Harmonic sheds more light on big 'CableOS' deal with Comcast

Harmonic's recently signed a four-year, $175 million enterprise licensing deal with Comcast centers on the vendor's "CableOS" software, but also includes incentives for the MSO to purchase fiber nodes and other network hardware from the vendor.

And if Comcast opts to purchase additional hardware from Harmonic, including gear that could be used for new distributed access architectures, the cable operator would also be in line to receive credits that will ultimately reduce the software fees it ends up paying to Harmonic.

The specific financials on that aspect of the agreement are not being disclosed, but Harmonic execs did discuss some of the broad strokes on this somewhat complex deal Monday during the company's Q2 earnings call.

While the $175 million value of the four-year deal does give Comcast an enterprise license to use and deploy CableOS software within Comcast's footprint, it does not cover hardware appliances, such as distributed access architecture (DAA) nodes or centralized cable modem termination system (CMTS) shelves.

"Such additional use of our complementary technology is upside," Harmonic CEO Patrick Harshman said on the call. "There's a real incentive to do additional business together."

While the structure of the deal does give Harmonic the high ground with respect to the software that Comcast will use to help virtualize its access networks, it also leaves the door wide open to other suppliers -- such as CommScope/Arris, Cisco Systems, Nokia and Casa Systems -- to sell DAA devices and other network gear to Comcast.

Harshman said the software-focused structure of the Comcast agreement is "unique" for Harmonic. Other agreements involving CableOS, including two relatively new ones with major but undisclosed international cable operators worth more than $100 million combined, reflect a combination of software and hardware. "Generally, that's how we're going to market elsewhere," he said.

Harmonic is hopeful that the Comcast deal will pave the way for even more sizable deployment deals involving CableOS.

"There's a lot of eyes in the industry on this," Harshman said of the Comcast agreement. "The endorsement that is implied by this deal, the experience that we're getting, is going to be only positive for us as we interact with other operators around the world."

CableOS deal limited to Comcast's footprint
Although multiple industry sources tell Light Reading that Comcast is exploring a model where it could eventually offer a converged cable access platform (CCAP) using a variant of CableOS on a syndicated basis, Harshman said the licensing agreement in place today allows Comcast to deploy the software as it sees fit inside its own footprint.

"We're not privy to all their internal plans," Harshman said in response to a question regarding speculation that Comcast is looking at a syndication model that could enable the MSO to sell a virtual CCAP product to other MSOs as it is doing now with its X1 video platform.

A syndicated version of a virtual CCAP product "would be extraordinary to this deal," he added. "We're certainly not predicting or authorized to discuss anything about Comcast's intentions [regarding] exactly what they're going to do within their footprint or any business development ideas they might have beyond their own footprint."

Harmonic also offered an update on its overall progress with CableOS, which is being deployed in more centralized cable network environments early on. At the end of Q2, CableOS was commercially deployed with 16 cable operators worldwide. About 780,000 cable modems are now connected to the software in those deployments, up 16% from Q1 2019.

"We've still got a ton of work ahead of us, but the CableOS train is clearly now leaving the station," Harshman said.

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— Jeff Baumgartner, Senior Editor, Light Reading

Jeff Baumgartner 7/30/2019 | 9:57:36 AM
Liberty Global also in the mix? Alongside the additional detail on Harmonic's CableOS deal with Comcast, Harmonic also announced that it had secured a new, five-year international contract for DAA deployments that will be worth more than $55 million. Harshman said he expects that project to get rolling toward the end of 2019 or into Q1 2019. That's on top of another ~$50M deal involving a different unnamed international customers signed last year that is on track to begin volume deployments in the current quarter.

Harmonic hasn't named the recipients of those deals, but Raymond James analyst Simon Leopold said in a research note that "[w]e suspect one of the large international awards comes from Liberty Global, and anticipate Harmonic eventually discloses this." -- JB
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