57 100.0%

a Includes fans and pumps. b Excludes energy for water heating.

Source: EIA (2011)

. 10

Figure 4.5.1 Projected Energy Use of STBs

Source: IEA (2009 ). 8 Reprinted with permission.

The majority of STBs today currently consume nearly the same power whether or not the device is being actively used to watch or record television. As a re sult, approximately two -thirds of the total annual energy use of STBs ( an estimated 18 billion kWh/year) occurs when a consumer is

neither watching nor recording a show. 74

- 7 4.5.2 Unit Energy Consumption of STBs

Each new generation of STBs includes faster processors, more memory, larger hard drives, and many other new features into a box with limited size and limited abilit y to remove heat with cooling fans. The need to maintain a power limit in the face of significant feature advances has resulted in tremendous efficiency gains over the last decade. Although efficiency has improved,

STB count per home is also increasing, resulting in increased total household energy consumption. Service providers have made only limited gains in reducing STB energy consumption when subscribers are neither watching nor recording video (though active energy use has indeed decreased).

A recent study measured the energy consumption of 58 pay- TV STBs deployed in the U.S. over the past two years, along with a small number of pay- TV STBs in Europe. 7 A few emerging OTT

STBs like AppleTV were also measured. The key conclusions were:

• U.S. STBs continue to use almost as much power when not in use as when active. However, leading European service providers have begun to solve this problem in the ir

newest STBs

.

• Satellite HD -DVRs in this study drew slightly more power than their cable counterparts ( Table 4.5.2 ). This trend may, however, change over time. IPTV, which is rapidly gaining market share compared to cable and satellite, enables the use of lower

- power STBs . The

most efficient U.S. HD

- DVRs tested were IPTV boxes, drawing approximately 18 watts when active, 15 watts less than the average cable or satellite HD -DVR. European IPTV

HD -DVRs demonstrated on mode power levels of less than 10 watts.

• Pay

- TV STB unit energy consumption has held steady in the last few years as the increased energy consumption of advanced features has offset component- level efficiency gains.

• Consumers are increasingly getting their video content from a variety of new broadband video streaming services, including Netflix, Hulu, AppleTV, and the just-introduced GoogleTV. Consumers ca n access these services via Internet -enabled TVs, video game consoles, Blu-ray players, or dedicated OTT STBs . The data included two of these OTT devices. The most efficient device in the study was an OTT STB, which drew just 3 watts

in on mode and under 1 watt in sleep mode.

• Many consumers currently use these streaming devices in addition to their pay- TV STB

. This streaming capability is likely to be integrated into future -generation TVs. These TVs will be able to stream video from sources such as Netflix, Hulu, and locally stored content on the home’s DVR. The study did not expect these low- power streaming devices to replace the central DVR in the near future.

Table 4.5.2 STB Power Use by Segment and Technology Type

Average On

- Mode Power (W) Average Sleep

- Mode Power (W) Units Measured

Cable

SD 15 15 13

HD 21 20 11

SD- DVR 26 25 24

- 8 HD

- DVR 32 31 13

Satellite

SD 12 9 1

HD 18 17 2

SD- DVR 30 29 1

HD

- DVR 40 38 11

IPTV

SD- DVR 10 10 2

HD

- DVR 18 15 2

OTT

STB 5 4 2

Source: Hardy and Swofford (2011). 7

Figure 4.5.2 STB Power Demand, Measured from 58 Pay- TV

STBs

Source: M odified from analysis used in Hardy and Swofford (2011)

. 7 Reprinted with permission.

Figure 4.5.2 shows the on mode and sleep mode power levels measured for all the devices in the study. On mode measurements are represented by dots, whereas sleep mode measurements are represented by bars. The measurements are grouped by broad STB functionality, an d color

- coded by base type (cable, satellite, IPTV, OTT). The major trends observed include: (a) a general increase in power with increased functionality (in particular HD and DVR); (b) a general4

- 9 increase in power for satellite STBs; (c) low power for IPTV and OTT STBs; and (d) very little difference between on mode and sleep mode power for the majority of STBs.

It is important to note, however, that the STBs measured in the study are up to two years old, and may not fully represent current models . These m easurements are, however, higher than from

similar studies in 2006 and 2007. 8 Figure 4.5.3 shows a similar figure for ENERGY STAR

qualified STBs, as of Oct. 17, 2011. As these are qualified models, they exhibit the best efficiency for STBs in their class. On average, these models are consuming significantly less power than the average models in Figure 4.5.2 , especially for HD

- DVR models.

Figure 4.5.3 Recent ENERGY

- STAR

- qualified STB Power

Demand

Source: EPA (2011). 11

Table 4.5.3 lists the estimated power use of various STB components. These estimates, however, are a few years old, and may not fully represent modern functionality. Included in these power use estimates is the power required for the return path (communication with the service provider). Several current technol ogies can be used for the return path, including:

• Plain Old Telephone System (POTS) – uses low speed dial-up modem to communicate infrequently with the service provider. Energy consumption is negligible. HD HD

- DVR Multi

room HD Multi

room HD

- DVR SD On Mode Power
Sleep Mode PowerCableSatelliteIPTVThin-Client4

- 10 • Ethernet

– keeps network presence active at all tim es, even in standby. Ethernet has low power consumption (~1W).

• ADSL

– keeps network presence active at all times, even in standby. ADSL has higher power consumption (few watts up to 10 watts depending on type and speed). ADSL specification allows for low power states, although often they are not used by manufacturers or telecommunication companies. Current European best practice is ADSL2 (2nd generation ADSL), which uses 2.6W - 3W. VDSL2 (2nd Generation VDSL) uses 3.5 – 6W.

• DOCSIS - keeps network presence active at all times, even in standby. DOCSIS has higher power consumption than ADSL. Current installations average from 5W up to 12W depending on type and speed of connection. DOCSIS currently does not have low power modes, although in DOCSIS 3 it should be possible to reduce the number of communication channels from 4up/8down to 1/1, but no service provider has done this commercially as yet. The best practice DOCSIS 3 would use 6.2 - 7.1W.

Table 4.5.3 Estimated Power Use Breakdown for Cable and Satellite Pay

- TV STBs

Functionality (F) or Component (C) On Mode Power Use (watts) % of Energy Consumption for

HD Receiver % of Energy Consumption for

HD

- DVR STB

Basic Components (C) 10 30% 24%

Data Modem (C) 10 30% 24%

High Definition (F) 8 25% 20%

Hard Disk Drive (C) 8 N/A 20%

Second TV Tuner (C) 5 15% 12%

Total 100% 100%

Source: Mudgal, Schischke, and Iyama (2008). 2

4.6 POTENTIAL ENERGY EFF ICIENCY MEASURES

Service providers and manufacturers continue to improve on mode STB efficiency, by improving power supply efficiency and utilizing efficient components. Although the industry has made progress, the increased energy consumption of advanced features has offset component- level efficiency gains. Recent estimates suggest efficient pay

- TV STBs and service provider networks could reduce the energy use of the inst alled base of STBs by 30 to 50 percent by 2020. 7

Efficient networks are an important part of the solution, but there are significant barriers to improving them. If a cable user disconnects their STB from the network by powering it off, the

head

- end reports a service fault and an engineer can be called. S imilarly, on satellite systems, software updates and subscription information may degrade over time, and the user may find they have no longer have a subscription when they turn the box on again. The cost to change the network infrastructure is potentially very large, and requires a long planning horizon. Changes to

the STB are likely relatively low cost and easier to achieve than those to the existing network

infrastructure.4

- 11 The primary energy savings opportunities identified by recent studies 7

, 8

, 12 ( Table 4.6.1 ) include:

• Enabling STBs to automatically power down to much lower power levels when not in use ( e.g. , in the middle of the night, while users are at work).

• Shifting to whole-home solutions th at include a main STB connected to the primary TV and either TVs specially -designed to access the video content stored on the main box or low-power thin client STBs that serve the same function.

These two opportunities are explained in detail below. Although other areas for energy efficiency improvement are worth mentioning ( e.g. , efficient power supplies, efficient components), power management and multi -room technology offer the most comprehensive means for maximizing energy savings without hindering the consumer experience.

Table 4.6.1 Energy -Saving Strategies for STBs

Measure

Number Measure Name Explanation Relative Savings Opportunity Difficulty

1 Power management Switch off components when not actually required, including hard disk, image processing chips, and multiple tuners High Moderate

2 Utilize multi

room technology Shifting to whole

- home solutions that include a main box connected to the primary TV with either TVs specially

- designed to access the

video content stored on the main box or low

power thin cli ent STBs that serve the same

function High Low

3 More efficient components Install switch

- mode power supply and more efficient chips for image conversion Moderate Moderate

4 Reduce disk

energy use Install more efficient disk designs, switch to

flash memory, or store content at a remote

server Moderate Moderate

5 Lower clock speeds on chips Reduce processing speed to minimum speed for type of image transmitted Low Low

6 Consolidate

boxes Some homes use two or more boxes to provide signals to several televisions High Moderate

7 Relax security requirements Service provider currently restricts ability of box to enter low power modes to guard against hackers and to protect content Moderate High

8 Allow user to set functionality Through a control panel, the user could modify settings to more precisely match his needs, possibly resulting in even greater energy savings Low Moderate

Note: Some measures overlap ( e.g. , measure 2 helps to achieve measure 6 in theory). Table has been modified to

include multi

- room technology.

Source: IEA (2007)

, 12 Table 37: Energy

- saving strategies for set

- top boxes. p. 147. Based on presentations at the "Workshop on Energy

- Efficient Set

- Top Boxes and Digital Networks" at the IEA, Paris, France, 4

- 6 July 2007.4

- 12 4.6.2 Power Management

Modern STBs draw nearly as much power when they are off or in sleep mode as they do when in

use. The re are “concerns about the energy use of today’s STBs because the power needed by the

STB when the user is watching/recording programming and the power needed by the STB when the user has physically hit the off button are virtually the same”. 13 STB components, such as hard drives and tuners, could be powered down when not in use without significantly impacting the user experience. 6 This would consider ably lower the power draw of STBs when they are not in use ( i.e. , watching or recording a show). Best in class power management schemes include both light and deep sleep states.

In the U.S., no pay-TV service provider has initiated a significant power ma nagement scheme to date. “Unfortunately, incorporating a sleep mode in STBs is more difficult to implement because a sleep mode solution would need to be developed and specified by service providers and agreed upon by hardware manufacturers, software developers, and communication protocol experts”. 13
There exist some reasons as to why such power management schemes have yet to be enabled in the U.S. Reasons include security, long boot-up times, updates to electronic program guides, and

the need for the STB to continuously stay connected to the network, among others. On the other hand, select service providers in Europe have already begun implementing p ower management schemes despite the above -mentioned issues.

European satellite service provider Sky Broadcasting offers an example of energy efficient STB hardware. They offer a HD -DVR that draws 23 watts in on mode and 13 watts in a light sleep

state. 7 Light sleep is a state in which there is no video output, no recording functions, but

network connections are maintained. The STB enters light sle ep when the user presses the power button on the remote. In addition, the STB enters a 1 watt deep sleep state between 11pm and 4am (unless the consumer is actively using the device), after which it enters a light sleep state. This deep sleep feature may b e disabled by the consumer, and a warning appears if the TV is on but there has been a long period of inactivity (se e Figure 4.6.1 ). The STB requires 90 seconds to wake up from a deep sleep, and wakes up almost instantly from a light sleep. During deep sleep,

the STB periodically and briefly wakes up every 30 minutes to check for updates and for new program recording requests, before returning to deep sleep. Figure 4.6.2 illustrates this sleep behavior schematically. Anecdotal reports suggest that Sky Broadcasting has received almost no negative feedback, that consumers are mostly happy with (or unaware of) the changes to the STBoperating behavior and that there is a low incidence of consumers disabling the auto-powerdown feature. Figure 4.6.1 Deep Sleep Warning from Sky Broadcasting

Source: Mudgal, Schischke, and Iyama (2008). 2 Reprinted with permission.4

- 13 Figure 4.6.2 Schematic Deep Sleep Power Consumption Profile

Source: Mudgal, Schischke, and Iyama (2008). 2 Reprinted with permission.

Chinese manufacturer Skyworth produces another example of an efficient STB . Their cable

STBs consume only 8 W by employing low power components and an efficient power supply. The standby power is only 1 W, and the technologies needed to achieve this low standby power add only US$ 1 to the cost of each box. In addition, the wake- up time from this st andby level is only 15 seconds. 8

4.6.3 Multi -Room Technology

Multi -room technology enables consumers to schedule recordings once on a central DVR and to view these recordings and live TV from any TV in the home. Multi

- room STBs with DVRs provide additional consumer utility since consumers can access programs saved o n their main STB hard drive from any connect TV in the house, and switch rooms while watching the same show. This is a premium feature that is sought after by consumers and is rapidly gaining popularity.4

- 14 Multi -room technology is new to the market, but it has the opportunity to limit national STB energy by eliminating the need for multiple fully functional and energy consumptive STBs in one home. Instead of multiple, fully-functional STBs , a home could be outfitted with a central

STB with multiple tuners, a nd several low-power thin- client STBs with minimal functionality ( Figure 4.6.3 ). Multi -room is only applicable to households with more than one STB.

True thin- client STBs do not require all of the components and functionality (and associated energy use) of a primary STB in the home. Implementing thin clients can significantly reduce household energy use. A central and fully functional DVR STB would communicate to t he service provider and contain the conditional access and network connectivity necessary to provide pay-TV content to the home. This box would then serve other client boxes in the home

connected to other TVs around the house. These client boxes would not need select functionality and components such as conditional access or DVRs, as they only need to be able to

communicate to the central box to obtain content as needed. Thin clients can draw as little as 8

W. 7

Figure 4.6.3 Example Multi

- Room Configuration

Source: Hardy and Swofford (2011). 7 Reprinted with permission.

Some multi -room solutions currently deployed do not use true thin clients. Instead, the service provider uses fully functional STBs in the client role. Although th is limits the number of DVRs in the home, it is not an optimal solution, and is potentially only saving energy at the household

level for 4

- 5 STBs/house or more. Replacing the auxiliary boxes with true thin clients eliminates this problem.4

- 15 Another strategy for reducing energy consumption involves TVs themselves serving as clients, which can obtain the content they need from the single and central DVR STB in a home. This

would eliminate the need for thin client STBs altogether and would reduce household ene rgy use by consolidating devices. TVs are already trending toward Internet capability, with growing feature sets and functionality. The reduction in household energy from eliminating the need for multiple STBs may potential ly offset any power premium t hat these additional features in the TV

would entail.

The RVU Alliance is a consortium of consumer electronics groups working to accelerate the availability of service provider content throughout the connected home. 14 RVU’s goal is to use

its Remote User Interface (RUI) technology for home networked television entertainment, ensuring interoperability among devices implementing RVU’s RUI technology, and educating the market about RVU technology. As innovation takes place in the market, service providers ar e encouraged to shift to multi-room solutions that only require one main STB and much lower power thin client STBs for the other TVs in the home.

The main gateway STB , however, may use significantly more energy than a normal STB . A

multi -room solution might therefore not save much energy per house if there are only 2 or perhaps 3 STBs in a house. There is rapid innovation in multi-room technology, and multi-room

STB power consumption is changing quickly. There is currently insuffic ient data to precisely determine how many STBs per home are required before a multi -room setup would save energy,

4.7 ASSESSMENT OF FUTURE PRODUCT EVOLUTION

The pay- TV STB has evolved past its originally intended role. Initially limited to acting as a

gatewa y for rendering pay -TV content to viewers, STBs are now technically capable of serving as a media center for the entire home. Technical innovation continues to take place at a rapid pace in both the pay-TV market and consumer electronics in general. Both h ave a significant impact on the STB . New opportunities already being implemented in some of today’s STBs include blending broadcast and Internet content, remotely accessing content, other placeshifting features, targeted advertising, social networking applications, and additional storage. 15 This section provides a brief overview of the importance of blending content, placeshifting, and other advanced video features, and their impact on the evolution of the STB

.

4.7.1 Blending Content and Device Consolidation.

The convergence of pay-TV, Internet video, and user-stored content will have a large impact on

the role of the STB over the next decade. For example, currently, Google TV’s software enables users to search and watch broadcast video content, browse the Internet, and organize media stored on a DVR, all while sitting in front of a TV rather than a computer. Google TV software is also currently available on two hardware devices: the Logitech Revue (a dedicated STB ) and Sony’s Internet TV with Google TV. The future of TV will likely be a mixture of technology and delivery methods, though service providers will remain influential stakeholders in the pay- TV

arena. 164

- 16 Additionally, STBs and network equipment are likely to become consolidated, with a single gateway devi ce providing television and Internet access to the home. EPA already includes

“home network interface” in its list of additional functionalities for the ENERGY STAR STB

program. 1 Given that many users obtain Internet and television service from the same service provider, and that both services can be delivered via the same medium ( e.g. , cable), it is very

natural for STBs and modem/routers to become integrated.

4.7.2 Placeshifting

The term placeshifting refers to technology that allows the user to watch video content on multiple devices, and ultimately multiple locations. Whereas timeshifting simply refers to the use of a DVR to be able to watch content whenever you want, placeshifting makes content available to the screen in front of the user, be it a TV, laptop, tablet, or cell phone. Any screen with an Internet connection would be able to view broadcast TV, saved DVR content, or Internet videos. This type of viewing flexibility is becoming increasingly popular with consumers.

The ultimate goal of placeshifting is to make video content, paid and free, available on all types of consumer electronics devices. One challenge of making pay -TV subscriptions available across multiple devices is ensuring adequate content protection, making sure the content is only viewed by those who pay for it. Video content owners are aware of past issues related to peer- to

- peer file sharing, particularly with respect to music content.

Important issues regarding the development of these cross- platform initiatives include: 3

• How content providers, service operators and their consumer electronics partners agree on industry- wide digital rights management schemes;

• The development of authentication solutions that account for the consumer as both a subscriber to premium pay- TV services and a user of online services;

• The role of consumer electronics such as home computers and residential gateways to transcode media and apply appropriate management rules on content; and

• Consumer demand for paying a premium on cross- platform content services.

4.7.3 Advanced Video Functionality

In the next few years, STBs will begin to offer advanced video functionality, including full 1080p high definition video, high efficiency video coding (HEVC) which saves on bandwidth, 3- D signals, and ultra high definition video.4

- 17 REFERENCES

1 EPA. 2011. ENERGY STAR Program Requirements Product Specification for Set-top Boxes:

Version 3.0 . Environmental Protection Agency. http://www.energystar.gov/ia/partners/prod_development/revisions/downloads/settop_boxes/ ENERGY_STAR_STB_Final_Version_3_Specification.pdf

2 Mudgal, S., K. Schischke, and S. Iyama. 2008. Preparatory study on complex set-top boxes (EuP Lot 18), Final Report . DG Transport and Energy, European Commission.

3 Scherf, K. 2010. The Necessity of Content Flexibility in the Connected Home . Parks

Associates.

4 Parks Associates. 2009. The Future of Networked Devices and Digital Content . Parks

Associates.

5 Roth, K., and K. McKenney. 2007. Residential consumer electronics electricity consumption

in the United State s. European Council for an Energy Efficiency Economy (ECEEE) Summer Study, June 4- 9, at La Coll e sur Loup, France.

6 May -Ostendorp, P. 2007. Tuning in to Energy Efficiency: Prospects for Energy Savings in

TV Set -Top Boxes . edited by N. Horowitz: Prepared by Ecos Consulting for Natural

Resources Defense Council.

7 Hardy, G., and J. Swofford. 2011. Better Viewing, Lower Energy Bills, and Less Pollution: Improving the Efficiency of Television Set-top Boxes . edited by N. Horowitz: Prepared by

Ecos Consulting for the Natural Resources Defense Council.

8 IEA. 2009. Chapter 7: Set-Top Boxes. In Gadget s and Gigawatts: Policies for Energy Efficient Electronics. Paris, France: IEA Publications.

9 Based on 0.6 metric tons of CO2 per MWh. EIA. 2008. 2008 Summary Statistics (United States). Table 1. U.S. Energy Information

Administration. http://www.eia.doe.gov/cneaf/electricity/st_profiles/us.html

10 EIA. 2011. Annual Energy Outlook 2011. Energy Information Administration. http://www .eia.gov/forecasts/aeo/

11 EPA. 2011. ENERGY STAR Set -top Box Qualified Product List . Posted October 17, 2011. Environmental Protection Agency. (accessed November 4, 2011)

12 IEA. 2007. Set -Top Boxes: Energy Use Affected by the Principal-Agent Problem in the

United States . In Mind the Gap: Quantifying Principal-Agent Problems in Energy Efficiency. Paris, France: IEA Publications.4

- 18 13 Porter, S. 2005. Cable and Satellite Set Top Box Energy Savings Opportunities , ed ited by N. Horowitz: Prepared by Ecos Co nsulting for the Natural Resources Defense Council. http://www.nrdc.org/air/energy/energyeff/stb.pdf

14 http://www.rvualliance.org/

15 Parks Associat es. 2009. Digital Lifestyles and the Service Provider . Parks Associates.

16 Drawbaugh, B. 2011. Could this be the year we get to ditch the cable box? engadget. http://www.engadget.com/2011/01/09/could- this -be-the- year

- we

- get

- to

- ditch -the- cable -box/1 APPENDIX: DEFINITIONS

VARIOUS GENERAL DEFINITIONS

A set -top box is an electronic device that receives a video signal and converts it for display on a television or, increasingly, on a computer monitor. 1

A set -top box is the generic name for a device used to convert an incoming TV broadcast signal to one that can be seen on a screen, and it therefore sometimes referred to as an integrated

receiver decoder. 2

A set

- to p box is a cable, satellite, Internet Protocol or other device whose primary function is to receive television signals from a specific source and deliver them to a consumer display and or recording devic e, such as a television or DVR. 3

A set -top box is a device that connects to a television and some external source of signal, and turns the signal into content then displayed on a screen. 4

A set -top box is any dedicated equipment that receives, processes and stores data from digital broadcasting streams and related services, and provides output audio and video signals. 5

BASE TYPE 3

Cable. A set -top box whose primary function is to receive television signals from a broadband, hybrid fiber/coaxial, or community cable distribution system with conditional access (CA) and deliver them to a consumer display, thin- client/remote set -top box, and/o r recording device

.

Satellite. A set

- top box whose primary function is to receive television signals from satellites and deliver them to a consumer display, thin- client/remote set -top box, and/or recording device.

Cable Digital Transport Adapter (DTA). A minimally

- configured set -top box whose primary function is to receive television signals from a broadband, hybrid fiber/coaxial, or community cable distribution system and deliver them to a consumer display and/or recording device.

Internet Protocol (IP). A set -top box whose primary function is to receive television/video signals encapsulated in IP packets and deliver them to a consumer display, thin- client/remote set

top box, and/or recording device.

Terrestrial. A Sset -top box whose primary function is to receive television signals over the air (OTA) or via community cable distribution system without conditional access (CCA) and deliver them to a consumer display, thin- client/remote set -top boxB, and/o r recording device

.

Thin

- client / Remote. A set -top boxB that (1) is designed to interface between a Multi-room settop box and a TV (or other output device), (2) has no ability to directly interface with a Service Provider, and (33) relies solely on a multi-room set-top box for content. Any set-top box that meets the definition of a cable, satellite, IP, or terrestrial STTB is not a thin

- client/remote set -top
box.2 PRODUCT FEATURES/COMPONENTS 3

Base Functionality. The primary functionality that defines the ENERGY STAR criteria applicable to a particular set -top box. Base Functionality is one of the following: Cable, Satellite,
IP, Te rrestrial or Thin

- Client/Remote

.

Advanced Video Processing. The capability to encode, decode, and/or transcode audio/video signals in accordance with standards H.264/MPE G 4 or SMPTTE 421M.

CableCARD. The capability to decrypt premium audio/video content and services and provide other network control functions via a plug- in conditional access module that complies with the

ANSI/SCTTE 28 HOST

- PPOD Interface Standard

. a

Digital Video Recorder (DVR). The capability to store video in a digital format to a rewritable

disk drive or other non- volatile storage device integrated into a set -top box. This definition excludes video capture software for personal computers or server- based DVR capabilities.

Data Over Cable Service Interface Specification (DOCSIS ® ). The capability to distribute data

and audio/video content over cable television infrastructure in accordance with the CableLabs ®
Data Over Cable Service Interface Specification

. b

European Data Over Cable Service Interface Specification (EuroDOCSIS) . An in ternational suite of standards that define interface requirements for cable modems involved in high-speed data and video/audio content distribution over cable television systems.

High Definition (HD) Resolution. The capability to transmit or display video signals with

resolutio n greater than or equal to 720p.

Home Network Interface. The capability to interface with external devices over a high bandwidth network (e.g., IEEE 802.11 (WiFi), MoCA, HPNA). For purposes of this specification, IEEE 802.3 wired Ethernet is not cons idered a Home Network Interface

.

Multi -room. The capability to provide independent audio/video content to multiple devices within a single

- family dwelling. This definition does not include the capability to manage gateway services for multi -subscriber scenarios.

Multi

- stream. The capability to deliver two or more simultaneous audio/video streams to a consumer display, thin- client/remote set -top box, or recording device. The simultaneous streams may be delivered via a physically separa te input or via the primary input. This definition does

not include out-of-band tuners.

Removable Media Player. The capability to decode digitized audio/video signals on DV D or

Blu

- ray Disc optical media

.

a http://www.scte.org/sta ndards/

b http://www.cablelabs.com/specifications/3 Removable Media Player / Recorder. The capabili ty to decode and record digitized audio/video signals on DV D or Blu

- ray Disc optical media

.

OPERATIONAL MODES 3

On Mode. Where the product is connected to a mains power source, has been activated and may be providing one or more primary functions. The common terms “active”, “in- use” and “normal operation” also describe this mode.

Sleep Mode. Where the product is connected to a mains power source, is not providing a primary function, and offers one or more of the following user oriented or protective functions which may persist for an indefinite time:

1) To facilitate the activation of other mod es (including activation or deactivation of On
mode) by remote switch (including remote control), internal sensor, timer;

2) Continuous function: information or status displays including clocks;

3) Continuous function: sensor- based functions.

Deep Sleep State. A power state within Sleep Mode characterized by reduced power consumption and increased time required to return to full On Mode functionality.

OTHER DEFINITIONS 3

Automatic Power Down (APD). The capability of a device to switch itself from On mode to Sleep mode after a predetermined period of time (APD timing) has elapsed. APD timing begins

when the f ollowing criteria have been met:

1) The device has ceased performance of all primary functions; or

2) The last user input has been received (e.g., remote control signal, volume adjustment).

Primary Function

. 1) Delivery of live or recorded audio/video content to a thin- client/remote set -top box or

local/remote recording device is considered a primary function;

2) Delivery of live or recorded audio/video content to a consumer display within four hours
of last user interaction/input is considered a primary function;

3) Continuous device functions (e.g., clocks, statu s displays, indicator lamps) are NOT
considered primary functions.

Service Provider. A business entity that provides audio/video content to subscribers with whom it has an ongoing contractual relationship. A Service Provider distributes ENERGY STAR qualif ied set -top boxes to end users unde r a lease or rental arrangement

.

Conditional Access. The encryption, decryption, and authorization techniques employed to protect content from unauthorized viewing. CableCARD and Downloadable Conditional Access System ( DCAS) are examples of conditional access technology.

Digital Television Adapter (DTA). A device that receives terrestrial (over the air) digital signals and converts them to an analog output suitable for analog TVs. DTAs do not provide4 digital signal out put. This definition does not include converters for satellite or cable digital signals or devices that perform multiple functions (e.g., D VD players with DTA capability)

.

Game Console. A stand -alone device whose primary function is to process video game content. The primary inputs for game consoles are special hand-held controllers rather than the mouse and keyboard used by a conventional computer. Game consoles are equipped with audio/video outputs for use with televisions as the primary display, rather than an external monitor or integrated display. Game consoles typically do not use a conventional general-purpose operating system, but often perform a variety of multimedia functions such as: DVD/CD playback, digital picture view ing, and digital music pl ayback

.

Out -of- band Tuner. A tuner compliant with standards ANSI/SCTE 55-1 2002, ANSI/SCTE 55- 2 2002, or similar, that is used to gain access to data channels outside of the primary audio/video source signal. These tuners may facilitate two

- way communication to allow a set -top box to exchange data (e.g., diagnostics) with the Service Provider, and may enable access to Pay- Per

View or other rich

- media interactive content

.

Typical Energy Consumption (TEC). A means for evaluating energy efficiency through a calculation of expected energy consumption for a typical user over a one year period, expressed in units of kWh/year.

Unit Under Test (UUT). The device being tested

.

Product Family. A group of product models that are: (1) made by the same manufacturer, (2) subject to the same ENERGY STAR qualification criteria, and (3) of a common basic design. Product models within a family differ from each other according to one or more characteristics

or features th at either: (1) have no impact on product performance with regard to ENERGY STAR qualification criteria, or (2) are specified herein as acceptable variations within a product family. For Set -top Boxes, acceptable variations within a product family include a esthetic housing changes that do not affect the thermal characteristics of the device (e.g., color, labeling,

o r other cosmetic modifications)

.5 REFERENCES

1 IEA. 2007. Set -Top Boxes: Energy Use Affected by the Principal-Agent Problem in the

United States . In Mind the Gap: Quantifying Principal-Agent Problems in Energy Efficiency. Paris, France: IEA Publications.

2 IEA. 2009. Chapter 7: Set-Top Boxes. In Gadgets and Gigawatts: Policies for Energy Efficient Electronics. Paris, France: IEA Publications.

3 EPA. 2011. ENERGY STAR Program Requirements Product Spec ification for Set -top Boxes:

Version 3.0 . Environmental Protection Agency. http://www.energystar.gov/ia/ partners/prod_development/revisions/downloads/settop_boxes/ ENERGY_STAR_STB_Final_Version_3_Specification.pdf

4 Mudgal, S., K. Schischke, and S. Iyama. 2008. Preparatory study on complex set-top boxes (EuP Lot 18), Final Report . DG Transport and Energy, European Commission.

5 European Commission. 2009. Code of Conduct on Energy Efficiency of Digital TV Service Systems Version 8 . Institute for Environment and Sustainability, Renewable Energy Unit. http://re.jrc.ec.europa.eu/energyefficiency/pdf/CoC_Digital_TV-version%208_2009.pdf