Dell’Oro Group analyst Jeff Heynen has revised the five-year forecast for global spending on broadband access equipment and customer premises equipment (CPE), and now estimates the market dropped just 2% in 2020. 

Heynen’s latest forecast, highlighted in a Dell’Oro Group blog post, revises a prediction made last summer that the market would drop 7%. 

“The combination of significant residential subscriber growth and increased capacity utilization rates noted by global broadband providers nearly offset the negative impacts of trade tussles, component shortages, and labor limitations,” Heynen wrote. 

ALSO READ: Looking Ahead to Post-Pandemic Tech

“In the first half of 2020, we heard from countless service providers that their projected capacity utilization rates for the entire year were reached by March or April,” he added. “A second surge in consumption in the fall, driven by children returning back to school and attempts at reopening economies, forced many operators to add even more capacity. With much of the world still dealing with the impacts of the COVID-19 pandemic and with remote work and online education continuing well into 2021, we see no slowdown in broadband capacity utilization, forcing service providers to once again balance accommodating traffic growth with managing overall spending.” 

For cable operators, Heynen said the ample DOCSIS channel capacity that spiked network access equipment revenue in 2018 and 2019 helped operators as they sought to address sudden surges in both upstream and downstream usage. 

ALSO READ: Broadband Access Equipment Sales Down 7% in 2020

“In most cases, cable operators used the software tools available as part of DOCSIS 3.1 to ensure adequate bandwidth for all subscribers. In other cases, operators purchased additional DOCSIS licenses as part of accelerated node split programs to address systems with the greatest need,” Heynen wrote. 

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

Dell’Oro Group analyst Jeff Heynen has revised his five-year forecast for global spending on broadband access equipment and CPE, and is now estimating that the market only dropped 2% in 2020. 

Heynen’s latest estimate, highlighted in a Dell’Oro Group blog posting, revises a prediction made last summer that the market would drop 7%. In fact, this was Heynen's second revision of his 2020 forecast--pre-pandemic, in January of last year, he had the market dropping by 5%. 

"The combination of significant residential subscriber growth and increased capacity utilization rates noted by global broadband providers nearly offset the negative impacts of trade tussles, component shortages, and labor limitations," Heynen wrote. 

"In the first half of 2020, we heard from countless service providers that their projected capacity utilization rates for the entire year were reached by March or April,” he added. “A second surge in consumption in the fall, driven by children returning back to school and attempts at re-opening economies forced many operators to add even more capacity. With much of the world still dealing with the impacts of the COVID-19 pandemic and with remote work and online education continuing well into 2021, we see no slowdown in broadband capacity utilization, forcing service providers to once again balance accommodating traffic growth with managing overall spending."

For cable operators, Heynen said the ample DOCSIS channel capacity that spiked network access equipment revenue in 2018 and 2019 helped operators as they sought to address sudden spikes in both upstream and downstream usage. 

“In most cases, cable operators used the software tools available as part of DOCSIS 3.1 to ensure adequate bandwidth for all subscribers. In other cases, operators purchased additional DOCSIS licenses as part of accelerated node split programs to address systems with the greatest need,” Heynen wrote. 

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

Global spending on broadband access infrastructure and customer premises equipment is expected to drop 7% in 2020, dipping to $11.4 billion, research company Dell’Oro Group said Tuesday.

A report issued in January by Dell’Oro Group predicted only a 5% decline.

On the cable side, the steep pandemic-fueled increase in consumer broadband demand has forced operators to seek immediate capacity increases through the purchase of additional DOCSIS licenses. But pursuing these node-split programs has come at a cost, said Dell’Oro Group Senior Research Director Jeff Heynen.

“In most cases, cable operators have used the software tools available as part of DOCSIS 3.1 to ensure adequate bandwidth for all subscribers,” he wrote. “In other cases, operators have purchased additional DOCSIS licenses as part of accelerated node split programs to address systems with the greatest need. But all those investments in existing CCAP platforms have resulted in postponements of strategic DAA projects.”

Dell’Oro expects the global broadband access business to pick up by 5% in 2021.

The firm believes that the pandemic will influence operators over a five-year period to increase spending—it has upped its five-year compound annual growth rate (CAGR) projection from -2% in January to -0.9% in its latest July report.

“This improvement might seem counterintuitive, given the worldwide impact of the COVID-19 pandemic,” Heynen wrote. “However, the pandemic and its resulting orders to stay at home for work and education, have shown the world just how critical adequate broadband access is to the global economy. As a result, global initiatives to expand and improve broadband access are either underway or will be shortly. Nearly all service providers have said that they have reached their planned capacity utilization rates for the entire year in the first half of 2020. Thus, they will need to expand this capacity to maintain comfortable operating levels.”

Dell’Oro also increased its CAGR projection for passive optical network (PON) technology from 0% to just under 1%.

“Although China’s ONT volumes are coming down from the peak years of 2017 and 2018, additional growth is expected from the rest of the world—particularly North America and Western Europe,” Heynen said. 

Comcast, which has compared its new virtualized CCAP core technology to its X1 video system, will proceed with plans to license the software-based network tech to third-party cable companies just as it does with X1, according to Dell’Oro Group analyst Jeff Heynen.

“Comcast fully believes that other cable operators can benefit from their virtual CCAP core architecture, and they intend to license it just as they have done with their X1 video platform,” Heynen wrote in a blog post.

In July, Comcast announced that it had entered a multi-year agreement with Harmonic to license the San Jose, California-based access tech vendor’s CableOS product, which virtualizes Converged Cable Access Platform functions. It was reported earlier by Light Reading that Comcast was thinking about licensing out the vCCAP solution it was cooking up with Harmonic. And in October, Comcast told Light Reading that it had moved into deployment mode with not only access network virtualization, but also a shift toward Distributed Access Architecture. The cable operator said more than 100,000 of its customers are being served by vCCAP and DAA architectures.

“There are, of course, questions around just how that licensing model might work and how revenue might be distributed between Comcast and Harmonic, its vCCAP partner,” Heynen wrote. “But it’s clear that Comcast is leaving the door wide open to profiting from its software development work.”

During its third quarter earnings call, Comcast said that monthly data usage by its customers had more than doubled over the last three years.

“To deliver more bandwidth, MSOs traditionally have had to split their optical nodes to reduce service group sizes,” Heynen said. “Each node split, however, requires more passive and active equipment, including splitters, combiners, receivers, and transmitters. More importantly for opex is the need to increase the number of hardware-based CCAP platforms to support the additional bandwidth and service groups. The net result is a significant increase in space and power requirements in both headend and hub sites, as well as additional complexity in fiber cabling requirements.”

Comcast, Heynen noted, is taking a “lead role” in pushing virtualization, which allows it to add capacity without incurring exponential increases in space and power consumption.

“Even if Comcast moves away from its plan of delivering full-duplex (symmetric 10 Gbps) services in a node + zero environment, a virtualized CCAP core gives them the ability to scale at their own pace and at any location,” Heynen wrote. “Servers could still be located in existing headends or primary hub sites, or they could be deployed in centralized data centers. With workload balancing across their CCAP core servers, there are effectively no restrictions on where Comcast can grow its capacity.”

As for X1, Comcast executives have compared the micro-services-based nature of their vCCAP solution with the video operating system. Currently, Comcast licenses X1 technology to Cox Communications, which uses it as the foundation of its Contour video product. Canada’s Rogers Communications, Shaw Communications and Videotron also license X1 tech. 

Comcast, which has compared its new virtualized CCAP core technology to its X1 video system, will proceed with plans to license the software-based network tech to third-party cable companies just as it does with X1, according to Dell’Oro Group analyst Jeff Heynen.

“Comcast fully believes that other cable operators can benefit from their virtual CCAP core architecture, and they intend to license it just as they have done with their X1 video platform,” Heynen wrote in a blog post.

In July, Comcast announced that it had entered a multi-year agreement with Harmonic to license the San Jose, California-based access tech vendor’s CableOS product, which virtualizes Converged Cable Access Platform functions. It was reported earlier by Light Reading that Comcast was thinking about licensing out the vCCAP solution it was cooking up with Harmonic. And in October, Comcast told Light Reading that it had moved into deployment mode with not only access network virtualization, but also a shift toward Distributed Access Architecture. The cable operator said more than 100,000 of its customers are being served by vCCAP and DAA architectures.

“There are, of course, questions around just how that licensing model might work and how revenue might be distributed between Comcast and Harmonic, its vCCAP partner,” Heynen wrote. “But it’s clear that Comcast is leaving the door wide open to profiting from its software development work.”

During its third quarter earnings call, Comcast said that monthly data usage by its customers had more than doubled over the last three years.

“To deliver more bandwidth, MSOs traditionally have had to split their optical nodes to reduce service group sizes,” Heynen said. “Each node split, however, requires more passive and active equipment, including splitters, combiners, receivers, and transmitters. More importantly for opex is the need to increase the number of hardware-based CCAP platforms to support the additional bandwidth and service groups. The net result is a significant increase in space and power requirements in both headend and hub sites, as well as additional complexity in fiber cabling requirements.”

Comcast, Heynen noted, is taking a “lead role” in pushing virtualization, which allows it to add capacity without incurring exponential increases in space and power consumption.

“Even if Comcast moves away from its plan of delivering full-duplex (symmetric 10 Gbps) services in a node + zero environment, a virtualized CCAP core gives them the ability to scale at their own pace and at any location,” Heynen wrote. “Servers could still be located in existing headends or primary hub sites, or they could be deployed in centralized data centers. With workload balancing across their CCAP core servers, there are effectively no restrictions on where Comcast can grow its capacity.”

As for X1, Comcast executives have compared the micro-services-based nature of their vCCAP solution with the video operating system. Currently, Comcast licenses X1 technology to Cox Communications, which uses it as the foundation of its Contour video product. Canada’s Rogers Communications, Shaw Communications and Videotron also license X1 tech. 

Shipments of WiFi 6 CPE will grow from only around 5 million units this year to more than 23 million in 2020, further expanding through 2023, according to research company Dell’Oro Group.

In fact, Jeff Heynen, senior analysts for Dell’Oro called the fast-emerging WiFi 6 standard, a fancy name given to the sixth iteration of 802.11 WiFi, a “game changer for service providers.”

“For many years now, the evolution of WiFi has been focused on improving two key technical attributes: speed and range,” Heynen wrote in a blog posting. “WiFi 6, however, is the first iteration to take a more holistic view of wireless technology that encompasses not only improvements in speed and range, but also network intelligence, analytics, and power efficiency. It is the first WiFi standard developed specifically for a world defined by the IoT and the consistent proliferation of connected devices.”

Related: Unto This 10G and 5G World Comes WiFi 6

Developed by the Institute of Electrical and Electronics Engineers (IEEE), the new 802.11ax standard, what we call WiFi 6, is an improvement on the fifth-generation 802.11ac standard. WiFi 6 backers say the technology doesn’t just improve speed and latency, enabling users to fully realize the multi-Gigabit speeds of their future network connections. WiFi 6 is also a major advancement in how data is distributed in the home, enabling routers to handle more devices at once, more efficiently.

“WiFi 6 will undoubtedly boost the connected home service offerings of those service providers willing to embrace the technology, and make it available across their CPE and home networking equipment,” Heynen said.

“WiFi 6 also has the capacity to dramatically improve how service providers will be able to provision, manage, troubleshoot, and analyze their in-home networking services,” the analyst added. “It provides options for the remote, zero-touch provisioning of devices and services, as well as the automatic adjustment of WiFi channels to ensure peak performance. As subscribers become savvier about broadband and WiFi, and as they become more reliant on broadband to enable multiple services in their home, they will demand uninterrupted service. With WiFi 6, service providers will finally have the power to deliver on those expectations.”

CommScope is preparing its first quarterly earnings report since closing on its $7.4 billion purchase of one of the cable industry’s biggest technology vendors, Arris.

With the biggest manufacturer of pay TV set-tops, cable broadband gateways and cable access network gear, not to mention new wireless connectivity products being developed and sold under the Ruckus Networks banner, all under the control of the Hickory, N.C.-based CommScope, what happens next?

Multichannel News posed that question to Jeff Heynen, research director of broadband and access and home network for Dell’Oro Group. Heynen has been observing the business of cable technology for nearly 20 years. Here are five things he believes are worth considering going forward in a cable industry now heavily under the influence of CommScope:

Can CommScope maintain Arris’s profitable global leadership position in cable access? This is the “No. 1 question” about the merger, according to Heynen, who said Arris controls about 55% of the worldwide market for the converged cable access platform (CCAP) and for cable modem termination systems (CMTS). This market, he said, was worth about $1.5 billion worldwide in 2018 and is still growing at a single-digit pace.

In the run-up to the merger’s closing just a few weeks ago, the narrative is that the deal was driven by complementary movement into wireless markets like Citizens Broadband Radio Service (CBRS), a huge focus for Arris’s Ruckus Networks division.

“Wireless operators are densifying and entering the broadband market and cable operators are likely to build wireless networks,” BTIG Research analyst Walter Piecyk wrote shortly after the deal was announced. “CommScope and Arris have complementary products that address these diverse sets of service providers.”

But CommScope also covets Arris’s network and cloud division, Heynen said, and hopes that not only will the CCAP/CMTS market continue to grow, but Arris will be able to maintain its dominant market share.

Both of those are big ifs, Heynen said, with upstarts including Harmonic and Nokia developing alternative Distributed Access Architecture solutions for operators and looking to displace leaders Arris, Cisco Systems and Casa Systems.

As operators begin to virtualize cable-access components like CMTS and push these functions out of the plant and closer to the subscriber, “Harmonic has a lot of momentum and is really pushing the envelope” with its virtualized cable access technologies, Heynen said.

The biggest operator client, Comcast, is already moving aggressively in the direction of DAA, he added. “You can save on rack space, you save on power consumption and you save on hardware costs,” Heynen said. “Comcast is going to be a big driver of DAA. The question is, how fast does Comcast move?”

Will the deal deliver CommScope the kind of synergies it needs to rekindle growth? CommScope is projecting $150 million in annual run-rate cost synergies in year three of the merger. But what about sales synergies? The company also expects a 30%-plus boost in adjusted earnings per share in the first full year post-closure, but investment analysts think that figure could be even better.

With operators pushing fiber ever deeper, “there are obvious synergies in being able to sell the [optical] infrastructure as well as the electronics,” Heynen said.

“In theory, CommScope should be able to leverage the Arris brand name, at least on the electronics side, and be able to bundle packages of new fiber nodes along with the additional bandwidth operators buy when they purchase Arris equipment,” he said.

CommScope’s stock is still recovering from an abrupt 30% hit it took a year ago, when investors became suddenly aware that its fiber connectivity equipment and mobile solutions sales were slowing down. Indeed, CommScope needed some kind of catalyst to juice sales of fiber, splitters, splicers and everything else that goes into the optical distribution network.

As an example of a potential cross-selling opportunity, Heynen cited the potential of Comcast’s upcoming migration to Full Duplex DOCSIS.

“If Comcast wants to do Full Duplex, it will need to achieve a goal of having only 50 or 60 homes per node,” Heynen said. This is a lofty objective, as fiber nodes typically service around 500 individual homes.

“It will be a phenomenal amount of spending. It’s not going to happen just over two years or five years, but it’s going to happen.”

Is CommScope really going to chuck Arris’s CPE division? Since the moment the deal was announced, the popular assumption has been that CommScope will sell Arris’ Customer Premises Equipment (CPE) business, which as been beset by challenges ranging from global parts shortages to the secular decline of the pay TV set-top.

But Heynen doesn’t see divestiture happening. “Set-tops are a mature business but they’re still a good run rate business if you can manage cost and manage supply chains,” he said. “Certainly, the set-top box market is declining, but it still throws off a lot of cash CommScope didn’t have before.”

Meanwhile, Heynen believes DOCSIS 3.1 gateways also have plenty of near-term potential.

“As much as Comcast and Charter like to say their DOCSIS 3.1 rollouts are over, they’re nowhere near done on the CPE side,” he said. “Most of their customers are still on DOCSIS 3.0 gateways.”

Cable operator spending on two key network-facing initiatives – distributed access architectures (DAA) and new “virtual” converged cable access platform (vCCAP) implementations – is poised to ramp up over the next five years, according to a new forecast from Kagan, a media research group within S&P Global Market Intelligence.

RELATED: Ramping Up for Remote PHY

Amid MSO plans to move ahead with multi-year transitions to next-gen technologies, Kagan sees spending on remote PHY and remote MACPHY optical nodes – elements that move important electronics and functions of traditionally centralized CCAPs toward the edge of the network – jumping from $60.9 million this year to $544.7 million in 2019 and $969.2 million in 2022.

RELATED: CableLabs Moves Ahead with Remote MACPHY

Kagan is also forecasting that virtual CCAP/CMTS revenue will climb from $20.5 million in 2018 to $536.3 million in 2022, anticipating that operators in North America and Western Europe will lead the way initially in virtualizing a “small percentage of their systems.”

The moves toward DAA and software-driven vCCAPs are entering play as MSOs strive to add capacity to their networks while also reducing the headend/hub space, cooling and powering requirements that come with traditional, centralized, chassis-based CCAP products.

And while the amount of spend that will go toward the access network won’t rise a huge amount even as more of that money goes toward DAA and virtual CCAP deployments (with a good portion of going to market-leading, incumbent CCAP suppliers), those initiatives are likewise expected to open up opportunities for others that are trying to elbow their way in.

“It’s clear that there will be opportunities for those new suppliers,” Jeff Heynen, consulting director at SNL Kagan, said.

Of recent note, Sweden’s ComHem is starting to deploy a centralized virtual CCAP approach in partnership with Harmonic and its “CableOS” platform, and WideOpenWest is pushing ahead on a DAA project with Nokia.

RELATED: Harmonic IDs a Real Deployment for Its Virtual CCAP

Heynen said getting a handle on space constraints will likely be the biggest initial driver for vCCAP deployments, noting that some MSOs are “feeling the pinch” in their headend and hub sites as they continue to need to tack on capacity.

However, he stressed in his study that even MSOs that are early to the game with virtual CCAP deployments will be operating co-existing virtual and non-virtual CCAPs for a number of years.

Kourou, French Guiana — “We have more internets!”

After years of tension and toil, that was the joyful exultation of a ViaSat engineer the night of June 2, nearly 45 minutes after ViaSat 2, a new high-capacity broadband satellite, was successfully launched into orbit aboard an Ariane 5 heavy-lift rocket from Arianespace’s facilities in French Guiana.

The new bird, built by Boeing Commercial Satellite Systems, is equipped to deliver a powerful payload of 300 Gigabits per second of total throughput.

ViaSat 2 won’t enter service until early 2018 (ViaSat announced on June 22 that the solar arrays of the new satellite were successfully deployed), but the company is already laying the groundwork to deliver satellite broadband services of 100 Megabits per second or more.

For satellite-delivered broadband, that will represent a major accomplishment. A 100 Megabits-per-second offering would essentially quadruple the maximum downstream speeds now delivered by ViaSat’s current top end “Exede” service, as well as what’s offered by one of its chief rivals, Echo-Star-owned Hughes Network Systems.

“We’re still working on our plans, but we likely will have service plans that are up to 100 Mbps, and we may have some that are as high as 200 Mbps,” Mark Dankberg, chairman and CEO of ViaSat, said in an interview just hours before the launch, and during a driving rainstorm that, thanks to the lack of lightning, was never truly a threat to scrub the big event. “The satellite’s capable of that. The real issue is how do we price those plans and how many subscribers can we put on them?”

Though a 100 Mbps satellite-delivered broadband service is achievable, Dankberg said he believes most of the company’s subscribers will be on tiers that deliver slower speeds. But the launch of ViaSat 2 will give the company, which has about 659,000 satellite-broadband subscribers, the ability to far exceed what it’s delivering in the U.S. today using a legacy satellite fleet that includes ViaSat 1 and birds acquired in its 2009 acquisition of WildBlue Communications.

In addition to delivering gobs of bandwidth, ViaSat 2, at an orbital location of 22,236 miles above the earth’s equator (at 69.9 degrees west longitude), will enable ViaSat to expand coverage in North America, Central America, the Caribbean and a portion of northern South America. Key transportation routes between North America and Europe also are expected to benefit.

And there’s a lot more to come. “ViaSat has ambitions to be a global broadband services company,” Dankberg said. “This ViaSat 2 launch is a big step along the way for us towards that path.”

Faster and More Competitive
The ability to deliver faster speeds will give ViaSat a way to compete more directly with cable operators, telcos and other wireline internet service providers. But that won’t be the primary focus.

“Our mission is to be a really good choice for the underserved — not necessarily for people who already have access to fiber-to-the-home or the most modern cable [high-speed internet] service,” Dankberg said. “But the qualification I’m going to make to that is, we want to give that same experience to people who otherwise can’t get it.”

ViaSat 2 will help to turn ViaSat into a bigger regional provider of services that will also span government and enterprise customers while also enhancing its ability to deliver high-quality inflight connectivity as well as broadband service to cruise ships.

It will also amp up competition with Hughes Network Systems, which launched its HughesNet Gen5 service in March, and has already added about 100,000 new and upgrading subscribers to the speedier platform, which matches a 25 Mbps downstream with a 3 Mbps upstream. Gen5 is powered by EchoStar XIX/Jupiter 2, a multi-spot-beam, Ka-band satellite made by Space Systems Loral that launched on Dec. 18, 2016, and complements Hughes’s EchoStar XVII and Spaceway 3 data satellites.

Related: Hughes Tees Up Faster Satellite Broadband Service

Hughes, which has about 1.04 million satellite broadband subs and reaches both U.S. continental coasts plus parts of Alaska, believes it’s playing an important role because terrestrial broadband providers are more limited in how rapidly they can expand and generally don’t put a lot of focus on rural areas, according to Peter Gulla, senior vice president of marketing at Hughes.

Gulla said Hughes is also “finding a lot of opportunity” in areas where the telcos are letting their DSL networks languish as many instead focus on new fixed wireless options.

Still, Hughes will keep its target focused mostly on rural areas and where DSL service is weak, rather than applying marketing dollars and other resources in areas where wireline broadband competition is already strong.

“We are starting to see opportunities in the slow DSL areas,” Gulla said. “But you won’t be seeing us dropping a lot of flyers in New York City trying to convince people that they ought to switch to satellite [broadband]. I think we’re being realistic about what our product is and what it’s good for and what it does and what the value is.”

Though ViaSat is getting ready to raise the speed bar for satellite-delivered broadband, Hughes is not yet making any formal commitments to upgrade its capabilities.

“Right now, 25 [Mbps] seems to be meeting the needs of our customers,” Gulla said. “But that doesn’t mean that’s the end of the line.”

Need for Pricing, Data Flexibility
Beyond speed, other issues remain hot-button competitive factors. Among them: Satellite broadband-service providers will need to be more flexible on pricing and support relaxed data policies if they are to have much success in their traditional markets, even as some of them look to extend beyond rural regions, Jeff Heynen, consulting director and analyst at Kagan, said. Strict and complicated usage caps and data plans have long been sticking points for the satellite services.

Related: FCC OKs OneWeb Satellite Broadband Service

Under policies for ViaSat’s current Exede service, for instance, subscribers get a fixed amount each month of “Priority Data” at speeds of up to 12 Mbps to 25 Mbps, and, once those data buckets are used up, it pivots to slower speeds — between 1 Mbps to 5 Mbps. For its higher-end tiers, ViaSat also supports an unmetered “Free Zone” from 3 a.m. to 6 a.m., when traffic tends to be the lightest. ViaSat also lets customers purchase more Priority Data for $10 per gigabyte, or discounts if they purchase buckets of 5 GB, 7 GB or 10 GB.

“In the past, most satellite services that are consumer priced have had hard limits to the amount of bandwidth that you can use,” Dankberg acknowledged. “We’ve been testing, on ViaSat 1, service plans that are virtually unlimited. With ViaSat 2, we’ll be able to make those more common, lower priced and with higher speeds.”

The HughesNet Gen5 service offers data plans ranging from 10 GB to 50 GB per month, before speeds are reduced to about 1 Mbps to 3 Mbps. It also comes with a “Video Data Saver” option that adjusts the bit rate to deliver video in DVD quality. Those customers still have the ability to watch in HD by toggling off the Video Data Saver capability. HughesNet’s data policy also includes “Bonus Zone” hours (from 2 a.m. to 8 a.m.), when the customer can use 50 GB per month of free data rather than pulling it from their monthly service plan. HughesNet suggests that Bonus Zone hours are used to download large files such as movies and system updates.

Achieving success in new markets, Heynen of Kagan stressed, will hinge greatly on competitive pricing and the easing of data caps as they face off with competition from wireline internet service providers, as well as emerging LTE- and 5G-powered fixed wireless options that will be capable of delivering hundreds of Megabits of data per second and possibly Gigabit-class speeds.

“As people use more data and OTT, they are going to be very wary of pushing the boundaries of those data caps,” Heynen said. “They have to find a way to make the data caps as well as the monthly pricing reasonable for the service.”

AT&T, for example, is pushing ahead with a big rollout of fixed LTE services. “Out in those rural areas, LTE is a potential competitive threat,” Heynen said, noting that he doesn’t expect satellite broadband to continue to have the most success in its traditional focus areas, serving areas instead without much landline broadband and servicing airplanes and cruise ships.

“I don’t see the cost structure allowing [satellite broadband ISPs] to compete with a traditional DSL, cable or fiber service,” he said. However, he said he does believe satellite broadband services that are equipped with 100 Mbps capability can offer a “reasonable alternative,” particularly as DSL service struggles to deliver speeds any greater than 25 Mbps.

Licking the Latency Issue
Though satellite broadband is poised to deliver speeds that can match up with some of its earthbound rivals, the issue that’s toughest to overcome is latency, which can impact some interactive apps and services such as VoIP and multiplayer gaming.

According to the Federal Communications Commission’s 2016 Measuring Broadband America Fixed Broadband Report, the median latencies of satellite-based broadband services range from 599 milliseconds to 629 milliseconds, versus terrestrial-based broadband services, which range from 12 milliseconds to 58 milliseconds.

“I can’t go against the laws of physics, but I’d like to,” Hughes’s Gulla said. “But the bottom line is that there’s that traveling distance to and from satellite, and at the current distances, you have latency.”

He said Hughes is upfront about that with customers. “We do our best to explain and ask [customers] what they intend to do when they call us. We’re very clear that if you’re doing first-person shooter games, you’re not going to win.”

Other satellite-broadband initiatives are looking to overcome that latency issue.

One prime example is SpaceX, the privately held aerospace firm run by serial entrepreneur Elon Musk. USA Today, citing comments from Patricia Cooper, the company’s VP of satellite government affairs, reported that SpaceX is planning to launch 4,425 small satellites via reusable Falcon 9 rockets to support a constellation of lower-latency, low-earth-orbit birds, alongside a proposal for another 7,815 satellites that are even closer to the Earth’s surface.

Additionally, Airbus is planning a fleet of hundreds of small, low-earth-orbit (about 750 miles above the Earth’s surface) satellites in a joint venture with a startup called OneWeb. According to CNN, the joint venture is eyeing one launch every 21 days from French Guiana, with the first expected to lift off in about nine months. Service via the partnership, which includes backing from Richard Branson’s Virgin Group, Qualcomm and Japan’s SoftBank, is reportedly expected to start in 2019 and to cover the globe by 2020. The FCC approved OneWeb’s request to deliver service in the U.S. in late June.

ViaSat is also casting its eye toward global coverage with its planned set of ViaSat 3 satellites. The first, which will expand and enhance ViaSat’s coverage in the Americas, is planned to launch in 2019, followed in 2020 by a satellite that will cover the Europe, Middle East and Africa (EMEA) region. ViaSat hasn’t announced when it expects to launch its third ViaSat 3 satellite, but it’s slated to provide coverage in the Asia-Pacific region.

Altice USA hasn’t outlined the economic model for its ambitious fiber-to-the-premises upgrade, but the operator is pretty well positioned to pull it off, particularly in the highly concentrated former Cablevision Systems properties serving parts of New York, New Jersey and Connecticut, according to an industry analyst who keeps close tabs on the fixed broadband sector. 

RELATED: Altice USA to Skip DOCSIS 3.1, Roll Out All-Fiber Network

Altice USA is in “unique spot” in that it is already relatively fiber-rich in the Optimum (former Cablevision) footprint, Jeff Heynen senior research analyst for SNL Kagan, said.

For starters, those systems already average 300 or fewer homes per node, he said. Additionally, its Lightpath division, which serves large business customers, has “tremendous” rights of way access, interconnection fiber points, and a bunch of buildings already connected to fiber.

Heynen also agreed that Altice USA’s preponderance of aerial plant in those areas will help because it means the operator won’t need to do a lot of expensive and disruptive trenching.

Those combination of factors, he said, will help to reduce Altice USA’s exposure to the biggest expenses it will face with the FTTP upgrade – labor and right-of-way access.

The Suddenlink footprint is more rural and, therefore, much different, but tends to serve areas where there’s more housing growth, presenting the operator with greenfields that are more optimal for FTTP deployments.

Given the difference in geographies also partly spells out why Altice USA has committed to upgrade to FTTP in the full Optimum footprint and most – but not all – of the Suddenlink footprint over the next five years.

Though most MSOs won’t go for a full-scale upgrade like Altice USA is pursuing, Heynen does expect some tier 2/3 cable ops move forward on similar strategies amid competitive pressures and because they could make better financial sense in these smaller doses.

“I still think he majority of operators will follow that DOCSIS path for as long as they can,” he said. “But it shouldn’t be surprising if other operators, including larger ones, commit to a larger fiber footprint buildout than what they’re currently doing.”

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Altice USA’s plan isn’t great news for DOCSIS vendors, but many of those suppliers, like Arris, have already added PON and other FTTP technologies to their arsenals, or have added cable tech products and expertise to their FTTP lineup.

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“If you’re a vendor and weren’t hedging bets on DOCSIS having a finite lifespan, then that is the wrong bet,” Heynen said. “At this point, with how operators are thinking about their access networks, all technologies are on the table.”

He said traditional DOCSIS tech players will also be aided by specs that allow the provisioning of DOCSIS to run on PON networks.

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“It’s a little easier than starting from scratch,” he said.

In addition to gunning for more global scale, the closure of Arris’s $2.1 billion acquisition of Pace last week will ensure that Arris retains global pole position in the increasingly tough cable set-top box market.

Arris held that slot following its purchase of Motorola Home in 2014, and will now expand its lead while also buying share among satellite-TV and telco service providers in key European markets. By most analyst estimates, Arris will be home to about 25% of global revenues in the set-top sector, staying ahead of such rivals as Samsung, Humax, Technicolor (which just bought Cisco’s set-top business), EchoStar and Advanced Digital Broadcast, among others.

Pace and Arris will also share some key clients. Both supply Comcast with the primary HD DVR that powers the operator’s next-generation, IP-based X1 platform. Comcast ended Q3 2015 with a 25% penetration of X1 while shipping about 40,000 X1 boxes per day.

Arris’s acquisition of Pace was opportunistic and, in some ways, necessary, SNL Kagan senior research analyst Jeff Heynen said.

“Pace was winning share at Comcast and DOCSIS CPE (consumer premises equipment),” he said. “I think that spooked Arris quite a bit. And financial analysts watch Arris very closely now.”

The deal also gives Arris a way to shore up its share in the optical node arena, and perhaps give the company means to balance things out amid a declining set-top box market. Arris is also somewhat insulated via its partial ownership of ActiveVideo, which virtualizes many set-top box functions in the cloud.

During the vetting process there were concerns that regulators might require Arris to divest part of its optical business, but the deal ended up sailing through without such conditions.

“I’m surprised the deal went through without more scrutiny,” Heynen said.

Arris now faces the difficult task of integrating Pace and achieving the deal’s anticipated financial synergies.

CEO: SMOOTH SAILING

Bob Stanzione, Arris’s chairman and CEO, believes that integration will be easier to achieve than the one Arris went through after it acquired Motorola Home almost two years ago.

“I think we’ll be able to move faster on this one than we did with Motorola Home,” Stanzione said. In the case of Motorola Home, Arris was not assuming the IT or the financial infrastructure, and had to build it all from scratch. Plus, there were some complicated transition service agreements in the Motorola deal that are not needed with the Pace merger.

Stanzione isn’t predicting when the Pace integration will be completed, but he does expect the “big milestones” to occur in the first half of 2016.

One area of early focus will be combining the sales teams. That’s already happening under the establishment of a new executive team that has former Pace executive Tim O’Loughlin now in charge of North American sales and Ron Coppock now running a new dedicated international sales organization.

“The first thing we’ll do … is combine the sales organizations,” Stanzione said. “We don’t want there to be any confusion in front of the customers; we’ll move most quickly on that.”

The longer-term focus will include back-office integration and the merger of product roadmaps where there are overlaps. In addition to the Comcast X1 example, Arris and Pace have also been supplying similar set-top products to AT&T.

“We will combine [set-top] product lines,” Stanzione said. “But it will take time, because we have to collaborate with customers … If they want us to manufacture two products for the next year, we’ll manufacture two products for the next year.” Those conversations just recently got underway, as they were restricted from occurring before the deal was consummated.

Overlaps in other areas will also force Arris to make some moves with respect to its employee base, which is now at about 8,000, Stanzione acknowledged.

“We have nothing to announce at this point,” Stanzione said in regard to that, but said Arris will update the market on those activities in February during its normal quarterly earnings call while also keeping employees up to speed.

EYEING OVERLAPS

“There are some overlaps and we’re going to work through them as quickly as we can and keep everyone in the loop as to what our thinking is,” he said.

Though the mergers with Motorola Home and Pace aren’t apples-to-apples comparisons, Arris reduced its workforce by about 500 employees about two months after closing the Motorola Home deal.

As for the grander strategy behind the deal, Stanzione still believe it “gives us an incredible boost in scale” and the opportunity to grow internationally, particularly in markets such as Australia, where Arris and Pace were working with different customers and can now combine those efforts.

“We’ll want to see both [the U.S. and international markets] grow,” he said. “But I think the opportunities for us to grow internationally are greater.”

Even though Arris has its hands full integrating Pace, don’t count out more M&A moves.

“We want to be prepared for that, we need to be prepared for that,” Stanzione said, noting that Arris closed the Pace deal with a strong balance sheet intact. “Any company that kinds of gets itself painted into a corner in this world and this environment that is fast-moving will regret it.”