Service providers themselves are ambivalent about the box. It used to be the main tangible asset that MSOs marketed to "own" a subscriber relationship, with a safe environment allowing transactions, access control and digital rights management to monetize live and on demand programs.
Lately, it has looked increasingly like a ball and chain that MSOs have dragged, a costly installed base, slow to evolve and adapt to the latest technologies, incapable of competing against better services and cost structures evolved from OTT.
Microsoft, in the latest incarnation of its XBox Live service, has brokered deals with several dozens of content providers beyond existing Hulu and Netlix and is launching today. More interestingly, Verizon FiOS, Comcast Xfinity and HBO are also part of the package... as OTT apps. The XBox is already a high-density, high-performance gaming and multimedia environment to play online games and stream video. Adding live TV and VOD makes sense and makes the set top box completely redundant. Microsoft innovates by integrating Bing, its search engine, the Kinect, its haptic motion recognition device and voice, with the EPG (Electronic Programming Guide) of the programmer. You can literally search y voice for a show, an actor, a director and see the results aggregated on your screen from various sources.
This experiment will no doubt cast a new light on the 35 million XBox live accounts, putting Microsoft firmly shoulder to shoulder with Google's TV efforts (and Motorola's set top boxes) and the next generation of Apple TV.
Soon will be a time when subscribers will buy access from their ISP independently from aggregation and content. Channels and MSOs will compete across new geographies on unmanaged devices, across unmanaged networks. New generation of apps will enable you to discover, access and curate content from your local media servers, the cloud and your traditional providers and present the result on the screen you elect. There is no technological or logistical barrier any longer. The business model of pay TV, subscription, advertising is undergoing changes of seismic proportions.