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“Inventory Correction,”“Inventory Realignment,” Or whatever term you prefer to call the root cause of 2023’s broadband spending slowdown will likely persist well into 2024. Without the benefit of fourth quarter numbers, total spending on broadband equipment in 2023 is expected to show a decline of around 10%. Early projections for 2024 indicate an additional 5% year-over-year decrease, as the lagging impact of interest rate increases to curb inflation will be felt more acutely. This additional 5% decrease would put total spending to around $16.5 B—roughly equal to 2021 spending levels.

The expected declines in 2023 and 2024 follow three straight years of white-hot growth in broadband network and service investments from 2020 to 2022. During this period,  year-over-year growth rates reached 9%, 15%, and 17%, respectively. Similar periods of growth from 2003-2006 and 2010-2014 were both followed by two subsequent years of reduced spending, as operators—particularly in China—shifted their capital expenditure focus from broadband to mobile RAN.

The silver lining here is that very early signals regarding 2025 show a return to growth, as BEAD and other subsidization efforts begin to trickle down to broadband equipment suppliers. Well before that, pockets of growth in fixed wireless CPE, cable DAA equipment and CPE, and continued spending on PON equipment by tier 2 and tier 3 operators should make the broadband market one in which the headlines might communicate malaise, but a peek under the hood shows clear signs of resilience powering an inevitable return to growth.

Here is what we are expecting in this coming year:

Cable Operators Travel Different Paths to Fend off Fixed Wireless and Fiber

Just like last year, in the minds of cable consumers, cable operators find themselves stuck battling against the perception that they are the provider with inferior copper technology that can’t be flexible when it comes to offering plans that meet a consumer’s budget, like fixed wireless currently can. As a result of this situation, larger cable operators are seeing increased broadband subscriber churn and quarters of net subscriber losses.

Comcast is pushing hard to counter those perceptions and is already offering its X-Class Internet tiers, which offer symmetrical speeds of 2 Gbps in Atlanta, Colorado Springs, and Philadelphia. Additional cities are expected to roll out these service tiers in 2024. Comcast’s use of full-duplex DOCSIS 4.0 (FDX), including brand new CPE using Broadcom’s D4.0 silicon in a two-box configuration. Later this year, we expect to see a combined gateway that also incorporates Wi-Fi 7, as Comcast looks to battle back against FTTH providers by providing the most advanced residential gateway to customers.

Meanwhile, in 2024, Charter’s Remote PHY and vCMTS rollouts will kick into high gear. (At the time of this publication, we are awaiting fourth quarter earnings from both Harmonic and Vecima, the announced RPD partners for Charter’s buildout to determine how much equipment the operator purchased in advance of this significant deployment.) For Charter, which is employing Extended Spectrum DOCSIS 4.0, 2024 will also bring much wider availability of 1.8 GHz amplifiers and taps, as well as a choice of CPE with dedicated silicon for ESD, as well as silicon that combines both FDX and ESD variants.

Charter will likely also announce additional vendors for its upgrade efforts, as the operator has been public about its desire for a multi-vendor environment.

Cox will also begin rolling out 1.8 GHz amplifiers this year but, like Charter, will likely run those at 1.2 GHz until taps and CPE become more widely available.

Meanwhile, for those operators that weren’t part of the initial DOCSIS 4.0 Joint Development Agreement (JDA) with Broadcom (and for some of those who were), DOCSIS 3.1 Plus is quickly becoming an important stopgap measure to help increase throughput within the existing DOCSIS 3.1 framework by leveraging additional OFDM channels. Operators can either use existing integrated CCAP chassis (with either legacy line cards supporting 3 OFDM blocks or newer cards supporting 4 OFDM blocks) or vCMTS platforms. This can be combined with either DOCSIS 4.0 modems or modems designed specifically for D3.1 Plus deployments, which won’t require the additional gain amplifier (and cost) needed for full DOCSIS 4.0.

While it remains to be seen which type of CPE operators deploying DOCSIS 3.1 Plus will move forward with, the fact that there is significant interest in the technology means that there will now be additional operators who will likely move on from DOCSIS 4.0 and instead buy themselves time with DOCSIS 3.1 Plus before moving forward with fiber overbuilds. The biggest question here is just how many operators will do so.

Speaking of fiber, we expect to see additional FTTH deployments—both greenfield and overbuild—by cable operators around the world. Whether using Remote OLT platforms or more traditional OLT platforms, cable operators will take advantage of work being done at CabeLabs to standardize the integration of ITU PON into existing DOCSIS management frameworks. This will make it far easier for MSOs to deploy XGS-PON, as well as 25GS-PON and, potentially 50G- and 100G-PON.

XGS-PON to Dominate Fiber Spend This Year

The PON equipment market will be the most dynamic this year, with tier 1 operators outside of BT OpenReach and Deutsche Telekom, all continuing to better align their inventories with anticipated subscriber growth, as well as reduced homes passed goals. For larger tier 1s, the short-term reduction in homes passed goals will ultimately give way to a renewed construction phase beginning in 2025 that should propel the overall PON market through the end of the decade.

But while the tier 1s slow, there will be no slowing the continued efforts by tier 2 and tier 3 operators in both North America and Europe to both upgrade and expand their fiber networks. In fact, the same dynamic that played out in North America in 2023 will likely repeat in 2024, as tier 2, tier 3, utilities, municipalities, and co-ops all continue their buildouts.

The technology beneficiary will be XGS-PON, which already surpassed 2.5 Gbps GPON revenue back in 2022, but will more than double it in 2024. And in markets where operators are beginning to see cable operators deliver symmetric 2 Gbps services, there is a strong chance they will also sprinkle in some 25GS-PON to comfortably deliver symmetric 5-10 Gbps services.

Meanwhile in China, which is expected to show a marked decline in new OLT port shipments in 2023, will likely see another decline until 50G-PON rollouts begin in earnest later this decade. On the flip side, ONT unit shipments in China are expected to increase as FTTR (Fiber to the Room) deployments expand, delivering 2-3 ONTs per home as opposed to the traditional architecture of using a single ONT to terminate fiber.

Wi-Fi 7 Progress Will Accelerate

With the Wi-Fi Alliance recently announcing the opening of certification testing for Wi-Fi 7 products, don’t be surprised to see dozens of Wi-Fi 7 residential routers and broadband CPE models being deployed by operators by the end of this year. Early gateway models, though pricey, have already been introduced to the market and will become much more widely available this Spring, and then well before the Holiday season. As of our July 2023 forecast, we expect over 2.5 million residential Wi-Fi routers and broadband gateways to ship in 2024, though we are undoubtedly increasing this forecast based on the certification testing opening up.

Operators can’t wait to deploy Wi-Fi 7 products to help differentiate themselves in increasingly crowded broadband markets and to eliminate much of the confusion in the market with the coexistence of Wi-Fi 6 and Wi-Fi 6E.