Looking to gain some ground on rival supplier Harmonic, CommScope said its virtualized form of a Converged Cable Access Platform (CCAP) is in trials with multiple cable operators and should reach the commercial launch stage by the end of 2019.
However, initial uptake of a vCCAP by cable operators is expected to be "relatively small" in 2020 as most MSOs continue to buy and add capacity for their more traditional CCAP platforms, CommScope President and CEO Eddie Edwards said Thursday on the company's Q3 2019 earnings call.
Still, a commercial launch of a virtual CCAP will enable CommScope to close the gap a bit on Harmonic, which is well out ahead of the pack with its "CableOS" platform and the vendor's tight licensing and deployment relationship with Comcast, the largest US cable operator. Another potential threat to CommScope is Comcast's exploration of a syndication/licensing model for the virtual platform based on CableOS that it has begun to deploy in several key markets.
Among other next-gen moves on the cable access network, Edwards noted that CommScope is engaged with a large-but-unnamed Tier 1 cable operator and a major chipmaker on a next-gen remote PHY device as operators start to pursue a distributed access architecture (DAA), which pushes electronics toward the edge and also plays an important role in future network virtualization efforts. CommScope is also working on a remote MACPHY module that will be "plug-in compatible" with the company's nodes and debut in the first half of 2020, Edwards added.
Tough sledding for Network & Cloud
Even as CommScope makes progress on new cable access network products, its Network & Cloud business continues to be sluggish in the months after CommScope wrapped its acquisition of Arris in April 2019.
Network & Cloud segment net sales in Q3 of $376.9 were down 29.2%, primarily due to reduced operator spending.
Alex Pease, CommScope's EVP and CFO, noted that some of that slowdown is due to capacity buys made in 2018 that cable operators have yet to consume before needing to purchase more. Also contributing to this soft patch is ongoing "uncertainty" around virtualization and DAA, causing a "sort of a freeze in spending as [cable operators] want to know how that evolution is likely to unfold … This will be a multi-year journey," Pease said.
Also impacting the business in the near term were the technical variances in next-gen architectural designs for HFC networks. While Comcast is expected to go with Full Duplex DOCSIS, a technique that will allow both upstream and downstream traffic to flow in the same block of traffic, most other operators are leaning toward Extended Spectrum DOCSIS, a less expensive option that will continue to split the spectrum dedicated for downstream and upstream capacity. New DOCSIS 4.0 specs, now under development at CableLabs, are expected to unify those two schools of thought.
"But there's no reason to believe why this business can't get back to its historical quarterly revenue and earnings potential as we work through these challenges," Pease said.
CommScope's customer premises equipment (CPE) business also struggled, as sales dropped 12.2%, to $826.4 million, again due to reduced cable operator spending. Tariffs stemming from the US-China trade war are also contributing to the pain in the CPE segment, though CommScope expects the impact from those tariffs to be "materially mitigated" by Q1 2020.
Total Q3 sales were $2.38 billion, up 106.9% because they included about $1.34 billion in sales from Arris.
- CommScope Posts Q3 Revenues of $2.38B, Net Loss of $156M
- CommScope Plots Progress With Low-Latency, Extended Spectrum DOCSIS
- CommScope Swaps Leadership of Its CPE Biz
- Harmonic's 'Cable OS' Deployment Nears the 1M Modem Mark
- DOCSIS 4.0 ends cable network feud
- Comcast Sizing Up Plan to Syndicate a Virtual CMTS – Sources
- Comcast's Virtual Access Network Rolls Into Multiple Markets, Spans 100K+ Customers
— Jeff Baumgartner, Senior Editor, Light Reading