Shipments of set-top boxes are expected to peak this year, at least in mature markets, and then commence a gradual decline.

However the rolling series of analog TV shutoffs in countries around the world, combined with the strong uptake of HDTV sets, mean that HD STBs will form a growing fraction of the total market, according to ABI Research.

HD STBs are expected to account for about 30 per cent of all STB shipments as soon as 2010.

Michael Inouye, ABI Research industry analyst, said this will be accompanied by a progressive movement from MPEG-2 to MPEG-4 for content delivery.

He said a growing affinity for HD boxes over SD is closely related to MPEG-4.

"As more HDTVs find their way into homes, the demand for HD content grows in kind," he said.

"Anticipating this demand, some countries and operators have elected to support the more efficient standard up front or to begin deployments of upgraded CPE."

Inouye said the price points of boxes are converging.

So much so that he said MPEG-4 and in some cases HD are getting sufficiently inexpensive that some operators will be providing them to their customers by default.

While some STB vendors feel that demand for standard models will be around for a long time, reports from infrastructure vendors suggest a push towards MPEG-4 encoders, according to Inouye.

So he said vendors will have to support MPEG-4.

In markets primarily served by digital terrestrial broadcasts where most sales of STBs are retail, especially those with a large MPEG-2 installed base, this means that vendors will have to encourage consumers to switch by reducing the prices of upgraded boxes.

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