Subscriber and Bandwidth Growth Will Remain Key Catalysts

Global spending on broadband access equipment and CPE is expected to drop only 2% in 2020, a significant improvement from our July 2020 forecast, which anticipated spending dropping by 7% in 2020. The combination of significant residential subscriber growth and increased capacity utilization rates noted by global broadband providers nearly offset the negative impacts of trade tussles, component shortages, and labor limitations.

In the first half of 2020, we heard from countless service providers that their projected capacity utilization rates for the entire year were reached by March or April. A second surge in consumption in the fall, driven by children returning back to school and attempts at re-opening economies forced many operators to add even more capacity. With much of the world still dealing with the impacts of the COVID-19 pandemic and with remote work and online education continuing well into 2021, we see no slowdown in broadband capacity utilization, forcing service providers to once again balance accommodating traffic growth with managing overall spending. Continuing RAN investments will force service providers to spend judiciously on their broadband networks. In certain cases, this will mean delaying longer-term strategic projects and focusing on addressing immediate capacity upgrades and onboarding a higher-than-average volume of new subscribers.

PON Equipment Spending Expected to Remain Solid

Our five-year CAGR for PON equipment has been increased to 3% from just under 1%. China, which has historically accounted for anywhere from 65-80% of total PON spending, has peaked in terms of total ONT units consumed on an annual basis. The Chinese FTTH market has matured, with broadband penetration in the country reportedly nearing 80%. Though subscriber growth is slowing, there is still a tremendous installed base of subscribers that will continue to require new ONTs.

Although China’s ONT volumes are coming down from the peak years of 2017 and 2018, additional growth is expected from the rest of the world—particularly North America and Western Europe. In North America, the FCC’s $20B RDOF (Rural Digital Opportunity Fund) program will help transition a significant number of rural areas to fiber over the next 5-7 years. In Western Europe, major operators including Orange, DT, BT OpenReach, and Proximus are all expanding their fiber rollouts and even moving quickly to XGS-PON for symmetric 10 G services.

Finally in Asia, India, Indonesia, and Malaysia, along with a 10 G upgrade cycle in Japan and South Korea should also help sustain the market.

Cable Infrastructure Spending Set for Growth

The glut of DOCSIS channel capacity that helped push down cable equipment revenue in 2018 and 2019 was actually beneficial to operators in 2020 as they were able to address significant increases in both upstream and downstream traffic during the pandemic with minimal increases in spending. In most cases, cable operators used the software tools available as part of DOCSIS 3.1 to ensure adequate bandwidth for all subscribers. In other cases, operators purchased additional DOCSIS licenses as part of accelerated node split programs to address systems with the greatest need.

Regardless, after two years of under-investing in infrastructure, the overall cable infrastructure market will see a steady increase in revenue throughout our forecast period, as mid- and high-split projects in North America and Western Europe, designed to increase upstream capacity, are accelerated. Investments in outside plant equipment, particularly new amplifiers and taps, will also continue as operators begin the multi-year process of preparing their networks for DOCSIS 4.0 and its ability to enable extended spectrum DOCSIS (ESD), low-latency DOCSIS, and full-duplex DOCSIS (FDD).

 

About the Report The Dell’Oro Group Broadband Access  and Home Networking 5-Year Forecast Report provides a complete overview of the Broadband Access market with tables covering manufacturers’ revenue, average selling prices, and port/unit shipments for Cable, DSL, and PON equipment. Covered equipment includes Converged Cable Access Platforms (CCAP), Distributed Access Architectures (DAA), DSL Access Multiplexers (DSLAMs), PON Optical Line Terminals (OLTs), Customer Premises Equipment ([CPE] for Cable, DSL, and PON), along with SOHO WLAN Equipment, including Mesh Routers. For more information about the report, please contact dgsales@delloro.com.

Broadband Spotlight Will Continue to Shine in 2021

At the close of each year, we analysts like to simultaneously look forward and look backward, reviewing the predictions we got right or wrong from the previous year and then putting forth our best bets for which technology trends will define our coverage areas in the coming year.

I just re-read my post from last year, which was full of optimism for WiFi 6, mesh networking, and zero-touch provisioning for home networking, as well as XGS-PON, mid-, and high-split upgrade projects on the infrastructure side of things. While most of those predictions came true, the context surrounding them could not have been any more unexpected.

In the world of broadband access and home networking, the COVID-19 pandemic has changed everything. Before the pandemic, fixed broadband network traffic was growing annually at a pretty predictable clip. But with the transition to teleworking and virtual education combined with a significant increase in video traffic related to streaming and online gaming, overall traffic and bandwidth surged by anywhere from 50-150% in just a matter of weeks. More importantly, the surge wasn’t just limited to peak busy-hour traffic. It extended throughout the entire day, putting a strain even on oversubscribed networks that forced network operators to reach quickly into their toolboxes to accommodate the consistent demand.

Cable operators responded to the increased traffic demands by segmenting their existing nodes and pulling forward mid- and high-split upgrade projects to increase upstream bandwidth. Those efforts will continue in 2021, resulting in continued increases in upstream channel license purchases. In particular, cable operators are expected to ramp up their purchases of OFDM-A licenses (Orthogonal Frequency-Division Multiple Access) for their DOCSIS 3.1 networks. OFDMA improves spectral efficiencies for upstream traffic, providing significantly more upstream bandwidth for subscribers without necessarily having to move to a full high-split architecture.

Sticking with cable, 2021 will see a steady increase in operators adopting distributed access architectures (DAA), including both remote PHY and remote MACPHY products. As operators continue to look across their existing node base, they are going to run into situations where they have already segmented their nodes as much as they can. These nodes are the first ones that will be swapped out with DAA nodes or augmented by R-PHY shelves in order to continue to meet growing capacity demands among those service groups. Those R-PHY deployments will also result in a corresponding increase in vCCAP server and license purchases this coming year.

2021 will also see an increase in the deployment of vCCAP platforms for cap and grow applications not directly tied to DAA deployments. There are plenty of projects underway with multiple vendors to cap investments in traditional CCAP platforms to either reduce headend rack space or power consumption or, more practically, because operators have maxed out the switch fabric or line card capacity of their current platforms.

Fiber Expansion Will Continue

The switch from copper to fiber among the world’s largest telcos really became clear in 2020. That trend will accelerate in 2021, in particular, because of the investments made this year in new optical line terminal (OLT) ports. Operators throughout North America, EMEA, and CALA switched more of their capex towards expanding their fiber networks than sustaining their DSL networks. This was clear at Telmex, BT OpenReach, and others. Major projects at Deutsche Telekom, Orange, Proximus, and elsewhere will drive not only more fiber expansion but 10 Gbps deployments using XGS-PON.

Fiber access networks are on the verge of a major tipping point, driven by the simultaneous catalysts of the shift to next-generation fiber technology and the shift to openness, disaggregation, and automation. The world’s largest broadband providers are quickly realizing that the need for increased throughput is matched by the need for a highly-scalable network that can respond quickly to the changing requirements of the service provider, their subscribers, and their vendor and application partners. The need to provision and deliver new services in a matter of hours, as opposed to weeks or months, holds just as much priority as the ability to deliver up to 10Gbps of PON capacity. Although service providers might have completely different business drivers for the move to open, programmable networks, there is no question that the combination of data center architectural principles and 10G PON technology is fueling a forthcoming wave of next-generation fiber network upgrades.

The service providers that adopt the combination of 10Gbps PON and openness will be best prepared to accomplish three major goals:

1. Deliver the advanced, 10Gbps capacity, and multi-gigabit services subscribers will expect and require using a cloud-native infrastructure that treats bandwidth and the delivered applications as workflows;
2. Anticipate and whether rapid increases in traffic demand with a highly-targeted and elastic infrastructure that can be activated without a forklift upgrade;
3. Develop an access network infrastructure that can process multiple workloads beyond broadband access, including hosted services that can be offered on a wholesale basis, as well as fixed-mobile convergence applications.

WiFi 6 Will Dominate the Home Networking Market

One of the biggest trends we will be talking about is a fundamental shift in how consumers and service providers think about home networking. There is a confluence of technologies all reaching the market at the same time that will positively impact the capabilities and management of home networks:

• WiFi 6: For many years now, the evolution of WiFi has been focused on improving two key technical attributes: speed and range. WiFi 6, however, is the first iteration to take a more holistic view of wireless technology that encompasses not only improvements in speed and range, but also network intelligence, analytics, and power efficiency. WiFi 6 also has the capacity to dramatically improve how service providers will be able to provision, manage, troubleshoot, and analyze their in-home networking services. It provides options for the remote, zero-touch provisioning of devices and services, as well as the automatic adjustment of WiFi channels to ensure peak performance
• 6GHz Spectrum and WiFi 6E: With so many new connected devices competing for available channels and bandwidth on both the 2.4GHz and 5GHz frequency bands, the WiFi Alliance is introducing WiFi 6E, which uses the unlicensed 6GHz band. In 2020, we expect that many countries will provide access to the 6GHz band, which will mean a huge chunk of unused spectrum for the growing number of residential and enterprise WiFi devices. More importantly for cellular operators rolling out 5G networks, the 6GHz spectrum band will allow them to provide seamless handoffs to mobile devices in homes and offices where their networks might have difficulty penetrating walls and treated windows. There has been much discussion around the pending boom in AR (Augmented Reality) and VR (Virtual Reality) applications for a number of years now. With the availability of the 6GHz spectrum, those applications can in theory be delivered without fear of latency due to channel contention. 6GHz will provide 14 additional 80MHz channels and 7 160MHz channels which will be needed for these intense, high-bandwidth applications.
• Simplified Control: If you were to compare the UIs of home gateways and routers from just two years ago to those available today, you’d be hard-pressed to find an area that has seen a more positive evolution. But 2020 will see even more transformation in an effort to give subscribers total and intuitive control over their broadband subscriptions. One of the areas we expect to see the most growth is in voice control of broadband services. Google’s Nest WiFi mesh systems now include voice control and allow users to verbally turn on a guest network, reboot the system, and initiate parental controls and speed tests. Quietly before the end of 2019, Amazon announced Alexa-enabled voice control of its own eero routers, as well as those from ARRIS/Commscope, Asus, Belkin, Netgear, and TP-LINK. The feature is called Alexa WiFi Access and we expect to see this service integrated across a wider range of devices throughout the year, including being integrated into service provider-supplied gateways, particularly from US cable operators.

These technology developments, coupled with a ratcheting up of the competition between service providers and consumer electronics companies for home network dominance will result in consumers receiving substantially better control of their own WiFi networks in 2021.

 

At this year’s virtual Cable-Tec Expo, four prominent themes have emerged throughout the online panels and technical presentations:

1. 1. Cable broadband networks have performed incredibly well during the COVID-19 pandemic, with minimal outages and minimal complaints from customers.
   2. Despite the reliability, there is a clear and pressing need to dramatically improve upstream bandwidth.
   3. Cable operators’ future is one of business, infrastructure, and service convergence, with their DOCSIS networks serving as the platform for fixed-mobile convergence on a large scale.
   4. Convergence at all levels will be driven in part by the evolution of a common control and management plane across all networks and services.

I’ve dealt with the first two topics earlier this year in multiple blog posts and articles. Those two themes will certainly continue to evolve and have an impact on cable operator spending and strategic priorities for their access networks for the next year.

With this blog, I do want to spend some time considering the overall impact of convergence on cable operators’ long-term strategic plans, especially when it comes to their desire to become both fixed and mobile network operators.

The FCC’s auction of 3.5GHz CBRS licenses, which concluded in August, yielded few surprises when it came to the leading purchasers of the spectrum. Verizon and Dish Network led all bidders in terms of money spent, with Comcast, Charter, and Cox rounding out the top 5. Other major cable bidders included Mediacom, Midcontinent Communications, Shentel, and Cable One.

Comcast and Charter have been signaling for some time that they intend to build CBRS-based mobile networks in their existing cable footprints in an effort to reduce the amount of money they pay Verizon and other MVNO partners to use their networks. Their MVNO operations were always intended as a way to build a subscriber base and a brand in advance of owning their own wireless networks, even if that meant consistent EBITDA losses.

Cox, which had entered the wireless space a decade ago, only to exit after disappointing results, has signaled its intention to re-enter the wireless market through the purchase of a significant number of CBRS licenses across its cable footprint.

Finally, Cable One has taken an interesting approach, acquiring CBRS licenses but also making investments in two fixed wireless ISPs (WISPs) to provide coverage in rural and less dense areas surrounding its cable footprint.

Though they have no intention, at this point, of becoming national carriers, cable operators can certainly become competitive in their current markets, offering bundles of fixed and mobile services with the goal of reducing churn and stealing away some market share from their telco rivals.

Let’s not forget that the largest cable operators already have a very dense network of millions of Wi-Fi hotspots either through their own doing (Comcast’s Xfinity) or through their CableWiFi Alliance. Additionally, most cable operators have been deploying advanced Wi-Fi gateways in residential and small enterprise locations that typically reserve a single SSID for either open CableWiFi or Xfinity Wi-Fi subscriber access. These hotspots can very easily be turned into 5G small cells, expanding and amplifying mobile network access for their subscribers.

The dense network of hotspots and access points that the largest MSOs already have in place combined with the licensed CBRS spectrum that they have acquired should give them access to 150MHz of spectrum that they can reuse across a larger number of subscribers per individual access point.

But that type of spectrum reuse will only be possible with a vast and far-reaching deployment of CBRS small cells. In fact, according to a fascinating paper by Cisco’s John Chapman presented at Cable-Tec Expo, it “can take 200 CBRS small cells to cover an area equivalent to the area covered by one LTE macrocell.”[1]

Though the deployment of such a huge number of small cells seems daunting and costly at first, Chapman goes on in his paper to show that existing and future DOCSIS networks are completely up to the task. Firstly, a large percentage of small cells deployed by cable operators will be strand-mounted, drawing power from the existing HFC plant. Those strand-mount small cells will be deployed in conjunction with small cells located in residences to expand coverage and capacity, such that cable operators could expect to see a small cell count of anywhere from 1 to 80 per optical node, depending on the density of the area being covered, the average span length, and the number of mobile subscribers being served.

Cable operators are very accustomed to thinking about their networks as a shared resource among households and subscribers and then adding capacity when utilization rates remain consistently above 70% for any particular service group. As MSOs have been pushing fiber deeper into their networks, reducing the average number of amplifiers per node, and deploying DAA nodes in an effort to improve MER (Modulation Error Ratios,) they have prepared themselves for an access network that can handle the variable requirements of both fixed and mobile traffic.

Chapman points out in his paper, DAA nodes and CBRS small cells are essentially performing the same function: They are both RF gateways that convert RF traffic to IP over Ethernet. As cable operators continue to add capacity to their networks by pushing fiber deeper and reclaiming spectrum used for broadcast video (which they have been actively doing during the COVID-19 pandemic,) there is more than enough bandwidth to backhaul fixed and mobile broadband traffic over their existing DOCSIS infrastructure. Furthermore, with the introduction of low latency DOCSIS and the new LLX (Low Latency Xhaul) protocol, the overall DOCSIS network can deliver the 2ms of latency mandated by today’s 5g services.

Finally, today’s virtual CCAP platforms are already evolving to provide flexible data and control plane functions across cable operators’ converging fixed and mobile networks. Services like DOCSIS, 1588 and SyncE, BNG, as well as PON, can all be containerized and isolated either physically or logically, depending on the operator’s preference. The virtual CCAP becomes the centerpiece for the control and management of a diverse collection of media gateways located in the outside plant, including DAA nodes, CBRS small cells, PON OLTs, Wi-Fi access points, and cable modems.

Cable’s path to convergence is clearer now than it ever has been, from a business and service perspective to an infrastructure perspective. Chapman summarizes his paper with two (of a number) of points:

• Today’s cable operators are tomorrow’s mobile operators
• Behind every great wireless network is a great wireline network

I am in complete agreement with him and would add that the efforts being made by vendors to realize this at the control and management planes suggest that they agree, as well.

[1] John T. Chapman, “Small Cell Traffic Engineering: How Many Small Cells are Needed for Proper Coverage,” SCTE Cable-Tec Expo, October 2020.

During the Huawei AirPON Commercial Release Conference last week, Huawei formally introduced its AirPON solution, a combination of a blade OLT (Optical Line Terminal) and Digital Quick ODN (Optical Distribution Network) equipment designed specifically to be deployed at existing cell sites. Though Huawei is first out of the gate with a blade-based OLT designed to deliver FTTH from distributed, non-cabinet locations, we fully expect to see other vendors address this space in the near future. The target market for the AirPON solution and those expected from competing vendors is existing mobile carriers looking to expand their service portfolio by adding FTTH (Fiber-to-the-Home) access by taking advantage of their existing cell sites and fiber infrastructure.

These distributed solutions aim to capitalize on the trend towards fixed-mobile convergence among global operators that have only recently been accelerated by the COVID-19 pandemic. The pandemic has shown that universal access to premium broadband services is absolutely critical, and operators are responding by ensuring they can provide premium broadband services across both their fixed and mobile networks. Additionally, the proliferation of national broadband plans or subsidized broadband expansion efforts include both fixed and mobile network options to speed the availability of broadband throughout entire countries.

AirPON Specifics

At the heart of the AirPON solution is an OLT on a blade that can be deployed either on a pole or the wall of a building. The unit can be installed alongside an existing cellular BBU (Baseband Unit) and either draw from an existing DC or AC power source or be deployed with a new power source. The blade OLT is environmentally hardened to withstand extreme temperatures and wind. The unit itself weighs less and is smaller than current strand- or pole-mount OLT nodes, because typical antenna installations on building rooftops are quite a bit smaller in diameter when compared with traditional utility poles.

The blade OLT a maximum of 1,024 subscriber connections, depending on the split ratio the operator selects and how much bandwidth they want to deliver. For mobile operators beginning to offer fixed broadband services, this range is ideal for addressing buildings where either cable, DSL, or 3G/4G fixed wireless connections were only available or where no fixed connections existed previously.

During the online event, Peter Lam of Hong Kong Telecom (HKT) noted that the AirPON solution allows them to deliver fiber services to over 700 villages in remote islands and rural areas of Hong Kong. For HKT, the AirPON solutions solve two significant issues: limited access to existing fiber and the typically high costs associated with delivering FTTH access. The vast majority of HKT’s FTTH offerings are via OLTs located in central offices. However, in remote areas, those central offices are often limited in their reach and limited in their ability to deliver FTTH connectivity.

In a similar presentation, Joel Agustin of the Philippines’ Globe Telecom, which is the country’s largest mobile network operator, noted that the AirPON solution allows the company to deliver residential broadband services, where it is estimated that the penetration rate remains near 20%. Some of the challenges that have hindered operators’ ability to deliver universal fixed broadband services in the Philippines include extremely long fiber spans, owing to an insufficient number of central office locations, particularly in suburban and rural areas, and extremely long times for civil works projects to be completed.

The historically long lead times to complete fiber deployment projects pushed Globe to consider using its existing base station locations as distributed central offices where they could co-locate the AirPON OLTs to reduce the time and cost required to roll out FTTH services. In the Philippines, the typical ODN distance for a CO-based OLT was 7km. By moving to a more distributed architecture using the AirPON solution, Globe was able to increase the number of distributed OLTs and reduce the ODN distance to 1-2km. The reduction in the distance reduces the total fiber infrastructure while also making it easier to secure right-of-way access to add in additional fiber strands to the individual OLT locations. Finally, the approvals and construction process is reduced significantly because Globe doesn’t need to set up additional cabinets to deploy the OLT. Instead, the blade OLT can be placed on the existing rooftop site, taking advantage of existing power supplies and optical backhaul cables.

From the OLT, the feed fiber connection can be dropped directly to an optical distribution point located either on a utility pole or in the MDU to then distribute fiber connections to individual subscriber homes. Globe is taking advantage of advances in ODN equipment and connections to be able to quickly turn up new subscribers while also identifying and isolating faults, such as fiber impairments. The new ODN equipment eliminates the need for fiber splicing using pre-connectorized cable, while also eliminating the need for the technician to open up the optical distribution point unit when connecting a new feeder cable.

Distributed solutions for FMC will continue to grow

The AirPON solution and other vendors expected to enter the market are targeted initially at mobile operators in the Asia-Pacific region who face similar network or geographic constraints as HKT and Globe Telecom, where the re-use of existing rooftop antenna sites for the blade OLT makes economic sense. Countries in Southeast Asia are particularly ideal candidates for the solution, assuming they have determined that the competitive environment and ROI make it feasible to begin rolling out an FTTH service.

Beyond Southeast Asia, these solutions can be applied to operators in Central and South America, as well as parts of Europe, the Middle East, and Africa. Again, with operator consolidation occurring more frequently and with mobile and fixed technologies and architectures beginning to merge, solutions that distribute traditional CO-based platforms are certainly viable technology options. In many cases, there is simply no cost-effective way to deliver FTTH services to rural areas without a distributed platform that allows the operator to build out an FTTH service incrementally. The additional benefit of the AirPON solution and others that will enter the market is that operators can also re-use their existing investments in rooftop antenna locations to help further improve the ROI and overall business case of deploying FTTH.