The global market for broadband consumer premises equipment (CPE) will end 2014 with the highest growth in revenues since 2010, increasing by 20 percent from 2013 to reach nearly $11 billion, according IHS Technology (NYSE: IHS).
Revenue this year is set to expand by a whopping $1.8 billion. Such notable growth establishes a strong foundation for an increase of approximately $1 billion per year in 2015 and again in 2016, when industry takings will climb to nearly $13 billion. Revenue will peak in 2017 at $13.1 billion, as presented in the attached figure.
“Managing the broadband experience has become a strategic priority for Internet service providers (ISPs), with online video consumption and the number of connectable devices in the household continuing to grow rapidly,” said John Kendall, senior analyst with the IHS Connected Home research practice. “Delivering a reliable broadband service that meets customer expectations increasingly requires investment in more advanced broadband CPE that not only expands bandwidth to the home, but also around the home.”
Information in this release is derived from the latest Home Networks Intelligence Broadband CPE Market Monitor report from the Consumer Electronics service of IHS. The report covers broadband CPE, including modems, gateways, embedded multimedia terminal adapter (EMTAs), routers, and optical network units (ONTs) for digital subscriber line (DSL), cable, and fiber-to-the-premises (FTTP) households. Also included is market share for semiconductors used in the equipment.
Gateways key to customer partnership
Much of the growth this year is due to a resurgent DSL CPE market, which had declined in 2013 as a result of operator investment in FTTP infrastructure to increase bandwidth to the home. However, new very-high-speed DSL (VDSL) bonding and vectoring technologies are letting service providers offer broadband speeds up to 200 megabits per second (Mbps) on legacy copper infrastructure. Such speeds are more competitive with the DOCSIS 3.0 system for high-bandwidth data transfer, without the need to invest in FTTP infrastructure. As a result, this allows ISPs more flexibility in the capital expense of improving their networks, pushing fiber closer to the home without the cost of directly accessing each household.
The increase in bandwidth throughput in more mature markets represents a fundamental shift of the bandwidth bottleneck from the last mile into the household, and more specifically, into the CPE serving that household. With so many connectable devices dependent on wireless Internet access, Wi-Fi is increasingly becoming the choke point for connectivity.
Broadband CPE shipments incorporating the 802.11ac specification will rapidly grow to 2018, as operators seek to alleviate this issue. Total households with ISP-supplied 802.11ac will rise to 472 million in 2018, up from just 116,000 in 2013.
With the broadband gateway expected to control routing video traffic through the home network—to the set-top box (STB), to the multimedia home gateway (MHG), or directly to a connected screen—be it the living room TV, tablet, laptop, or mobile phone, then it must provide much more than simple gateway functionality. This advanced functionality can manifest in several different forms: advanced Wi-Fi specification, home network device management, Wi-Fi monitoring, or home network troubleshooting and diagnostics. The services require software to manage them, thus driving up the technological requirements in the gateway, such as more advanced chipsets or additional memory. Such variables, jn turn, will drive growth in the market value for broadband CPE during the next three years.
The need for advanced functionality has been anticipated by many CPE suppliers and operators alike, who are adopting varying strategies to deal with this. Many suppliers have focused on software in addition to advanced hardware for both pay TV and broadband CPE through both organic growth and acquisitions.
For example, cable operator Comcast has acquired PowerCloud Systems, parent of SkyDog, which develops Wi-Fi monitoring software.
“The 802.11ac standard offers service providers the opportunity to initially leverage better Wi-Fi as a differentiating factor, but it will very quickly become table stakes, especially in more mature, saturated markets,” Kendall said. “Internet service providers want to avoid being the ‘dumb pipe,’ or merely the means by which their customer receives bandwidth to their home. Instead, the strategic focus is on becoming a partner with the customer, by helping to manage that bandwidth, route traffic more efficiently, and monitor and remotely troubleshoot interruptions or degradation of service. The future of the broadband CPE market will no longer only be served by brute-force bandwidth solutions, but by more intelligent management of that bandwidth in the home network. This has the added benefit of reducing operating expenses, such as lowering call volumes to service centers and expensive truck rolls.”