A move by cable operators worldwide to the DOCSIS 3.0 wideband standard for transmitting digital data in home networks, along with the increasing use of gateway devices, will fuel solid growth this year in the overall broadband cable market for customer premises equipment (CPE), according to an IHS iSuppli Broadband & Digitally Connected Home special report from information and analytics provider IHS.
Total broadband CPE shipments in 2012 are projected to reach 33.1 million units, up 13 percent from 29.3 million units last year. With DOCSIS 3.0 equipment currently on the highest growth portion of the adoption cycle, this year's expansion is a vast improvement from the marginal 0.3 percent uptick of 2011, separated from 2010 levels by just 100,000 units.
Shipments will decline slightly in 2013 as the market undergoes some adjustments to account for the big growth this year, before expansion returns again in 2014. Growth will continue from that point on, with broadband CPE shipments by 2016 amounting to some 35.4 million units.
DOCSIS, or Data Over Cable Service Interface Specification, defines a standardized method of transmitting digital data over existing hybrid fiber/coaxial (HFC) networks. DOCSIS makes wideband tiers available to customers that might otherwise be lured away by the telcos’ fast and sophisticated fiber-to-the-home services, which run at 100 megabits per second and beyond. Telcos had also previously offered Digital Subscriber Line (DSL) to customers, but it became clear that DSL had reached its practical limits in bandwidth and reach, especially as the high-bandwidth usage of video and Internet Protocol Television gained importance
DOCSIS 3.0 is the latest iteration of the wideband standard, faster than the previous 2.0 version in both the upstream and downstream directions for data transmission, and now the clear winner in the CPE market by a wide margin. CPE shipments last year were nearly tied between the two versions at roughly 14.6 to 14.7 million units apiece, with 3.0 ahead by a small edge. However, the ratio in 2012 between 3.0 to 2.0 is 25.8 million units to 7.2 million units—a difference of nearly a factor of four. Shipments of 3.0 will continue to rise in the years ahead, while those of 2.0 will decline steadily until 2015, and then cease completely in 2016.
Gateways rule the CPE market
Among the two major competing classes of broadband CPE equipment, modems will remain the primary CPE device this year with 17.3 million units, even though declining use means that 2012 will be the final year when modems trump gateways.
Gateways as a whole accounted for only 12 percent of total cable broadband CPE shipments in 2008, but share of the devices had surged to 38 percent in 2011. This year, shipments of gateways will reach 15.8 million units, accounting for 48 percent of the overall CPE market. The tables will be permanently turned next year when gateways vault to the top with 18.6 million units in shipment, compared to 14.3 million units for modems.
The rise of cable gateways is driven by increasing demand for mobile connectivity that Wi-Fi provides, as well as by a new holistic perspective of the home that has seized cable operators around the world. In this view, operators look at the home as a multifaceted opportunity for diverse services extending beyond broadband, voice and video. Not content with just providing triple-play services, cable operators are also planning to offer gateway functionalities such as security monitoring and energy management—capabilities far exceeding the reach of the traditional modem. In play are no less than the entire infotainment needs of the consumer, IHS iSuppli believes.
CPE chip vendors hang tight with their customers
Only a handful of companies—chip vendors and equipment manufacturers alike—play in the cable CPE semiconductor market.
Just two firms make the semiconductor chips needed in CPE equipment: Intel Corp. on the one hand, and Broadcom Corp. on the other. Intel (formerly Texas Instruments’ cable modem group) certified the market’s only DOCSIS 3.0 chips initially in 2008—a year before Broadcom certified a competing solution in 2009. Broadcom, however, has since closed the gap that Intel had previously enjoyed with its one year time-to-market advantage, and Broadcom now leads the DOCSIS chip market in shipments today.
For CPE manufacturers, chipsets from both Intel and Broadcom can be found in their portfolio of products, even though well-established relationships can be seen between customer and preferred vendor. For instance, Intel is the primary chip maker for vendors such as Arris and Motorola, while Broadcom is the preferred provider for vendors like Cisco and Netgear.
Intel has recently announced second-generation DOCSIS 3.0 chips in the form of the company’s Puma 6 family of products. Meanwhile, Broadcom’s development for an equivalent offering is reportedly far behind, with availability to come sometime next year.