Revenue slides at Arris/CommScope and Casa Systems in Q1 2019 reflected a broader decline across the cable access network sector.
Total cable access network-related revenues plummeted 38% in Q1 2019, to $275 million, versus the year-ago period, driven by a "strong slowdown" on capacity purchases by MSOs and an ongoing delay in deployments of new distributed access architectures, according to new data from Dell'Oro.
Cable access network spending is known to be lumpy, "but not to this extreme," said Jeff Heynen, Dell'Oro's research director, broadband access and home networking. He said he doesn't recall seeing revenues in this segment of the market reach drop to such a low level since 2013.
He said the trend in reduced Q1 spending can be traced partly to Comcast and Charter Communications, which have all but wrapped up their DOCSIS 3.1 network deployments.
Spending on scalable infrastructure by Comcast and Charter Communications in Q1 2019 was about $600 million, a big drop from $1.4 billion in Q4 2018 and $1.1 billion in Q3 2018.
"We're talking about a significant decline sequentially just for capex for two of the largest cable operators in the world," Heynen said. "But this isn't just one or two operators cutting their capex. It's quite a few of them, and the big ones, too. This was bound to have a significant impact on the infrastructure market."
To amplify that point, he noted that capex for the "products and enablers" segment at Liberty Global was also down in Q1 2019 -- to $126 million from $208 million in the year-ago quarter.
Looking ahead, Heynen doesn't expect Q2 2019 to be as bad as Q1, but spending is expected to remain sluggish.
Much of that inertia comes as some major cable operators wrap up D3.1 network rollouts and put off some capacity spending as they continue to hammer out their DAA strategies.
"You just don't switch overnight to a new architecture and a one-for-one revenue exchange with existing purchases," Heynen said. "It just doesn't happen that way."
The good news is that the second half of the year should be significantly better for incumbent players such as Arris, Cisco Systems and Casa Systems, as well as for Harmonic and Nokia and others that are trying to elbow their way in as MSOs start to pivot to DAA and move toward network virtualization.
Though access network spending is off to a tough start, spending on cable modems, gateways and other broadband consumer premises equipment is a bright spot as MSOs gear up to deploy devices that can support their new D3.1-powered networks.
Heynen said broadband CPE revenue growth rose 34% in Q1, and is expected to remain strong for the rest of 2019.
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- Why Cable DAA Is DOA This Year
- Cable Access Network Capex in for a Lumpy Ride
- Casa Systems Sees Bottom Fall Out in Q1
— Jeff Baumgartner, Senior Editor, Light Reading