The virtualization of cable and fiber networks is core to Harmonic's long-term strategy, but the vendor says an initiative underway to reclaim C-band spectrum for 5G will bring in some big bucks later this year.
The overall C-band opportunity is worth "several hundred million" dollars to Harmonic and others over the next couple of years, Patrick Harshman, Harmonic's CEO, said Monday on the company's second-quarter earnings call.
"We don't expect to win all of that business, but we think we're positioned to win a good chunk of it, so it can in fact be impactful for multiple quarters," he said, noting that the work already underway will provide a material contribution to Harmonic's video-related revenues in Q4 2020.
Much of that early work centers on the FCC's ambitious plan to reclaim C-band spectrum for 5G. Today, that spectrum is being used by programmers and other media companies to distribute primary video feeds via satellite. To prepare for the FCC-led transition, those incumbent C-band users intend to move some of that distribution to terrestrial delivery systems or hybrid platforms that use both terrestrial and satellite delivery.
SES, one such incumbent user of C-band spectrum, has partnered up with Harmonic on a transition plan that has been filed with the FCC. They have agreed to collaborate on the deployment of Harmonic's XOS-branded advanced media processing products in the headend along with edge transcoding for remote sites for the primary distribution of video feeds.
Harmonic's overall opportunity target in this area covers anyone that uses C-band satellite frequencies for the primary distribution of video content, but most of the initial focus for the vendor will center on the US.
"We're pursuing opportunities overseas, but I would say the opportunity is in sharpest focus right now and our initial activities are anticipated to be in the US," Harshman said, referring to the FCC's well-publicized process to reclaim C-band spectrum for 5G.
Those C-band efforts are poised to give Harmonic's video business a sizable jolt. While Harmonic's Q2 2020 video revenues were down 33.7% to $47.5 million, due primarily to COVID-19-related slowdowns, Harmonic is predicting video-related revenues to balloon to $87 million to $97 million in Q4 2020. Harmonic shares were up more than 16% in after-hours trading Monday on its revised outlook.
CableOS pace slows during the pandemic
COVID-19, meanwhile, has also slowed down the pace of activity for CableOS, Harmonic's virtualization platform for both hybrid fiber coax (HFC) and fiber-to-the-premises (FTTP) networks. About 1.7 million cable modems were served by CableOS by the end of Q2, up 116% year-over-year, and up 27% sequentially. That's still a drop in the bucket considering the MSOs with CableOS deals in place today serve in the neighborhood of 50 million modems.
Still, Harmonic has been adding Tier 1 operators to the CableOS mix. Building on its enterprise licensing deal with Comcast (Harmonic's sole 10% or greater revenue customer in Q2), Harmonic has also announced recent deployment deals with Millicom and Vodafone.
The pandemic has "somewhat slowed our progress onboarding additional new customers," Harshman said.
However, Harmonic has been tacking on new design wins (including Harmonic's first "significant" CableOS purchase in the Asia-Pacific region), with deployments scheduled to start in the second half of the year, he added. Harshman also expects at least one additional top five cable operator in North America to purchase CableOS by the end of 2020.
Despite some slow going for CableOS, Harmonic's overall cable access business still grew 100% year-over-year – to $26.5 million in Q2 2020 versus $13.3 million Q2 2019.
Harmonic is also looking to broaden the addressable market for CableOS by adapting its virtualized software core for FTTP networks, with field trials slated to start in Q3. That work is initially focused on cable operators that operate both HFC and FTTP networks, but the company expects CableOS to also apply to telcos that are seeking a unified core access platform.
- Harmonic cable access revenues surge 100% in Q2
- SES, Harmonic to transition C-band for 5G
- SES makes a grab for some of Intelsat's C-band money
- Harmonic adds Vodafone to its 'CableOS' win list
- Harmonic's 'CableOS' adds more fiber to its diet
- Harmonic sheds more light on big 'CableOS' deal with Comcast
- Broadband access equipment to dip 7% in 2020 – Dell'Oro
— Jeff Baumgartner, Senior Editor, Light Reading