Betting on Broadcom

Broadcom Corp. (Nasdaq: BRCM) has developed a nice niche market for modem silicon that bonds together multiple Docsis 2.0 downstream channels, but it's playing from behind when it comes to the delivery of chipsets based on the full set of Docsis 3.0 specifications.

So far, Texas Instruments Inc. (NYSE: TXN) is the only vendor to have its silicon housed inside Docsis 3.0-based modems that are undergoing official certification tests at CableLabs . Cable insiders believe Broadcom's official entry will bode well for modem pricing, which, at current levels, could slow any broad-scale deployment of Docsis 3.0.

But exactly when Broadcom's Docsis 3.0 modem silicon will be ready for prime time is still a guessing game.

Industry insiders believe Broadcom should have something ready for CableLabs as early as Certification Wave 59 in late March, with product ready to ship in the fourth quarter of 2008. That would position Broadcom to participate in cable's first significant Docsis 3.0 cable deployment window. (See Docsis 3.0 Testing Skips a Beat .)

Broadcom is revealing no details, but it's saying the right things, in case there are any cable operators within earshot.

"I'm not pre-announcing any product," says Jay Kirchoff, senior director of product marketing for Broadcom's cable TV business line. "Broadcom is continuing to invest heavily in 3.0 cable modems, 3.0 MTAs [multimedia terminal adapters], and 3.0 CMTS [cable modem termination system] technology. We are very big believers in the Docsis 3.0 market."

Pricing pressure
Obviously, hardware availability is key to the timing of Docsis 3.0 adoption, but modem prices will play a role, too.

And the price expected out of the gate is considered high -- possibly too high for operators to make high-volume purchases, even though they're prepared to pay a small premium for Docsis 3.0 modems.

Docsis modem and silicon suppliers aren't disclosing prices, but a 3.0 modem today is said to cost up to $80. Industry insiders say MSOs eventually want 3.0 pricing to drop into the realm of 2.0 modems, or about $30 per unit.

"Ultimately, it's a very price-sensitive market," says a cable industry observer.

Plus, MSOs have long memories. They won't soon forget that when Docsis 2.0 modems first came on the scene, they actually cost less than CPEs based on Docsis 1.1, thanks in part to some additional silicon integration and a decrease in the cost of materials. Although many operators did not take advantage of the full capabilities of Docsis 2.0, such as its dilated upstream, it became an easy economic decision for them to start buying and deploying 2.0 modems exclusively.

Similarly, if Docsis 3.0 modems get to the right price, some MSOs may begin to seed their systems with 3.0 modems at a small premium over 2.0 before they upgrade their CMTSs or even offer Internet services that use channel bonding.

Broadcom's arrival could help that happen faster.

"Typically, Broadcom… comes down the cost curve quicker," says one source from the cable vendor community. "I would tend to think that Broadcom, once they've got it all taped out [will] be hitting the cost points."

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