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…but a lot has changed since 2023

It has been a long slog, but on June 27th HPE finally received the go ahead to acquire Juniper, avoiding what could have been a protracted court battle in the US.  By granting two limited concessions, HPE will now be able to absorb its smaller rival, in a bid to take on Cisco.

HPE’s intention to acquire Juniper for $40/share was announced a year and a half ago, but first CEO-level discussions related to a potential transaction occurred much before that, in February 2023.  The engagement has been a long one, stretched out due to an executive change, price negotiations, regulatory hurdles, and the late intervention by the US Department of Justice.  Meanwhile, a lot has changed in the IT equipment market.

Negotiations on a Roller Coaster

The last two years have been marked by pandemic shock waves and AI hype.   When HPE’s CEO, Antonio Neri, first contacted Juniper about a potential transaction, the IT equipment market was showing signs of recovery after supply-challenged 2022. ChatGPT had launched just three months earlier, and the world was awestruck by its vast potential.  Juniper’s early investments in an AI-driven architecture seemed prescient.

During the acquisition negotiations, the IT market skyrocketed, fueled by backlog fulfillment. However, by the end of 2023, the market was awash with excess inventory, and Juniper’s 4Q23 revenue expectations fell below the outlook executives shared with HPE in October. Fast forward a year, and Juniper’s 2024 revenues were 12% below the figure they had predicted during the negotiations.

Meanwhile, the AI landscape has also shifted.

The focused use of AI to automate network operations is becoming a mainstay for equipment vendors, narrowing Juniper’s lead in AIOps mindshare. Since Neri began negotiating with Juniper, CommScpope has introduced RUCKUS One, Extreme has begun taking beta customers on Platform ONE, and Cisco announced AI Canvas – all with AI-fueled features that compete with Juniper’s Mist.

Meanwhile, in a backdrop of economic uncertainty driven by global trade tensions, the broader use of AI may divert enterprise budgets over the next few years.  To implement AI workloads in earnest, enterprises will need to spend on compute, AI models, applications and renewed cybersecurity, which could depress sales of networking equipment.

Where the Rubber Hits the Road

Now that the transaction is final, Juniper’s CEO Rami Rahim will take over HPE’s new networking division, consolidating Juniper’s business with HPE’s Intelligent Edge. Over half of Juniper’s sales are to enterprise customers, and this segment of the business will be fraught with drama.

Until now, HPE’s Aruba products have competed head-to-head with Juniper Mist, and customers are concerned about the implications this acquisition will have on product roadmaps. The overlap is the highest in the WLAN and Campus Switch portfolios.  While Juniper has the innovative microservices architecture, HPE has the higher market share, the closest competitor to networking behemoth Cisco.

Forces to Shape the Outcome

The concessions that HPE made in order to avoid a lawsuit from the U.S. Department of Justice are unlikely to present a large hurdle to the success of the acquisition.  HPE is required to divest its Instant On business, which was designed for the SMB (Small Medium Business) segment and makes up a small percentage of HPE’s revenue.   The combined HPE/Juniper entity is also required to auction two licenses to the WLAN Mist AIOps source code, while maintaining full ownership of the code for their own use. This may present an interesting opportunity for two American companies, but it is only a small piece of a successful enterprise IT strategy.  The formula for competing with Cisco must involve a complete networking portfolio of hardware and software, along with a well-developed channel.  A license to Mist source code can only go so far.

The real hurdles to this acquisition are deeper and more difficult to solve.  Rami Rahim’s top priorities will include rationalizing road maps, obtaining the promised $450 Million in G&A (General and Administrative expense) savings, and incentivizing the sales teams and channel to toe the line.  While navigating complex technological and organizational optimizations, HPE’s new networking division will have to face the following market forces:

  1. Enterprises have “IT inertia”

In a worst-case combination, HPE could shut down the HPE or Juniper product lines with the smallest market share in each overlapping area. If every one of these customers got angry and changed to another vendor HPE-Juniper would lose about a quarter of its enterprise sales.

However, changing vendors is not something enterprises like to do.  They have trained their staff, developed custom tools, and come to appreciate the features of their existing equipment.  With the right positioning, HPE can embark on a slow product integration of Aruba Central and Mist, giving customers the best of both worlds and allowing a smooth transition.

  1. Entrenchment of Goliath

Neri wants to challenge the market leader Cisco, but he will have to do more than incorporate Juniper’s enterprise revenues to become number one.

Networking vendors saw a glimmer of hope when, with the acquisition of Splunk, Cisco seemed set to leave its networking heritage behind to focus on AI, cloud and cyber security. However at Cisco Live in June, CEO Chuck Robbins appeared alongside Chief Product Officer Jeetu Patel with a message that the company may be pivoting to AI, but that networking was remaining at the core of Cisco’s strategy. (https://www.delloro.com/cisco-live-2025-networking-reappears-at-the-center-of-ciscos-ai-strategy/).

Cisco captures over a third of all enterprise market revenues.  HPE and Juniper combined make up 8%. The plan to become number one will be a long-term project and will involve fighting IT inertia with a powerful product offering exuding simplicity and providing a lower-cost option to Cisco customers.

  1. Security is another world

Security is a critical and rapidly growing priority for enterprises. With its acquisition of Juniper, HPE has entered the firewall market, creating opportunities to expand its sales and bolster its emerging SSE (Secure Service Edge) revenue.

However, the combined entity remains significantly behind established network security leaders like Palo Alto Networks and Fortinet, holding low single-digit market share in the SSE and firewall segments. It is worth noting that network security is one of the few segments that Cisco does not lead, and conversely, neither Palo Alto Networks nor Fortinet are among the leaders in other enterprise networking categories. HPE, as a traditional networking vendor, will face unique challenges in penetrating the network security market.

  1. Culture is a Killer

The Harvard Business Review estimates that the majority of acquisitions fail to generate value due to hubris, social factors and a lack of understanding of the strengths that made the acquisition target a success.  Both the Mist and Aruba brands have a strong recognition in IT circles, and bring different values to Juniper and HPE, leading to an acquisition with high potential for infighting, misunderstanding, and false assumptions.

It’s Theirs to Lose

Since acquiring Mist in 2018, Juniper has demonstrated the potential to take this cloud-managed, AI-driven architecture to the big leagues.  While HPE Aruba’s premises-based enterprise portfolio has a dominant position, its cloud-managed solution has languished.  Acquisition failure would represent a huge opportunity lost for Juniper and would cut HPE out of margin-rich recurring software streams that come with cloud-managed sales.

Meanwhile, established vendors such as Ubiquiti, Huawei, CommScope and Extreme are ready to take advantage of market confusion.  In addition, startups with innovative technology and business structures are betting that enterprises frustrated with incumbents are keen to try something new.  If HPE bungles this acquisition, there will be no shortage of competitors ready to pounce.

HPE’s established extensive channel and installed base, merged with Juniper’s Mist AIOps engine, could be the combination that gives Cisco a run for its money. Market digestion and a shift in AI spending may be mere bumps in the road.  In the end, hubris, blind spots and brand culture could be the biggest risks of all.

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We recently attended the Telco AI Forum hosted by RCR Wireless. It was an excellent event, touching on many AI Telco topics. Some of the key takeaways related to AI RAN include:

  • Near-term focus on AI-for-RAN
  • Monetization is part of the long-term vision
  • Transition will be gradual
  • AI from day 1 with 6G

AI in the RAN has been around for decades. But the focus is shifting. Operators now focus on AI-for-RAN, meaning opex, performance, and efficiency improvements. In addition to the role AI can play in the automation journey and with energy savings, operators are increasingly looking at how to squeeze more out of the existing spectrum by using AI for channel estimation, MIMO, CA, and beamforming, among other things. Michael Irizarry, CTO of US Cellular, mentioned they are seeing 10% to 15% of potential efficiency gains in the network.

Monetization is part of the long-term vision. Not surprisingly and consistent with what we discussed in a recent AI RAN blog post, “AI RAN Should We be Excited“, there is strong consensus that AI RAN can improve the user experience, enhance performance, spur efficiency gains, reduce power consumption, and play a critical role in the broader automation journey. However, there is greater skepticism about AI’s ability to turn the RAN sites into profit engines. While many still buy into this concept of improving the overall site utilization by using the workloads for both RAN and AI, the key change over the past year is simply the realization that the GPU business case needs to be justified in the “RAN only” scenario. AI-and-RAN or multi-tenant RAN can improve the ROI, but it should not be a requirement to justify the investment.

The transition from RAN to AI RAN will be an evolution steered by the business case. Rob Hughes, head of wireless marketing at Fujitsu, envisions an approach similar to that of 5G SA. In some cases, the operators start small and go after specific pockets before expanding more broadly.  Michael Irizarry with US Cellular believes rip & replace is unlikely. “The competitive nature of this Industry puts a lot of pressure on the margins, and the ROI will guide the investment cycle”. As the natural cycle ends, operators can assess their best options. Guy Turgeon, Senior Principal Industry Specialist at Red Hat, envisions that the operators that have already started the journey by moving to a cloud native architecture leveraging COTS HW might be in a better position from a readiness and skillset perspective. At the same time, there is no question that the asymmetric starting point between appliance-based RAN and COTS HW will impact the transition, and custom HW will likely comprise a significant share of the 5G AI-for-RAN market. The AI-RAN Alliance discussed the hybrid CPU/GPU roadmap.

AI RAN will be a reality from the start with 6G. While 6G does not change the existing site grid dynamics and the splits between C-RAN and D-RAN, the expectation is that AI will be a focus from the start with 6G. Since the base case scenario is that the “anchor” band for 6G will be in the upper 6 GHz+ range and the business case is hinging on carriers’ ability to leverage the existing macro grid, the expectation is that AI is needed for RAN optimization and in the MAC layer for scheduling, beam management, and MIMO optimization. Ofir Zemer, Vice President, Product Management at Qualcomm and responsible for its RAN Automation suite, believes a powerful agentic layer is essential for Level 3+ automation to manage the increased complexity in the networks (According to the TM Forum, the average operator is currently at Autonomous Networks Level 2, Level 3+ is expected by the time 6G comes around).

For more info, please visit the RCR Wireless Telco AI Forum site to watch the webinar on-demand.

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The use of intelligence in the RAN is not new—both 4G and 5G deployments rely heavily on automation and intelligence to replace manual tasks, automate the RAN, manage increasing complexity, enhance performance, and control costs. What is new, however, is the rapid proliferation of AI and generative AI, along with a shifting mindset toward leveraging AI in cellular networks. More importantly, the scope of AI’s role in the RAN is expanding, with operators now looking beyond efficiency gains and performance improvements, cautiously exploring whether AI could also unlock new revenue streams. In this blog, we will review the scope and progress.

AI RAN Vision

Considering the opportunities with AI RAN, its evolving scope, the proliferation of groups working on AI RAN, the challenges of measuring its gains, and the absence of unified frameworks in 3GPP, it’s not surprising that marketing departments have some flexibility in how they interpret and present the concept of AI RAN.

Still, some common ground exists even with multiple industry bodies (3GPP, AI-RAN Alliance, ETSI, NGMN, O-RAN Alliance, TIP, TM Forum, etc) and key ecosystem participants working to identify the most promising AI RAN opportunities. At a high level, AI RAN is more about efficiency gains than new revenue streams. There is strong consensus that AI RAN can improve the user experience, enhance performance, reduce power consumption, and play a critical role in the broader automation journey. Unsurprisingly, however, there is greater skepticism about AI’s ability to reverse the flat revenue trajectory that has defined operators throughout the 4G and 5G cycles.

The 3GPP AI/ML activities and roadmap are mostly aligned with the broader efficiency aspects of the AI RAN vision, primarily focused on automation, management data analytics (MDA), SON/MDT, and over-the-air (OTA) related work (CSI, beam management, mobility, and positioning).

The O-RAN Alliance builds on its existing thinking and aims to leverage AI/ML to create a fully intelligent, open, and interoperable RAN architecture that enhances network efficiency, performance, and automation. This includes embedding AI/ML capabilities directly into the O-RAN architecture, particularly within the RIC/SMO, and using AI/ML for a variety of network management and control tasks.

Current AI/ML activities align well with the AI-RAN Alliance’s vision to elevate the RAN’s potential with more automation, improved efficiencies, and new monetization opportunities. The AI-RAN Alliance envisions three key development areas: 1) AI and RAN – improving asset utilization by using a common shared infrastructure for both RAN and AI workloads, 2) AI on RAN – enabling AI applications on the RAN, 3) AI for RAN – optimizing and enhancing RAN performance. Or from an operator standpoint, AI offers the potential to boost revenue or reduce capex and opex.

TIP is actively integrating AI/ML into its Open RAN vision, focusing on automating and optimizing the RAN using AI/ML-powered rApps to manage and orchestrate various aspects of the network, including deployment, optimization, and healing.

While operators generally don’t consider AI the end destination, they believe more openness, virtualization, and intelligence will play essential roles in the broader RAN automation journey.

What is AI RAN

AI RAN integrates AI and machine learning across various aspects of the RAN domain. For the broader AI RAN vision, the boundaries between infrastructure and services are not clearly defined, and interpretations vary. The underlying infrastructure (location, hardware, software, interface support, tenancy) varies depending on multiple factors, such as the latency and capacity requirements for a particular use case, the value-add of AI, the state of existing hardware, power budget, and cost.

AI-RAN, aka the AI-RAN Alliance version of AI RAN, is a subset of the broader AI RAN opportunity, reflecting AI RAN implementations utilizing accelerated computing and fully software-defined/AI-native principles. AI-RAN enables the deployment of RAN and AI workloads on a shared, distributed, and accelerated cloud infrastructure. It capitalizes on the demand for AI inferencing and converts the RAN infrastructure from a single-purpose to multi-purpose cloud infrastructure (NVIDIA AI-RAN Paper, March 2025).

While the ideal reference solution is AI-native/Cloud-native, AI RAN can be offered until that vision is achieved. The majority of the AI RAN deployments to date are implemented using existing hardware.

Why integrate AI and RAN

With power and capex budget requirements rising on the RAN priority list, one of the fundamental questions now is where AI can add value to the RAN without breaking the power budget or growing capex. It is a valid question. After all, RAN cell sites have been around for 40+ years, and the operators have had some time to fine-tune the algorithms to improve performance and optimize resources. AI can make sense in the RAN, but given preliminary efficiency gains, it will not be helpful everywhere.

Topline growth expectations are muted at this juncture. However, operators are optimistic that integrating AI and RAN will produce a number of benefits:

  • Reduce opex/capex
  • Improve performance and experience
  • Boost network quality
  • Lower energy consumption

AI can help introduce efficiencies that help to lower ongoing costs to deploy and manage the RAN network. According to Ericsson, Intelligent RAN automation can help reduce operator opex by 60%. AI will play an important role here, accelerating the automation transition, simplifying complexity and curbing opex growth. Most of the greenfield networks are clearly moving toward new architectures that are more automation-conducive. Rakuten Mobile operates 350 K+ cells with an operational headcount of around 250 people, and the operator claims an 80% reduction in deployment time through automation. China Mobile reported a 30% reduction in MTTR using Huawei’s AI-based O&M. Nokia has seen up to 80% efficiency gain in live networks utilizing machine learning in RAN operations.

The RAN automation journey will likely take longer with the existing networks. The average brownfield operator today falls somewhere between L2 (partial autonomous network) and L3 (conditional autonomous network), with some way to go before reaching L4 (high autonomous network) and L5 (full autonomous network). Even so, China Mobile recently reported it remains on track to activate its L4 autonomous networking on a broader scale in 2025. Vodafone is exploring how AI can help to automate multi-vendor RAN deployments, while Telefonica is implementing AI-powered optimization and automation in its RAN network. According to the TM Forum, 61% of the telcos are targeting L3 autonomy over the next five years.

AI can help improve the RAN performance by optimizing various RAN functions, such as channel estimation, resource allocation, and beamforming, though the upside will vary. Recent activity shows that the operators can realize gains in the order of 10 to 30% when using AI-powered features, often with existing hardware. For example, Bell Canada, using Ericsson’s AI-native link adaptation, increased spectral efficiency by up to 10 percent, improving capacity and reliability of connections, and up to 20 percent higher downlink throughput.

Initial findings from Smartfren’s (Indonesia) commercial deployment of ZTE’s AI-based computing resulted in a 15% improvement in user experience. There could be more upside as well. DeepSig, demonstrated at MWC Barcelona, its AI-native air interface, OmniPHY, running on the NVIDIA AI Aerial platform, could achieve up to 70% throughput gains in some scenarios.

With the RAN accounting for around 70% of the energy consumption at the cell site and comprising around 1% to 2% of global electricity consumption (ITU), the intensification of climate change, taken together with the current power site trajectory, forms the basis for the increased focus on energy efficiency and CO2 reduction. Preliminary findings suggest that AI-powered RAN can play a pivotal role in curbing emissions, cutting energy consumption by 15% to 30%. As an example, Vodafone UK and Ericsson recently showed on trial site across London that the daily 5G radio power consumption can be reduced by up to a third using AI-powered solutions. Verizon shared field data indicating a 15% cost savings with Samsung’s AI-powered energy savings manager (AI-ESM), Similarly, Zain estimates that the AI-powered energy-saving feature provided by Huawei can reduce power consumption by about 20%, while Tele2 believes that smarter AI-based mobile networks can reduce energy consumption in the long term by as much as 30% to 40%, while simultaneously optimizing capacity.

AI RAN Outlook

Operators are not revising their topline growth or mobile data traffic projections upward as a result of AI growing in and around the RAN. Disappointing 4G/5G returns and the failure to reverse the flattish carrier revenue trajectory is helping to explain the increased focus on what can be controlled — AI RAN is currently all about improving the performance/efficiency and reducing opex.

Since the typical gains demonstrated so far are in the 10% to 30% range for specific features, the AI RAN business case will hinge crucially on the cost and power envelope—the risk appetite for growing capex/opex is limited.

The AI-RAN business case using new hardware is difficult to justify for single-purpose tenancy. However, if the operators can use the resources for both RAN and non-RAN workloads and/or the accelerated computing cost comes down (NVIDIA recently announced ARC-Compact, an AI-RAN solution designed for D-RAN), the TAM could expand. For now, the AI service provider vision, where carriers sell unused capacity at scale, remains somewhat far-fetched, and as a result, multi-purpose tenancy is expected to account for a small share of the broader AI RAN market over the near term.

In short, improving something already done by 10% to 30% is not overly exciting. However, suppose AI embedded in the radio signal processing can realize more significant gains or help unlock new revenue opportunities by improving site utilization and providing telcos with an opportunity to sell unused RAN capacity. In that case, there are reasons to be excited. But since the latter is a lower-likelihood play, the base case expectation is that AI RAN will produce tangible value-add, and the excitement level is moderate — or as the Swedes would say, it is lagom.

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Charter’s proposed $34.5 billion acquisition of Cox Communications reflects just how much the US broadband landscape has changed. The near-nationwide availability of fixed wireless access (FWA), combined with expanding fiber footprints, has put cable operators on the defensive as they struggle with net broadband subscriber losses. Back in September 2024, I detailed the situation in a blog titled, “US Telcos Betting on Convergence and Scale to End Cable’s Broadband Reign”:

Going forward, the 1-2 punch of FWA and fiber will allow the largest telcos to have substantially larger broadband footprints than their cable competitors. Combine that with growing ISP relationships with open access providers and these telcos can expand their footprint and potential customer base further. And by expanding further, we don’t just mean total number of homes passed, but also businesses, enterprises, MDUs (multi-dwelling units), and data centers. Fiber footprint is as much about total route miles as it is about total passings. And those total route miles are, once again, increasing in value, after a prolonged slump.

For cable operators to successfully respond, consolidation likely has to be back on the table. The name of the game in the US right now is how to expand the addressable market of subscribers or risk being limited to existing geographic serving areas. Beyond that, continuing to focus on the aggressive bundling of converged services, which certainly has paid dividends in the form of new mobile subscribers.

Beyond that, being able to get to market quickly in new serving areas will be critical. In this time of frenzied buildouts and expansions, the importance of the first mover advantage can not be overstated.

So, maybe the specific combination of Charter and Cox was a surprise. But the notion that cable operators had to fight back by getting bigger was certainly not.

Network Upgrade Plans Likely to Stay the Same

Of course, there is no guarantee that this transaction will ultimately be approved. So, while the trade and legal reviews are getting underway, both operators still face competitors that are likely to accelerate their own marketing and sales initiatives designed to attract subscribers from the latest “corporate behemoth,” which only wants to stamp out competition and raise your broadband and mobile service prices. Charter and Cox, even though they have slightly different access network upgrade plans, will continue along their individual paths to raise speeds and improve signal quality across their HFC plant.

Fortunately, for both operators, the long-term vision of their access networks remains nearly aligned, though the timing might be slightly different. It’s worth a quick look at how Charter and Cox are both similar and different when it comes to their broadband access network strategies:

  • Charter and Cox are moving forward with Distributed Access Architectures (DAA) using vCMTS and Remote PHY Devices. Charter is in the early stages of their RPD deployments, while Cox has converted nearly all of its existing optical node base to Remote PHY. Cox had historically relied on Cisco for its M-CMTS (Modular CMTS) platforms, an early precursor to Remote PHY, and subsequently took the next evolutionary step of homing RPDs to the existing CCAP installed base. While that did allow the operator to move to Ethernet transport between the headend and RPDs, the benefits of moving to a vCMTS architecture weren’t fully realized, which is why Cox is now working with Vecima’s vCMTS platform.
  • Both Charter and Cox believe in using the Extended Spectrum flavor of DOCSIS 4.0, though Charter expects to deploy DOCSIS 4.0 earlier than Cox. This is because Cox is already running the vast majority of its network at 1 GHz with a mid-split architecture, while Charter is in the process of upgrading its usable spectrum from 750 MHz to 1.2 GHz (using 1.8 GHz amplifiers running at 1.2 GHz) using a high-split architecture. According to Charter CEO Chris Winfrey, “In terms of the network, Cox is largely through an upgrade for what we would call a mid-split upgrade…There’s no rush for us to go try to harmonize that into a high split footprint.” Winfrey also said, “In our planning, the eventual conversion to DOCSIS 4.0 with DAA doesn’t take place for years and it’ll be done at a lower cost as a result of them having already completed their mid-split and because of the scale that we’ll have at the time that we’re completing our own DOCSIS 4.0 and DAA upgrades.” In other words, Cox has a longer runway with its current mid-split, 1 GHz architecture delivering 2 Gbps downstream speeds. So, should the merger go through, the Cox systems would be delivering similar downstream speeds as the upgraded Charter systems, but would likely have reduced upstream capacity relative to the upgraded, high-split systems.
  • Charter is also a proponent of GAP (Generic Access Platform) nodes and has begun deploying these modular nodes in its network to replace aging and discontinued units. Cox, on the other hand, has made no mention of GAP nodes and likely doesn’t need to in the short-term, given that it spent a good deal of capex years ago to upgrade to 1 GHz. Even Charter isn’t deploying GAP nodes universally across its network, as it will continue to source GAP and non-GAP nodes from multiple vendors.
  • When it comes to vCMTS, Charter has hinted about having cores from multiple vendors, though to date it has only publicly announced Harmonic as its vCMTS supplier. Meanwhile, Cox just recently announced its selection of Vecima’s Entra vCMTS, which makes sense given the deployment of Vecima RPDs. But Vecima RPDs are also being deployed at Charter. So, does that mean that Vecima stands to win a share of Charter’s vCMTS business, as well? Although RPD and vCMTS interoperability is expected and is in deployment at other operators, Charter has made note of some interoperability challenges within its network. Thus, it utilizes Falcon V as a testbed for vCMTS and RPD interoperability, along with Vecima’s acquisition of Falcon V.
  • When it comes to fiber deployments, Charter and Cox have different technology choices. Charter continues to use 10 Gbps DPoE (DOCSIS Provisioning over EPON) for both its RDOF-funded projects and its Greenfield fiber builds. In contrast, Cox was an early adopter of both GPON and the newer XGS-PON technology. As a result, Cox has a significantly higher percentage of PON (Passive Optical Network) connections compared to Charter in terms of total homes and businesses served.

It goes without saying that there are many variables from a technology perspective surrounding this proposed transaction that are likely to have profound implications on the cable outside plant and headend vendor landscape. The combination of two of the largest cable operators in the world ultimately reduces the number of opportunities for unique vendors, thereby furthering consolidation among those vendors. Should this deal move forward, I fully expect there to be some consolidation among equipment vendors as they look to grow their share at the new combined company.

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Recent shifts in U.S. trade policy, including the implementation and adjustment of tariffs, have introduced uncertainty into global markets. Temporary rollbacks and exceptions—such as reduced rates and product-specific carve-outs—have added to the complexity, particularly in response to market reactions.

As of now, the effective average tariff rate on U.S. imports is estimated at 27%, the highest level since the early 20th century, reflecting broader efforts to recalibrate trade dynamics. Accordingly, a key question from clients remains: how will changing tariff policies affect broadband deployments and the demand for related equipment?

Given the frequent adjustments to trade policy—including recent exemptions for smartphones, consumer electronics, and certain GPUs—it remains challenging to forecast the full extent of the impact on broadband infrastructure in the near term.

What follows are our best estimates as to the impact tariffs will have this year and beyond on the broadband market:

1. In the US, tariffs will have minimal impact on most fiber broadband equipment pricing and deployments.

Key fiber broadband equipment providers in the U.S. have already moved most of their assembly and manufacturing to the U.S. in order to adhere to the BABA (Build America, Buy America) waiver of the NTIA’s BEAD (Broadband Equity, Access, and Deployment) program. Though not all of the products being deployed in broadband access networks have been onshored, the most commonly deployed components—PON OLTs, ONTs, cabinets, and fiber-optic cable—have already been self-certified by the respective vendors and have already seen substantial increases in domestic manufacturing.

Beyond BABA, some major operators have multi-year purchase agreements in place for fiber-optic cabling and connectors that should protect them from any impact of tariffs on the import of silica and other raw materials used in the manufacture of fiber cables. For example, in 2024, AT&T signed a $1 billion multi-year agreement with Corning to ensure a stable supply of fiber cable and connectivity solutions. Originally intended to safeguard against supply shortages, this move now also serves to mitigate the risk of rising component costs.

2. Unlike FTTH, cable outside plant upgrades in support of DOCSIS 4.0 are likely to be impacted.

Commscope, which manufactures amplifiers and outer outside plant components in Mexico, and Teleste, which manufactures amplifiers in Finland, will both be impacted by tariffs at any level. We suspect that these manufacturers are either looking to relocate these facilities or manufacturing to the US or are seeking waivers in order to satisfy growing demand from Comcast, Charter, Cox, and others. The relocation of manufacturing is no trivial task and will introduce shipment delays beyond the inventory both already have in their warehouses. The time it takes to move manufacturing is a primary argument for the more gradual introduction of tariffs as opposed to introduction and implementation on the same day.

Additionally, Vecima Networks, which is delivering GAP (Generic Access Platform) nodes to U.S. operators, has already signaled that tariffs will also be materially significant at any level. The net result for cable operators pursuing DOCSIS 4.0 is additional deployment delays as well as increased equipment prices.

3. Residential Wi-Fi routers will feel an impact.

Just as Wi-Fi vendors are looking to ride the wave of Wi-Fi 7 penetration into more homes and businesses, tariffs at any level will easily increase the retail cost of even the most popular Wi-Fi brands by anywhere from 5 to 15%. China, Taiwan, and Vietnam are the manufacturing sources for the vast majority of these devices and, although these devices have been exempted from the tariffs as of Friday night, the likelihood of those full exemptions remaining is very slim, in our opinion.

 4. Indirect impacts of tariffs and forecast adjustments.

The challenge for all industries now is that they simply cannot unsee what has already happened. The state of economic recovery in many countries and industries was already fragile after dealing with the supply shock of the COVID-19 pandemic, which introduced accelerated levels of inflation that were only exacerbated by government policies designed to stimulate economies. Those macroeconomic challenges were felt acutely in telecom equipment purchasing as service providers overbought capacity in 2022 and early 2023 and then had to focus on drawing down those inventories, putting pressure on their equipment vendors to sustain themselves during the spending slowdown. Just as these businesses are set to rebound and return to more normalized and consistent purchasing levels, tariffs are introduced, making the road to recovery cloudier.

In our January 2025 forecast, we had already reduced our expectations for North American broadband equipment spending from our July 2024 forecasts. These adjustments accounted for moderate tariff increase of 15-30% for imported electronics, semiconductors, and other components from China. However, the broader scope of tariffs, which now includes countries like Vietnam and India, exceeds our initial expectations.

However, the tariffs and their resulting costs passed on to end customers actually play only a small role in the forecast changes. The expectation that the BEAD program would come under review and delay the initiation of select fiber projects also played a role in our forecast reductions. Though we were expecting a very limited amount of BEAD funds to actually flow through to broadband equipment providers in 2025, we did expect to see some in the fourth quarter. Now, we highly doubt any money will be spent on OLTs or ONTs this year, instead pushing the spend well into 2026.

The bigger concern we had going into 2025 was the uncertainty among consumers and businesses alike about what impact the new administration’s policies would have on overall spending and investment patterns. After two years of steady inflation and higher interest rates, US consumer confidence was already trending downward. Consumer debt levels were rising and stubbornly high mortgage rates limited the number of new homes being purchased, as well as overall refinancing. With consumer spending in the US typically 68% of GDP, any further decline in confidence could result in consumers pulling back from spending.

And that is where the maelstrom around tariffs this past week has left consumers very concerned about what the immediate future holds for them. That uncertainty is likely to result in consumers either maintaining their current spend on broadband services or downgrading those services to save some money each month. The combination of consumers managing their communications budgets more tightly, fewer new home purchases, and less moves all means it will be incredibly difficult for broadband providers to continue to grow residential ARPU.

Lack of ARPU growth could result in some delays in planned upgrades from GPON to XGS-PON or from DOCSIS 3.1 to DOCSIS 4.0, for example. But it won’t stop the continued buildout of fiber networks in both greenfield and overbuild scenarios, because those are long-term investments with decades-long returns. Even if the cost to pass and connect homes increases due to tariff-induced price increases, the fiber strategies of major operators including AT&T, Frontier, Lumen, and others aren’t going to change.

Broadband and mobile bundling will undoubtedly accelerate this year as telco and cable operators try to lock in subscribers early with aggressive pricing and incentives on mobile services. Those moves will eat into ARPU growth, as well. But service providers will forgo some margins in the short-term in order to expand their subscriber base when the market volatility subsides.