Zoom Telephonics is a small company that will soon gain access to a big name brand – Motorola.

Zoom, under an exclusive five-year licensing agreement announced earlier this week, will use the Moto brand in cable modems/routers and set-tops (as well as cable modems inside set-tops) sold at retail in the U.S. and Canada.

The deal, Zoom CEO Frank Manning said Tuesday on a conference call, carries “significant upside with some risk.”

The upside is obvious – Zoom, which sells cable modems and gateways at outlets such as Best Buy, Micro Center, Staples and Walmart, believes it stands to sell more products at retail using a better-known consumer brand.

“We’ll be doing the same for the Motorola brand and we should be able to expand the number of retailers and service providers who buy from us,” Manning said. “This won’t be easy. Zoom will… compete with powerful companies, including Arris and Netgear for shelf space and sales." 

Now, the risks. Zoom has not announced the specific terms of the licensing agreement other than to say it has agreed to pay Motorola Mobility a one-time set-up fee and a royalty based on net sales, but Manning acknowledged that his company has “made significant financial commitments” in doing the deal.

Zoom will be also paying to use Motorola’s brand on products that are already affixed with notoriously thin margins (even with the retail markup), but Manning believes the Motorola label will help it overcome that challenge.

“Even with those [financial] commitments, we believe that Zoom’s cable modem margins after licensing fees should stay the same or increase given Motorola brand's power,” he said.

Zoom, he added, also plans to raise additional funds to provide working capital to finance the growth it hopes to generate with the new branding strategy, but said it was too early to provide those details.

Manning also believes that Arris, which has rights to the Motorola brand through the end of this year, is taking on some risk by leaving the Motorola brand behind.

Arris seems to agrees that it could face some challenges at retail without Motorola on its banner.

“Shelf space in retail outlets can also be impacted by how recognizable a brand is by customers,” Arris said in this recent 10-Q filing. “If we are unable to successfully rebrand those products, our sales in those regions and channels may decrease. Further, the loss of the use of the ‘Motorola’ brand may result in a lower amount of shelf space, or space in less desirable areas, which may impact our sales.”

Arris has been trying to build consumer awareness of its brand through initiatives such as its sponsorship of Carl Edwards in the No. 19 Toyota Camry. But how much Arris truly has at stake at retail is not easy to determine, since the company does not break out how much cable CPE revenues comes in from that channel. On Tuesday’s call, Manning helpfully estimated that Arris’s Motorola brand sales are presently in the range of $50 million to $100 million per year.

Zoom would do well if it’s able to grab just a portion of that, as the Boston-based company generates annual sales of about $12 million. In the first quarter of this year, Zoom posted revenues of $3.06 million, down slightly from the year-ago quarter primarily to reduced sales of dial-up modems.

Arris, meanwhile, is in the cat bird’s seat of cable broadband CPE. According to Infonetics Research, Arris ended 2014 with 36% share of global revenue in the category, followed by Cisco Systems (19%) and Technicolor (13%).

Jeff Heynen, the research director for broadband Access and pay TV at Infonetics, said Zoom and other cable modem makers could see greater opportunity at retail as more consumers cut the pay TV cord and go broadband only, paired with the trend toward rising equipment lease fees.

Manning also discussed Zoom’s plans to use the Moto brand on products other than modems and routers, noting that the roadmap includes CPE that can support cable VoIP services as well.

The branding license also covers set-tops should Zoom decide to branch off in that direction.But don't hold your breath. 

“We're not even sure that we will enter the [set-top] area, but we wanted to have that right to [use] the Motorola brand,” Manning said. “As hard as the cable modem business is to enter, I think the set-top box business is even harder." 

Driven by broadband speed upgrades, shipments of DOCSIS channels rocketed to a record 4.8 million worldwide in 2014, a year-over-year increase of 114%, according to Infonetics Research’s latest report on the cable access tech market.

Cable access gear – a category that includes cable modem termination systems (CMTSs), converged cable access platforms (CCAPs), edge QAMs and coaxial media converters – grew 27%, to $1.7 billion, in 2014. Fourth quarter revenues totaled $493 million, an increase of 11%.

Shipments in North America were particularly strong, rising 139% in 2014, with revenues jumping 35%.

But it wasn’t a rosy year for all makers of DOCSIS-powered networking gear. While Arris dominated the market with 48% of global revenue in the sector and Casa Systems turned in a record year, with a revenue increase of 195%, Cisco Systems “had one of its most disappointing years for CCAP/CMTS sales,” Infonetics said.

Infonetics noted that 2014 will be remembered as a “transitional year” as MSOs started to switch from traditional CMTSs to provisional deployments of CCAPs, which are higher-density, power-saving platforms that will combine the functions of the CMTS and edge QAM and pave a path toward an all-IP infrastructure.

From 2013 to 2014, CCAP revenue increased 997% percent, to $1.4 billion, while CMTS revenue dipped 84%, to $155 million, according to Infonetics.

"The continued growth of DOCSIS channel shipments is a strong sign of multiple system operators' (MSOs') ongoing investment to ramp DOCSIS bandwidth and services like IP video by splitting optical nodes and reducing service group sizes via CCAP," said Jeff Heynen, principal analyst for broadband access and pay TV at Infonetics Research, in a statement, noting that channels expansion will continue as operators prepare for DOCSIS 3.1 and remote-PHY platforms, though most growth will come from CCAP products.

But there are bumps in the road, with the pending merger between Comcast and Time Warner Cable threatening to exacerbate usual first quarter slowness. With that in mind, Infonetics expects DOCSIS and edge QAM channel shipments to drop 7% in Q1. 

Nearly 90 million DOCSIS 3.0 modems and gateway devices were shipped over the last 12 quarters and the momentum is showing “no signs of stopping,” Infonetics Research said in its latest report on the broadband consumer premises equipment (CPE) market.

The report, which tracks CPE shipments for DSL, FTTH, LTE and cable through the third quarter of 2014, also found that global broadband CPE shipments totaled $2.6 billion in Q3, up 6% from the second quarter.

Of that total, a cumulative 89.1 million DOCSIS 3.0 units where shipped over a 12-month period (Q4 2011 through Q3 2014). Among more recent trends, revenues tied to D3.0 gateways, which include home networking support, rose 14% sequentially in Q3, the research firm said.

"The current momentum behind DOCSIS 3.0 continued again in 3Q14 and shows no signs of stopping,” Jeff Heynen, principal analyst for broadband access and pay TV at Infonetics said, in a statement. “Cable operators worldwide are using the technology to gain broadband subscriber share. Even if MSOs aren't currently offering DOCSIS 3.0 services, prices on the D3 devices have come down to the point where it makes sense to move forward with them.”

And there was even some D3.0 product news this week, as MaxLinear announced that Hitron Technologies will use its MxL268 Full-Spectrum Capture 32-channel front-end receiver and MxL231 programmable gain amplifier in a new family of DOCSIS 3.0 CPE that can deliver downstream bursts of up to 1.6 Gbps. Hitron is showing off its new 32-channel DOCSIS 3.0 products this week at the International CES in Las Vegas.

Next on the horizon is DOCSIS 3.1, a new platform that will delivery multi-gigabit speeds over HFC networks. On Tuesday, Broadcom introduced its first D3.1-based reference design, the BCM 93390. STMicro, meanwhile, is demonstrating its D3.1 technology at CES.

Over-the-top video providers are poised to generate $5.8 billion in revenues this year, representing a growing threat to traditional pay-TV models that’s just starting to get rolling, Infonetics Research said in a new forecast on the video marketplace.

OTT pay-TV revenues will eclipse $10 billion in 2018, Infonetics forecasted, noting that the global pay-TV market totaled $117 billion in the first half of 2014, up 3.9% from the first half of 2013.

So, OTT isn’t taking over the world yet, but it’s on a steep growth path.

"Subscription-based over-the-top (OTT) providers like Netflix, Hulu Plus, and Amazon have seen phenomenal growth over the last couple of years. With a combination of wide availability across end devices, user-friendly interfaces, and access to vast content libraries, these providers continue to challenge traditional pay-TV providers and are in the early stages of siphoning off revenue," Jeff Heynen, principal analyst for broadband access and pay TV at Infonetics Research, said in a statement.

He also pointed out that OTT providers are encroaching onto the turf of traditional pay-TV players by integrating apps on leased set-tops,  a move that gives them access to a larger pool of current pay-TV subscribers. In the U.S. several MSOs, including WideOpenWest, Suddenlink Communications, Grande Communications, Atlantic Broadband, and RCN, have already integrated Netflix with their leased STB platforms or have plans underway to do so. 

While cable’s DOCSIS 3.1 platform looks to extend the life of HFC networks, an emerging technology called G.fast aims to perform a similar trick for DSL for the telcos as they look for ways to squeeze more speed out of their widely deployed copper-based networks.  

While interest in G.fast and its 1-Gig potential reached frothy levels last week at the Broadband World Forum in Amsterdam as chipmakers and network equipment suppliers trotted out their latest wares based on the technology, analysts agreed that the G.fast has the potential to pump more life into DSL, but also questioned whether it will be a big hit, let alone  a home run, for the telcos as they look for G.fast to turn copper into broadband gold.

But the potential for G.fast, which brings a new, speedy twist to the twisted pair, is indeed sizable, as telcos would certainly be eager to squeeze more speed out of their DSL lines and deliver services that can more closely compete with cable’s widely-deployed DOCSIS platform before having to take the plunge with pricey fiber-to-the-home upgrades.

But tying G.fast to any 1-Gig speed claims is somewhat of a misnomer,  as that represents  the aggregate data capacity (upstream plus downstream) it can achieve. And there’s another key caveat – G.fast, which requires a noise-cancellation technology called vectoring, requires very loop lengths (250 meters or less) for the platform to achieve a sizable data boost.

As would be expected, suppliers and chipmakers are bullish on the prospects of G.fast, even before the standard is fully baked. Most of the heavy lifting on the standards front was complete by last December, giving chipmakers enough confidence to move ahead with product designs, knowing that any small ticket changes can be handled in software.

“We still see a ton of value that we can unlock in the copper plant with advanced DSL technologies.” Jim McKeon, Broadcom’s senior director, product marketing, Broadband Carrier Access, said. Broadcom is a big enough believer in the technology that it has developed and introduced G.fast-based silicon for home-side gateway and network-facing equipment  (please look further below for a snapshot of last week’s G.fast action).  He expects Broadcom’s products to be ready for full production by the first half of 2015.

McKeon said Broadcom’s approach is backwards compatible with VDSL, allowing telcos to perform incremental upgrades. “Introducing G.fast will be a very straightforward exercise,” he said, predicting that there will be significant field trials underway next year alongside some small deployments before rollouts kick into high gear in 2016. “There’s a surprising amount of urgency coming out of the telcos for G.fast.”

And that interest has been global, he said, noting that there are about 400 million lines of DSL installed. “We’re still seeing a lot of potential in wireline broadband. We wouldn’t be investing in it if we didn’t see that,” McKeon said.

G.fast: Big Potential, Big Questions

Analysts who track the broadband access market and are keeping tabs on G.fast aren’t ready to call it a home run.  But they understand the value proposition.

“G.fast is going to have legs, but the question is how long are those legs going to be,” Teresa Mastrangelo, founder of marketing analysis and consulting firm Broadbandtrends, said. “The telcos are excited about the potential for G.fast and the speed that it can provide.”

Jeff Heynen, principal analyst, broadband access and pay TV, at Infonetics, expects to issue his first G.fast forecast early next year, but said the total addressable market for the technology won’t be a straightforward exercise.

 While telcos that are doing vectoring now, such as KPN of the Netherlands, Swisscom, BT, Belgacom, Deutsche Telekom, A1 Telekom Austria,  and even AT&T and CenturyLink Communications, are among the candidates for G.fast, “I don’t think it’s a one-to-one relationship,” he said.

 “Will G.fast be massively adopted? I’m still not sure,” Heynen said.

Both analysts also wonder if some telcos will decide that it makes more financial sense to just pull fiber all the way to the premises once they start looking at the short loop lengths required by G.fast.

Mastrangelo said operators will need loop lengths in the range of 25 meters to 40 meters to get the biggest bang out of G.fast, but notes that the initial trials are using more realistic loop lengths that enable speeds in the vicinity of 100 Megabits per second to 200 Mbps.

And she expects that wide deployments of  G.fast will require some significant network engineering, which could steer telcos toward more surgical deployments in area where they are feeling the most competitive heat, perhaps look at driving deployment on a demand-based preregistration model, such as the one Google Fiber uses for FTTP.

G.fast’s Big Week

Last week’s Broadband World Forum in Amsterdam produced a wave of G.fast activity. Here’s a snapshot:

-Alcatel-Lucent unveiled a G.fast optical network terminal that will launch in the first quarter of 2015 following 12 trials with operators, including A1 Telekom Austria, BT and Orange.

-Adtran said it has G.fast trials underway with unnamed service providers in Europe, North America and Asia Pacific.

-The Broadband Forum announced its G.fast certification program, and identified the University of New Hampshire InterOperability Laboratory as the first testing lab for that effort. UNH-IOL expects to begin initial G.fast product testing in the first half of 2015, and to announce its first wave of certifications next fall.

-Broadcom added G.fast capabilities to its BCM63138 gateway system-on-chip, and a new family of G.fast-facing chipsets for DSL central offices – the BCM65200 DSP and BCM65900 analog front end.

-Sckipio Technologies demonstrated a “commercial” G.fast chipset (the DP3016-EVM DPU) with built-in vectoring connecting at rates of up to 700 Mbps on 16 ports simultaneously.  Sckipio partners Lantiq, VTech, XAVi, and Zinwell were among those that showed off gateways and bridges that used the new silicon.

The march toward more software-defined networks will produce an ever-mounting pile of hard dollars for the world's suppliers of telecom and datacom network products. According to Infonetics Research, a cumulative $1 trillion will be spent on telecom and data equipment and software over the next five years.

"Despite the fact that enterprises and service providers are in the middle of massive network upheavals due to the evolution of software-defined networking (SDN) and network functions virtualization (NFV) technology, the telecom and datacom networking equipment and software market is on track to grow annually through 2018 with the fastest growth coming in 2015," said Jeff Wilson, principal analyst at Infonetics Research, in a statement.

Worldwide, sales of telecom and datacom equipment and software hit $183 billion in 2013, up 3% from the prior year.

Based on global revenue, Cisco Systems continues to lead the telecom and datacom network equipment and software market with 19%, followed by Huawei, Ericsson, Alcatel-Lucent, and ZTE – the same top five as the year prior, just in a slightly different order.

"Looking at just the service provider equipment space, we're seeing a shakeup in vendor market share, with Huawei leapfrogging longtime number-one Ericsson to take the top spot in 2013. While Huawei's been doing well in a number of regions, China's economy is a key factor keeping Huawei's growth so strong,” said Michael Howard, an Infonetics co-founder and  the co-author of the report.