Telecommunications Infrastructure Archives - Page 3 of 40

At last week’s SCTE TechExpo, Comcast announced that Rogers Communications, Canada’s largest cable operator, will be licensing Comcast’s broadband access network design. This includes DAA equipment, CPE, and other network monitoring and management elements. Now, Rogers syndicates Comcast’s broadband access architecture and components, in addition to the X1 video platform, which it has been licensing since January 2017.

This announcement was only a surprise in its timing, as rumors had been swirling for months, if not years, that Comcast would be syndicating its broadband network design and corresponding network elements to other cable operators. In fact, back in 2017, I wrote an article titled “Comcast’s Hands-on Approach to the Headend and Home,” where we speculated about Comcast moving in this direction. This was largely because it had already gained experience by syndicating its X1 video platform and aimed to “streamline the lengthy cycle of product definition, development, testing, homologation, and deployment. Comcast has signaled its intention to define the future access network in conjunction with its technology suppliers. Through the development of an RDK-like operating system designed to provide a standard reference point for the creation, provisioning, and management of broadband traffic and services.”

Virtualizing the Broadband Access Infrastructure

Further, the article argued that Comcast is working on virtualizing its broadband access infrastructure and all the software elements in order to create an operating system for DOCSIS networks and broadband services, in general. “Again, we believe the idea here is for Comcast to exert the same level of operational control over its broadband access network as it is doing in subscribers’ homes (with X1), by developing an access network operating system upon which all CCAP, optical node and optical line terminals (OLTs) will run. This operating system will extend the existing DOCSIS specification into a virtualized environment, providing specifics for the provisioning of broadband services across the entire access network. Additionally, it will incorporate APIs to tie into RDK-B and extend service provisioning into the home. This new system, called s RDK-A (RDK for Access) will allow Comcast and any of its licensees to move faster toward a more virtualized future.”

Comcast’s Partnership with Harmonic and CableOS

At the time the article was written, the focus was on software, particularly the CableOS vCMTS platform from Harmonic that Comcast had selected to serve as its primary platform moving forward. Back in September 2016, Harmonic announced a warrant agreement with Comcast allowing the operator to potentially acquire 7.8 million shares of Harmonic stock based on sales and deployment milestones of Harmonic’s CableOS product. At the time, the article noted that “the agreement with Harmonic is interesting because the company has not been a major supplier of CCAPs to Comcast. But Harmonic’s CableOS (now cOS) platform addresses the anticipated changes Comcast and other MSOs will see in their broadband access networks.” We speculated that “not much is known regarding the specific software elements that Comcast is looking to incorporate into its longer-term vision of an access network OS. If this is the case, it is a potentially huge win for Harmonic. It could mean the licensing of its CableOS software to other cable operators. For Comcast, this would ultimately mean more control, technologically and economically, over how broadband services are created and delivered from its network, which will be absolutely critical as broadband encompasses fixed, Wi-Fi, and mobile networks.”

We could not have predicted that Comcast’s licensing blueprint would go well beyond software and control plane functions to also encompass amplifiers, remote PHY devices, and machine learning tools all designed to help cable operators reduce their time to market and improve their overall network reliability.

Why Rogers is the Right Partner

Beyond having already been a long-time customer of Comcast’s X1 video platform and having recently signed a 10-year deal for ongoing access to Comcast’s video platform and CPE, Rogers Communications was the right partner at the right time for Comcast, for two reasons: First, the company has been occupied with its massive merger with Shaw Communications, Canada’s second-largest cable operator. The deal, which was first announced in 2021, officially closed in 2023. However, the hard work of bridging their networks and vendors is still ongoing, taking valuable network planning resources and personnel.

Second, back in July 2022, Rogers experienced a major network outage that impacted not only 12 million Rogers broadband and mobile customers, but also a number of ISPs with wholesale access to Rogers’ network. The outage, lasting from 15 hours to multiple days, resulted in Rogers having to give out approximately $150 million in customer credits. Rogers also developed a $10 billion plan to improve network reliability over three years to prevent, or at least minimize future outages.

Adopting Comcast’s broadband access network blueprint made sense for an operator under heavy pressure to prove to its subscribers and the Canadian Government that its network challenges were behind it. Now, Rogers can focus on marketing and selling its services, especially as it faces intensifying competition from Telus and Bell Canada, both of which are moving forward with major fiber overbuilding projects.

Which Access Technology is Right for Rogers?

Comcast is moving full-speed ahead with Full Duplex (FDX) DOCSIS 4.0. Rogers has already publicly communicated that it is testing FDX technology in its lab. However, is that the right choice for Rogers, and, does the licensing of Comcast’s access network blueprint mean it is on a path to FDX, as opposed to Extended Spectrum (ESD)?

Similar to Comcast, Rogers has both a node plus zero portion of their HFC networks, as well as a more traditional node plus five or six portions. We estimate that the node plus zero covers around 1 million homes, while the more traditional HFC plants 3 million homes. In that node plus zero portion, Rogers has deployed GPON but is in the process of upgrading to XGS-PON. Shaw also has a smaller fiber footprint, but instead of GPON, Shaw has deployed 10G EPON.

For the bulk of its HFC footprint, Rogers was previously rumored to be on the path toward deploying ESD using 1.8GHz amplifiers. However, given the new licensing arrangement with Comcast and the additional spectrum management tools the Comcast solution provides, Rogers could very well be considering deploying more FDX throughout its system. This is especially the case if the amplifiers are proven to work consistently in node plus 6 and even node plus eight environments. Both the Rogers and Shaw plants have long spans and larger amplifier cascades to deal with.

Though FDX amplifiers are presumed to be considerably more expensive than 1.8GHz amplifiers, it can be argued that the cost savings in not having to swap out taps, which is required in ESD deployments, makes FDX a wash on a per-home basis. Time will tell whether this is true or not.

Also, there is something to be said for the idea of being able to use the shared spectrum of 108 MHz to 684 MHz dynamically across both the upstream and downstream based on traffic demands. Combining that flexibility with additional machine learning tools to anticipate network issues could go a long way to restoring customers’ faith in the Rogers network.

It’s also worth noting that Comcast’s licensing arrangement also provides for the management of fiber networks using both headend OLTs and remote OLT modules. So, Rogers and any other potential licensees could adopt the framework across both their DOCSIS and fiber footprints.

Will Comcast Technology Solutions License to Additional Cable Operators?

The ongoing (and now very real) threat of Comcast’s entry into the broadband access technology licensing game has certainly disrupted the vendor landscape. If you have not been supplying Comcast with vCMTS, RPD, amplifiers, or other technologies, then the TAM for your products certainly takes a hit, especially now with the combined entity of Rogers and Shaw being taken off the table.

The question now is this: Are there any other operators who could potentially license Comcast’s broadband access solution? The obvious candidates are the operators who have been licensing Comcast’s X1 video platform. Besides Rogers and Shaw, these include Cox Communications and Videotron.

At this time, however, we don’t believe any of these remaining operators are interested in licensing Comcast’s broadband architecture and services. X1 was timely because it provided an advanced UI and backend video management platform for a service (broadcast TV) that was hemorrhaging subscribers amidst increasing content costs. Broadband is not in that same situation. Plus, operators are far more reluctant to potentially cede roadmap control to another operator—especially since they have already been doing that in some cases with their equipment vendors.

But if operators continue to have difficulty adding broadband subscribers, especially with competition increasing and margins potentially decreasing, then that could open the door for Comcast to expand its broadband access licensing footprint. Just as Broadcom has made its unified DOCSIS 4.0 chipset available to all operators in an effort to build scale, Comcast is looking to build a similar scale for its offering. It won’t be a significant money-maker for the operator, but more a mindset and market-maker.

Two startups with shared advisory board members are hitting the market with solutions designed to facilitate cable’s convergence with wireless and 5G. The announcements are well-timed, given the funk cable operators find themselves in as net broadband subscriber losses mount, but also as those same operators continue to take a sizable share of new mobile subscribers. Additionally, the cable industry, which has for years benefited from decades of shared development cycles and deployments of the latest DOCSIS technologies, finds itself with multiple paths forward (DOCSIS 3.1+, DOCSIS 4.0, fiber, FWA, etc.) and trepidation that the next technology decision will leave it further behind its competitors.

Air5 and Air Wireless each aim to solve different problems cable operators face today. However, both share a core belief: cable operators’ future success depends on their ability to get to market quickly and build networks that transparently handle both fixed broadband and wireless traffic and services across their networks. In a recent blog, I detailed how US telcos are betting on service convergence to continue to chip away at cable’s massive broadband subscriber base. It stands to reason that cable operators will fight back using the same approach.

Extending DOCSIS Wirelessly

First, Air Wireless is pitching a solution that allows cable operators to extend their DOCSIS networks and services wirelessly using E-band spectrum, ranging from 60 GHz to 90GHz, and a point-to-multipoint architecture that looks and feels very similar to how optical nodes are distributed throughout an HFC network. The technology isn’t new. In fact, Air Wireless acquired the assets from a Slovenian startup known as Globtel, which had developed the Gigaray platform to transport voice, video, and DOCSIS data traffic wirelessly from a base station to transceivers located at businesses, MDUs, and residences. The transceivers connect to existing DOCSIS 3.1 modems and set-top boxes, allowing for a quick and easy method for aggregating and backhauling DOCSIS traffic.

The primary benefit of the Air Wireless solution to operators is time-to-market. Operators can extend their DOCSIS networks without having to run fiber to a new node location. Or, an operator can deploy the solution as a way to get services to an MDU or new neighborhood quickly and in advance of a more traditional buildout of an HFC network. In rural areas or regions where the costs associated with deploying fixed infrastructure just don’t make sense relative to subscriber ARPU, the Air Wireless solution gives operators a more cost-effective option for DOCSIS network extensions. Because of this flexibility, the company is reported in customer trials around the globe.

In the US, the key opportunity lies in the upcoming BEAD-, RDOF-, and Capital Projects Fund-related rollouts, which are time-sensitive and aimed at addressing lower-density rural and underserved areas. In India, cable operators such as Hathway, Den, and others are seeking ways to expand their networks and remain competitive with Reliance Jio and Bharti, both of which have begun significant fiber expansions. The Indian government continues to subsidize rural broadband rollouts to remote villages, where the Air Wireless solution could play a role in distributing broadband services. In Europe, where permitting delays and labor costs make network expansions costly, the Air Wireless solution could be used to extend DOCSIS networks more quickly.

One of the more interesting applications for the Air Wireless solution that also has global appeal is using the platform as a way to overbuild and upgrade existing HFC plants to deliver end-to-end DOCSIS 3.1 capabilities and take advantage of the more flexible modulation formats offered by OFDM. Many operators are still using DOCSIS 2.0 and DOCSIS 3.0, in some cases without channel bonding. Instead of potentially swapping out amplifiers or doing faceplate upgrades for new diplex filters, operators could use the Air Wireless platform with Remote PHY or Remote MACPHY modules to move to DOCSIS 3.1 more cost-effectively. In Latin America, for example, where cable operators are moving to fiber instead of upgrading from DOCSIS 2.0 or 3.0 to DOCSIS 3.1, the Air Wireless platform could give them a more cost-effective way to add throughput without the significant labor costs associated with trenching fiber.

Converging DOCSIS and 5G

While Air Wireless is focused on extending DOCSIS networks wirelessly, Air5 is focused on converging DOCSIS and wireless networks, taking advantage of architectural similarities between mobile backhaul networks and DAA-based DOCSIS networks. The CU (Centralized Unit) and Distributed Unit (DU) of 5G networks are roughly equivalent to the Remote PHY, Remote MACPHY, and select functions of the vCMTS in DAA networks.

Ultimately, the vision is that optical nodes become small cell sites with a shared infrastructure allowing cable operators to continue delivering DOCSIS data services as they do while also either continuing to offload their MVNO mobile traffic onto their Wi-Fi networks or directly onto the converged network via radio units that can handle the frequency conversion required to hand off mobile traffic. The shared infrastructure will require an upgrade to existing outside plant equipment so that DOCSIS data can still be delivered in spectrum up to 1.2 GHz, while 5G traffic can be transported anywhere between 3 GHz-5 GHz. New amplifiers, which Air5 is working on with partners, will have to be deployed. That might be a hard pill to swallow for operators who are just about to upgrade much of their installed amplifier base to 1.8 GHz.

Fixed-mobile convergence has been in various stages of discussion and deployment for years if not decades. So, why is this time different? Let’s consider a few different reasons:

Mobile subscriber growth and service bundling are critical for cable operators. In the US, the largest cable operators have seen significant growth in their mobile subscriber numbers, providing a silver lining to the dark cloud of broadband subscriber losses. Cable operators have grown their mobile subscriber base via MVNO relationships with Verizon and T-Mobile, but they are increasingly looking to deploy their own CBRS spectrum to become more self-reliant. Service bundling—especially if it allows subscribers to do truly seamless hand-offs between 5G and Wi-Fi networks while maintaining a single subscriber identity—is a critical goal of all operators.
Cable operators have powered outside plants. One of the biggest arguments against HFC networks, when compared with PON-based fiber networks, is actually a significant advantage when it comes to convergence: Power. HFC networks rely on signals that need to be amplified approximately every 2500 feet. To support this, 90-volt AC power inserters have been deployed at consistent intervals to provide for the powering of nodes, amplifiers, and Wi-Fi access points. In fact, US cable operators have deployed over 600 K Wi-Fi access points partially due to the availability of power at strategic locations. Cable operators not only have enough power to deploy small cells but also the fiber necessary to backhaul these small cell sites.
Control and user plane separation makes convergence easier. Because 5G core networks provide control and user plane separation, it becomes easier to converge 5G and Wi-Fi networks across the RAN and core. Additionally, cable operators’ transition to DAA architectures helps to virtualize DOCSIS networks. This gives operators much greater flexibility to offer network slicing, allowing Wi-Fi traffic can ultimately be managed by a converged 5G and DOCSIS core. This process begins with an evolution of the vCMTS to a vBNG and then an AGF (Access Gateway Function), which essentially serves as the bridge between the wireline network and the mobile core.

Expanding the Component Vendor Ecosystem

One of the benefits of convergence is the potential increase in the number of component vendors developing new chips to support the larger, combined TAM (Total Addressable Market.) There is probably no segment in the communications sector that could use a supplier expansion other than DOCSIS, which has historically been dominated by Broadcom. In fact, in a recent blog, we argued that Broadcom’s decision to accelerate the availability of a 3 GHz-capable unified chip that supports DOCSIS 5.0 could be an effort to “pre-empt efforts by upstarts such as Air5, which is developing products that fuse 5G and DOCSIS networks and, simultaneously, opening up the shrinking DOCSIS component ecosystem to suppliers in the RAN and mobility sectors.”

We have already seen significant consolidation of DOCSIS infrastructure and CPE suppliers in the last year and we fully expect that this will continue, as the DOCSIS equipment TAM, by itself, is not enough to sustain the current vendor ecosystem. Component supplier consolidation is expected soon, as well, certainly with Qualcomm’s rumored exploration of an acquisition of Intel.

Lurking around are the likes of Nvidia and AMD, who are looking to merge signal processing and GPUs. Though these components would be designed for use in mobility networks, there is no reason they couldn’t be adapted to work in converged networks, as well.

At this week’s SCTE Tech Expo Event in Atlanta, executives from Broadcom, Charter Communications, and Comcast officially opened up access to a unified DOCSIS 4.0 chipset to all interested cable operators and vendors. Previously, the unified silicon had been limited to those operators willing to pay to join a JDA (Joint Development Agreement) with Broadcom, allowing them first access to the chips and the ability to offer them to their CPE, node, RPD, and amplifier suppliers. In addition to Charter and Comcast, that group included Cox Communications, Liberty Global, and Rogers Communications.

The announcement comes a full year after Comcast and Broadcom announced they were collaborating on a unified approach that could support both flavors of DOCSIS 4.0—Comcast’s preferred Full Duplex (FDX) variant and most other tier 1 operators’ preferred Extended Spectrum DOCSIS (ESD) version.

The hope of the unification effort and the announcement of more widespread availability is that the bifurcation in the industry will end and that more cable operators who have been on the fence about moving to DOCSIS 4.0 will feel compelled to move forward now that they have the flexibility of accessing both versions.

But is this really going to happen? Will the operators who were locked out of the exclusive tier 1 JDAs scrap the network evolution strategies they developed as an alternative to DOCSIS 4.0, just because Broadcom and its key operator customers have finally decided to hand over the keys? Further, which operators would actually consider running both versions of DOCSIS 4.0 in their networks, especially when ESD requires amplifier upgrades to 1.8GHz, while Full Duplex does not?

The Reality of DOCSIS Implementation

The answer to the last question is none. The flexibility to support both variants with a single piece of silicon sounds elegant in theory. But in reality, the likelihood of an operator delivering Full Duplex to select systems and Extended Spectrum to other systems is slim to none. That is just as true for the non-JDA operators as well as for the tier 1 operators who have been part of the JDA from its inception.

For a large majority of operators who were not part of the JDA, the DOCSIS 4.0 ship has sailed. The path forward for them is to continue maximizing DOCSIS 3.1 through mid- and high-split upgrades, coupled with a transition to DAA to improve overall signal quality and throughput. This also includes re-purposing spectrum previously used for QAM video via a transition to IP video. These operators will be the first to deploy DOCSIS 3.1 Plus, using the extra OFDM channels of DOCSIS 4.0 modems alongside simple software upgrades to their centralized CCAP platforms or by the deployment of vCMTS platforms. These upgrades will allow operators to deliver downstream speeds of 8 Gbps and upstream speeds of 1.5 Gbps—very competitive with the vast majority of ISP fiber offerings. Also, by layering on Low Latency DOCSIS (LLD), operators can significantly drop their latency to 5 milliseconds, surpassing what most fiber-based ISPs can deliver today.

And in those systems where there is a likely threat of a fiber overbuilder coming in to disrupt their market, cable operators are responding with fiber themselves, using 10G EPON, XGS-PON, and, in some cases, 25GS-PON to protect their serving areas and subscriber base.

These strategies were developed as a way to respond quickly to competitive threats. Between the rise of fiber ISPs, open access fiber networks, and MNO fixed wireless services, these cable operators had to evolve their networks to remain competitive without having initial access to the unified DOCSIS 4.0 silicon. Just because they now have access to the silicon will not result in a deviation from a network evolution strategy that has been signed off on by the senior leadership teams of many cable operators. Unifying the two technologies of DOCSIS 4.0 into a single piece of silicon is, for many operators, simply too little, too late.

Frustration over DOCSIS 5.0 Development

Compounding some operators’ (and equipment vendors’) frustration with the DOCSIS 4.0 development process was the follow-on announcement that Broadcom, Charter, and Comcast were collaborating on DOCSIS 5.0, which would push broadband speeds to 25 Gbps via spectrum extension in the outside plant to 3 GHz, easily doubling and even tripling the spectrum in many current generation networks. Though the three companies said that they plan to lead an effort to develop specifications for the entire industry, some have noted their frustration that the work has been done outside the normal process of working through SCTE and CableLabs first.

For many operators, both large and small, the bifurcation of the DOCSIS 4.0 technologies reflected a go-it-alone mentality among the major tier 1 operators, which had not existed in the development of previous generations of DOCSIS. The announcement of DOCSIS 5 with chips being demonstrated at the show simply reinforced concerns that the evolution of DOCSIS won’t be determined by the collaboration of the industry as a whole, but rather by Broadcom, Charter, and Comcast.

It is possible that Broadcom’s motive in accelerating the availability of a 3Ghz-capable unified chip is to pre-empt efforts by upstarts such as Air5, which is developing products that fuse 5G and DOCSIS networks and, simultaneously, opening up the shrinking DOCSIS component ecosystem to suppliers in the RAN and mobility sectors. With Qualcomm rumored to be exploring an acquisition of Intel combined with Air5’s proposed solution, Broadcom might be feeling some heat in a market segment it has dominated for quite some time. Hence, the desire to define the next upgrade cycle and secure operator consent now.

Challenges of Upgrading to 3 GHz

But pushing the outside plant to 3GHz is a monumental and costly effort. New amplifiers would need to be added and existing amplifiers re-spaced in order to deal with higher dB loss along the cascades. Similar issues have been dealt with in the past through innovative developments of amplifier components and there will likely be continued innovation to make the 3 GHz upgrade more economically feasible.

It’s worth considering whether any of the major operators planning to upgrade to 1.8 GHz will now forego those upgrades across their footprint and instead wait on 3 GHz amplifiers. When it comes to tap replacement, it seems likely that operators will prefer to deploy 3 GHz versions. However, the situation around amplifiers is far less clear.

Shifting Focus to Fiber

Broadcom, Charter, and Comcast giveth, and they taketh away.

Just when the industry is supposed to have clarity and unity around DOCSIS 4.0, the announcement of DOCSIS 5.0 sends operators (and vendors) back to the drawing board.

Certainly, for the two largest cable operators in the world, getting ahead of the curve is essential, especially after being caught flat-footed by T-Mobile, Verizon, and AT&T with their fixed wireless offerings, that continue to siphon away valuable broadband subscribers. Defining a long-term path forward by maximizing their active plants is critical. It is also important not to underestimate the fact that cable plants are line-powered and hold a distinct advantage over passive plants when it comes to the future deployment of small cells and Wi-Fi hotspots to further the goal of service convergence.

But for many more cable operators whose network evolution today is about maximizing DOCSIS 3.1, the future is clear and it already involves a diverse vendor and component supplier ecosystem. That future is fiber.

With Enterprises’ Anticipated Transition to AI, the Network Vendor Landscape is Shifting

Amidst the expansive setting of Shanghai’s Expo 2010 site, Huawei wowed over 20,000 attendees at Huawei Connect 2024 for three days this September. The conference had the dazzling feel of a Mobile World Congress for enterprises – but with Huawei as the main attraction.

Complete with humanoid robots playing soccer and fast EV charging stations, slick demos displayed the breadth of Huawei’s portfolio. Areas of the showroom floor targeted different industry verticals, with the majority of the expositions orchestrated and staffed directly by Huawei. Around the periphery of the floor, partner companies showcased the way that applications for specific verticals such as banking or transportation were being supported by Huawei’s technology.

The scale of Huawei’s Enterprise Connect showed the aggressive bet that the company is taking on IT infrastructure, despite the soft market currently hampering vendors.

Huawei Continues to Invest in R&D

At a time when many technology companies are cutting staff or freezing hiring, Huawei is recruiting the brightest graduates in China and has climbed to a workforce of over 200,000 employees. The company is weeks away from opening its largest research complex, the Huawei Lianqiu Lake R&D Center, in which it has invested 10 B Yuan (USD 1.4 B). The 2400-acre site is in Jinze, outside Shanghai, and consists of office buildings, laboratories, conference halls, and canteens connected by a system of trains that wind their way through a lakeside landscape. The new facilities are expected to accommodate 35,000 employees.

At Huawei Connect in Shanghai, staff from the vendor’s solution teams were on hand, explaining their mandate of pulling from the wide array of Huawei equipment to build customized multi-technology solutions for enterprise customers. Wireless LAN (WLAN) and Campus Switching often make up the foundation of such solutions, and Huawei has made concerted investments in its portfolio.

The company took an aggressive bet on Wi-Fi 7 in 2023 and is now the vendor with the largest family of Wi-Fi 7 Access Points (APs), with a dozen different models available. Huawei’s R&D department has focused on driving costs down on the lower-end Wi-Fi 7 APs, stimulating the market outside North America to move over to the new technology. With each of the new AP models supporting interfaces of 2.5 Gbps or higher, Huawei expects that the wave of next-generation Wi-Fi will generate revenue in multi-gigabit switch ports as well. In North America, where Huawei is prevented from competing by government restrictions, there is a smaller selection of Wi-Fi 7 APs available to enterprises, and there has been a higher penetration of Wi-Fi 6E.

A Glut of Shipments Has Slowed the Market

For most WLAN and Campus Switch vendors, 2024 will be a year of significant revenue decline. Following the order backlogs built up during a period of supply constraints, a high volume of campus network equipment was delivered in late 2022 and early 2023, flooding the market with excess inventory. Since then, enterprises have delayed purchases, distributors have lowered inventory levels, and prices have become more competitive. Even though Huawei did not face the same supply shortages as their North American competitors, they have felt the impacts of the shipment glut.

In China, enterprise activity has slowed as the economy has softened and competition in the Campus LAN market (made up of Campus Switch and WLAN sales) has remained intense. H3C, Ruijie, and Sundray are all aiming to chip away at Huawei’s dominant market share.

Huawei has continued to look elsewhere for growth, taking on networking competitors Cisco and HPE in Europe, Middle East and Africa (EMEA), Asia Pacific excluding China, as well as in Latin America. Over the past two years, Huawei has fairly consistently landed the majority of the company’s Campus LAN revenues from markets outside China, benefiting from a ramp up of technology spending in the Middle East in addition to winning major projects in Europe, Africa, and Southeast Asia. In EMEA, the macroeconomic region with the highest Campus LAN revenues after North America, Huawei’s aggressive expansion has threatened HPE’s second place rank in terms of revenue share.

AI Sows Uncertainty

In 2Q 2024, the Campus LAN market showed a glimmer of recovery, with worldwide revenue growing quarter-over-quarter for the first time in a year. However, enterprises are facing a seismic transition, with generative AI poised to revolutionize businesses in ways that are not well understood, by either the enterprises or their suppliers.

Most industry participants agree that whatever form enterprise AI takes, companies will be making considerable AI investments in the upcoming years. This has caused uncertainty in the size and rate of the expected recovery in campus network equipment sales, leaving vendors to wonder whether IT budgets will be diverted.

Cisco and HPE have taken actions to position themselves to benefit from the AI revolution, with both companies announcing partnerships with Nvidia, and Huawei has its own portfolio for enterprises embracing AI. Meanwhile, if the AI revolution causes either of the two leading vendors to lose focus on their network equipment markets outside North America, Huawei is poised to pounce.

The Vendor Network Equipment Landscape is Shifting

The Campus LAN market is characterized by one dominant company (Cisco) and over a dozen smaller competitors, and recent divestiture and acquisition activity is changing market dynamics. HPE’s August sale of a large portion of its stake in H3C leaves the Chinese vendor a greater latitude to compete outside China, which adds another challenger to battle for coveted network revenue in EMEA and Asia Pacific excluding China. HPE’s acquisition of Juniper, expected to complete late in 2024 or early 2025, will subsequently reduce the number of players in the field.

While an acquisition of this scale could distract both HPE and Juniper from capitalizing on opportunities in the short term, a combination of HPE’s global market presence and Juniper’s popular Mist solution may eventually make HPE a more formidable competitor to Huawei.

Meanwhile, Arista executives have declared their intention to break out of the data center, targeting $750 M of campus network revenues by 2025. By beginning with its existing data center customers, Arista has managed to grow its Campus LAN revenue, even in these last four quarters of market contraction.

Huawei has bet aggressively that the next generation of LAN technology will propel the company’s market share outside China. Meanwhile, HPE is making bold moves of its own, promising to challenge Cisco’s dominance in networking with its acquisition of Juniper. With the smaller manufacturers adapting their strategies and jostling for position, the landscape of enterprise network vendors is ripe for a shakeup.

The jockeying for position in the US broadband market shows no signs of slowing down. In just the past two weeks, Verizon announced a $20B deal to acquire Frontier Communications and push the combined entity to a fiber footprint of 25 million homes and a fixed wireless footprint of approximately 60 million homes. Meanwhile, AT&T announced partnerships with four open access network providers to help it expand the reach of its fiber services outside its existing wireline footprint. AT&T will serve as an ISP in these markets, delivering both residential and enterprise services via these partnerships. AT&T is on track to pass a minimum of 30 million homes with fiber by 2025 in its own footprint, as well as an additional 1.5 million homes through its Gigapower joint venture with BlackRock. AT&T has also quietly increased the availability of its Internet Air FWA (Fixed Wireless Access) services to over 130 markets, as It potentially positions the service to move beyond just a means of capturing existing DSL subscribers.

These deals follow on the heels of T-Mobile’s proposed acquisition of Lumos Networks, which is slated to pass 3.5 million homes with fiber by the end of 2028. Under the terms of the deal, Lumos will transition to a wholesale model with T-Mobile as the anchor ISP. This is exactly the type of arrangement T-Mobile has established with some of its other infrastructure partners. However, with its partial ownership of Lumos, T-Mobile can presumably generate better returns and healthier margins from its broadband service offerings. The joint venture also is consistent with T-Mobile’s goal of expanding its market presence and footprint without expending a significant amount of capital. In fact, if you take the $1.4B that T-Mobile will ultimately invest in Lumos as it increases its homes passed from 320K to 3.5M by the end of 2028, T-Mobile’s cost per home passed ends up being somewhat less than $500.

That $500 per home passed figure could be even lower should Lumos continue to secure additional American Rescue Plan Act (ARPA) Capital Project Fund grants as well as a portion of the $3.6 B in aggregate BEAD (Broadband Equity, Access, and Development) funding across North Carolina, South Carolina, and Virginia.

The primary reason for T-Mobile’s push into both direct fiber network ownership and partnerships with open access fiber providers is that the operator has over 1 million customers on a waiting list for its fixed wireless service. These customers can’t be served because they are in markets where T-Mobile does not have enough 5G capacity to serve them. As T-Mobile expands the reach of its fiber offering, it can not only provide service to these customers but also existing FWA subscribers. Once an FWA subscriber switches to T-Mobile Fiber, that opens the spectrum for additional FWA subscribers.

US Telcos Smell Blood

US telcos are moving quickly to expand the reach of their fiber, fixed wireless, and ISP services to complement their nationwide mobile networks because they smell blood among the largest cable operators. Telcos are disrupting the broadband market faster and more efficiently right now—a disruption that could very well be amplified by Federal and State subsidies.

With the rollout of 5G networks having had little impact on the profitability of mobile services, fixed wireless has emerged as the most successful use case for mobile network operators (MNOs) can monetize their excess 5G capacity. FWA’s timing couldn’t have been better, with inflation having increased from 2021 on, pushing subscribers to seek out more affordable—but still high quality—broadband service offerings. FWA hit the market providing a powerful combination of affordability, speed, and availability.

The success of FWA combined with overall fiber network expansions has given telcos a potent tool for not only the convergence of mobile and fixed broadband services but also the emergence of these services being offered on an almost nationwide basis. It’s pretty simple math. If you can offer a product or service to a larger number of end customers, the higher the likelihood of continued net subscriber additions, all other things being equal.

Even in markets where there is overlap between fixed wireless and that MNO’s own (or marketed) fiber broadband services, there isn’t really a danger of cannibalization, because the two services will very likely address very different subscribers. As the telcos’ ARPU (average revenue per unit) results have shown, subscribers are willing to pay more for fiber-based connectivity. In 2Q24, for example, AT&T announced that its fiber broadband ARPU is $69 and that the mix shift of its subscribers to fiber has pushed overall broadband ARPU up to $66.17, representing a 6% increase from 2Q23.

Meanwhile, in the second quarter, T-Mobile reported an ARPA figure of $142.54, which was up from $138.94 in 2Q23. Partially fueling that increase was an increase in the number of customers per account, due largely to the adoption of FWA services. Remember, T-Mobile prices and treats its FWA offering as an additional line of service, making it very simple to add to an existing T-Mobile account.

With a starting price point of $50 and typical download speeds ranging from 33-182 Mbps and upload speeds of 6-23 Mbps, T-Mobile is clearly targeting the low-mid cable broadband tiers—and having a great deal of success in converting those subscribers.

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.

The push and pull of broadband and wireless subscribers isn’t expected to slow down anytime soon. Certainly, with inflation continuing to put pressure on household budgets, consumers are going to be focused on keeping their communications costs low and looking for value wherever they can find it. That means we are returning to an environment where subscribers take advantage of introductory pricing on services only to switch providers to extend that introductory pricing once the initial offer expires. That shifting and its expected downward pressure on residential ARPU will likely be countered by increasing ARPUs at some providers as they move existing DSL customers to fiber or, in the case of cable operators, move customers to multi-gigabit tiers.

The US broadband market is definitely in for a wild ride over the next few years as the competitive landscape changes across many markets. The net result is certain to be shifts in market share and ebbs and flows in net subscriber additions depending on consumer sentiment. One thing that will remain constant is that value and reliability will remain key components of any subscription decision. The providers that deliver on that consistently will ultimately be the winners.

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