With competitive pressure from fiber and fixed wireless access (FWA) expected to surge in the coming years, cable operators are likely to respond in kind with heavier spending on network upgrades, according to a new broadband access forecast from Dell'Oro Group.
Revenue for cable distributed access architecture (DAA) equipment is set to rise to nearly $1.3 billion by 2026, up from about $1 billion in 2021, the research firm predicts. That DAA category includes elements such as virtual converged cable access platforms (vCCAPs), remote PHY devices (RPDs), remote MACPHY devices (RMDs) and even remote optical line terminals (OLTs).
Remote OLTs, a relatively new focus of the Dell'Oro forecast, are devices that can be snapped into DAA fiber nodes to support passive optical network (PON) services alongside DOCSIS and even some wireless/mobile applications. Remote OLTs are expected to generate more than $100 million in revenues by 2025, with the bulk of that spending coming from the North American cable market, said Jeff Heynen, VP at Dell'Oro Group.
Remote OLTs, viewed by Heynen as another form of DAA alongside RPDs and RMDs that can be managed by a DOCSIS core and backend systems, can help cable operators deploy fiber-to-the-premises (FTTP) on a somewhat targeted basis for business users or hit areas where competitive broadband threats are most severe.
"What we're finding is that there's a need to compete sooner than later, in some cases, where they [cable operators] might be losing subscribers maybe to fixed wireless or to fiber overbuilders," Heynen said.
Still, most of the DAA spending in the scope of Dell'Oro Group's 2025 forecast is expected to come from the other types of components as operators make a run at DOCSIS 4.0, a new set of CableLabs specs designed to drive multi-gigabit speeds alongside low latency and enhanced security capabilities on widely deployed hybrid fiber/coax (HFC) networks.
Heynen acknowledges that the future makeup of the cable access network will be mixed. Though some tier 2 and tier 3 operators are pushing ahead with FTTP upgrades, larger tier 1 companies (with Altice USA being an exception) will continue down the path to DOCSIS 4.0.
"I still feel it's full steam ahead with DOCSIS 4.0," Heynen said. However, larger cable operators are "sprinkling in more and more fiber-to-the-home outside of greenfield areas," he added.
The overall need to enhance the access network and spend more heavily on upgrades – whether it's with FTTP or DOCSIS 4.0 – comes about as cable operators face more broadband competition on multiple fronts.
"Cable operators are getting squeezed at the low end by fixed wireless now and, soon enough, on the high end by fiber," Heynen said. "There's nothing that drives capex more, historically, than competition. It hasn't been technological shifts per se; it's been a competitive threat and the need to challenge that competitive threat. And that is very clearly the situation [that] the North American cable operators find themselves in right now, whether they want to admit it or not."
Increases across full broadband market
Cable's not the only sector expected to see a jump in network spending. Dell'Oro Group believes revenues for the entire broadband access market will climb to $23.4 billion by 2026. That compares to just under $16 billion in 2021 and an expected $17.3 billion this year.
"There's been no real slowdown, at least through the first half of this year, on broadband equipment purchases," Heynen said.
Below the top overall broadband category, Dell'Oro Group sees PON equipment revenue growing from $9.3 billion in 2021 to $13.6 billion in 2026, largely driven by XGS-PON deployments in multiple regions. XGS-PON aside, there's been no slowdown on fiber buildouts despite supply chain challenges and relatively high prices.
FWA is also having a moment, as revenue for fixed wireless customer premises equipment (CPE) is forecasted to reach $5.1 billion by 2026 – a big leap from the $1.1 billion in 2021 revenues.
Heynen sees fixed wireless CPE spending accelerating this year and into 2023 and 2024, then flattening out a bit.
"The big challenge right now is the devices themselves are so expensive," he said, citing the impact of supply chain constraints and the fact that components for the equipment are pricey anyway.
Though revenues in that category are rising, Dell'Oro Group has reduced its forecast on the number of units shipped to about 18 million by 2026. That's still tremendous growth from 4.3 million units in 2021, but unit costs are collaring its full potential.
"It's hard for operators to justify the cost right now unless you're making a T-Mobile-type effort to launch and steal market share," Heynen said. "There aren't many other mobile operators around the world that feel the same way."
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- A critical piece of Comcast's DOCSIS 4.0 puzzle begins to fall into place
- DOCSIS 4.0 may not be the end of the road for HFC, CableLabs CEO says
— Jeff Baumgartner, Senior Editor, Light Reading