As part of its switched-digital-video initiative, Comcast selected Arris as a supplier of equipment that can dynamically allocate bandwidth for multiple unicast applications.
The value of the deal was not disclosed. The Arris products covered under the contract are known as universal edge-quadrature-amplitude-modulation (edge-QAM) systems.
Such universal edge-QAMs can provide bandwidth for multiple services, including switched digital video and video-on-demand, whereas traditional QAMs require channels to be dedicated exclusively to one service, like VOD.
Comcast, which is currently testing out switched digital video in Denver and New Jersey, will use the Arris D5 Universal Edge QAM system as part of its nationwide SDV rollout, said Mike Caldwell, senior director of product management for video at Arris.
“Ostensibly, this is for their switched-digital-video rollout, but it’s also to support their other platforms, like VOD and CMTS [cable-modem-termination system], as they move forward into a converged IP [Internet-protocol] world,” Caldwell said. The D5 supports VOD, SDV, Data Over Cable Service Interface Specification and broadcast video.
Comcast has said that it expects to begin launching services based on SDV commercially in the second half of 2007.
The Comcast deal is Arris’ first major win in North America for the universal edge-QAM system. Caldwell added that other MSOs in the States are currently conducting trials with the D5, but he wouldn’t name them.
Arris last month announced that will boost the density of the D5 by 50%, from 48 to 72 QAM channels per two-rack-unit-high chassis, via a software upgrade slated to be shipping in the first quarter of 2008.
ThinkEquity Partners analyst Anton Wahlman said in a research note that the edge-QAM win at Comcast was a positive sign for Arris. However, he added, the deal underscores Arris’ dependence on the MSO, which is the equipment-maker’s single largest customer: Comcast accounted for $91.6 million of Arris’ revenue in the first quarter of 2007, or 39% of overall sales.
“We believe the 40% dependence on Comcast makes the company vulnerable to an attack from Cisco and Motorola,” Wahlman wrote. “Arris still does not have the product breadth to compete across the board with those video powerhouses.”
Separately, French electronics-maker Thomson earlier this week announced that Comcast has picked it as a supplier of voice-enabled cable modems, in addition to the MSO’s current deal with Arris for such devices.
Under the terms of the deal, Comcast will use Thomson's DHG535 embedded multimedia-terminal adapters (eMTAs) to provide customers with both digital-voice and high-speed-Internet service through a single integrated device. Thomson, based in Paris, has an existing deal with Comcast to supply data-only cable modems.
According to Wahlman, Thomson’s eMTA deal could be bad news for Arris. It “has at least the potential of posing grave danger to Arris’ revenue outlook,” he wrote in a research note. But he also noted that the actual effect may be minimal “because there may not be any volume associated with it.”
Arris declined to comment on the ThinkEquity report. In April 2006, Comcast announced a deal with Arris to purchase a minimum of 1.2 million eMTAs over two years.
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