BAIS Podcast: Stephen Wilson on Cable Operator Technology Trends

Stephen Wilson on cable operator technology trends - 5.55mb | mp3

Transcript

Jaimie Lenderman: Hello, my name is Jaimie Lenderman, Broadband Access Intelligence Service research manager at Omdia. Today I’m joined by my colleague, senior principal analyst Stephen Wilson. In our podcast today, we are going to talk about the future of cable networks and the different options that cable operators are pursuing. Good afternoon, Stephen, how are you doing?

Stephen Wilson: Yes, I’m well, thank you. How are you?

Jaimie Lenderman: I’m doing well. Thank you. So let’s go ahead and dive into it. So let’s talk high level: how are cable operators performing today?

Stephen Wilson: Well, I think if we look at different markets, we do see that some cable operators are losing broadband subscribers. The subscriber numbers have started to fall. But I think it’s important here to distinguish between subscriber declines that are caused by network performance degradation, subscriber concerns about network performance, and those subscriber declines that are caused by other factors, so things like price or customer service. So now, subscriber losses, due to inferior cable network performance, have very different consequences for network upgrade strategies than subscriber losses caused by a say a loss of certain sporting rights or poor customer service. Now, if we focus in on the US market, what we see is that US cablecos have definitely seen a pronounced slowdown in growth in subscriber numbers. And actually, a lot of that is due to increased competition from FWA, and really for more price-sensitive customers. In fact, FWA (fixed wireless access) performance at best is likely to be no better than cable broadband performance. And at the same time, US cable operators have also noted that the subscriber slowdowns they have experienced are more due to, I think, reduced subscriber acquisition rather than increased churn. So these slowdowns for US cable operators are not necessarily all network related or all due to network performance issues. And I think it’s also worth noting that some US operators that are investing in fiber to the premises have also seen overall subscriber declines. So, for example, DSL losses, customers moving let’s say to 5G FWA competitors, those losses have outweighed fiber-to-the-premises subscriber gains. So that’s a little bit where we are today in terms of cable broadband performance.

Jaimie Lenderman: So what are some of the different network upgrade strategies that cable operators are doing to stay ahead of the curve?

Stephen Wilson: Well, I think in a nutshell, there are two sort of paths here. So the first option is to continue down the DOCSIS path and upgrade to DOCSIS 4.0; and then the second option or second set of options is really to invest in fiber to the premises. Now with DOCSIS 4.0, you’re getting sort of maximum download speeds of up to 10 gigabits per second, maximum upload speeds up to six gigabits per second. And it’s also worth noting, I think, that there’s still scope for operators to upgrade speeds with DOCSIS 3.1. That is a strategy being perceived by some cable players. And that could also allow multi-gigabit downstream speeds and gigabit upstream speeds through changes in in frequency allocations. On the other hand, you’ve got the strategies of upgrading to fiber to the premises, and that will deliver superior speeds compared to the DOCSIS options, and in particular with fiber to the premises, you’re looking at symmetrical multi-gigabit speeds. So let’s say for example, with XGS-PON you’ve got 10 gigabit per second symmetrical capacity, and 25 and 50G PON, then promise further increases in capacity and speed. But I think at the same time when thinking about FTTP, it’s important to note that cable operators are looking at this in different ways. So for some cable operators, I think it’s more of a strategic play—and those kinds of operators are really looking to migrate their cable customers to fiber to the premises. They’re looking to do that quickly. They’re looking to decommission the cable network. On the other hand, I think you’ve got other cable operators that see fiber to the premises as more of a tactical play. And this, I think, really is more about only deploying remote OLTs in digital nodes. And at least at first, you’re only migrating customers that actually request FTTP. So that’s more of a hedge-your-bets, wait-and-see strategy. Whereas as I said, some other operators, cable operators, are fully committed to migrating their cable network to FTTP in the near future. So that’s a little bit about the network upgrade strategies that are being pursued.

Jaimie Lenderman: So there’s a lot of different options and directions to go. But with everything described, is there potentially a quote, unquote right strategy for cable operators to adopt when looking to upgrade these networks?

Stephen Wilson: Well, so I think that’s an interesting question. And I think, actually, the answer here is really that there isn’t a one-size-fits-all approach. I think one of the things I would highlight is that, in particular, the attractiveness for cable operators of upgrading their networks to fiber to the premises, that really depends on several factors. And those factors can differ between markets and also within markets as well. So for example, differences in fiber to the premises cost per premises passed. So in some countries, where such costs are higher, it’s definitely more difficult to justify the case for cable operators upgrading to fiber to the home. I think you’ve also got to consider the extent of FTTP infrastructure competition today and in the future. If there is more competition from alternative fiber infrastructures, then there’s more incentive certainly for cable operators to upgrade to fiber to the premises. And then I think opportunities in wholesale is an interesting point to consider. So if there are opportunities to benefit by offering wholesale access as a cable operator, then that can be an incentive to move to fiber to the home as well. And that’s really because DOCSIS is largely unsuited to offering wholesale broadband access. So for example, if I’m a cable operator with quite low subscriber take-up rates, I might think that offering wholesale access is a way to increase those subscriber take-up rates, and that there might be a driver for me to upgrade my network from cable to fiber to the home, which is more suitable for offering that wholesale access. And then I think one other thing to consider is the ability to compensate for inferior broadband access quality with other areas like fixed and mobile bundling. So if an operator is strong in other parts of its retail portfolio, then it has a greater ability to compensate maybe for slower broadband, and maybe then has more incentive to stay with the DOCSIS path. So yeah, I think in summary, it’s not a question of one right strategy; you’ve got to consider these variations between the different markets and even within markets.

Jaimie Lenderman: So it’s all very interesting, Stephen, thank you for going through that. So with all things considered, how do we think that this is going to play out in the future?

Stephen Wilson: Well, I think some operators will definitely be in a position to make the DOCSIS 4.0 rollout business case work, so that certainly can make economic sense. And that might be, for example, the case with some large US cable operators. Now, just to give you an idea, we forecast that cable equipment revenue will be 24% higher in 2025, than in 2022. And that reflects DOCSIS 4.0 rollouts from some cable operators. I think beyond this point, beyond that 2025 point, cable equipment revenue will fall and that really reflects the fact that some of these DOCSIS 4.0 upgrades will have already been carried out by that point. And then I think beyond that, more cable operators will move to upgrade to FTTP and I think along I guess along those lines it is hard I think to see a future for DOCSIS beyond DOCSIS 4.0. So for instance, using higher frequencies on the DOCSIS plant, that presents some challenges that you might then need to bring fiber closer to end customers. And that is an approach that’s not really gained widespread acceptance in the telco world; those smaller kinds of nodes have not proved to make economic sense as a deployment. So I think more cable operators moving to roll out fiber to the premises. And we expect, I think, continued diversity among those cable operators in PON technology choice. So I think in emerging markets, it might make sense for cable operators to choose to upgrade to GPON. And that might be let’s say, because the cost premium for XGS-PON ONTs is too high in low ARPU markets. On the other hand, we definitely see that XGS-PON is already being widely deployed by let’s say, some cable operators in Europe. So that will certainly be a common choice. But at the same time, I think the largest cable operators, let’s say in the US, remain committed to EPON. And I think specifically to 10 Gig EPON. So I think if you’re interested in finding out more about Omdia’s views on the future of cable networks, we have published a report titled, Analyzing the Future of Cable Networks, DOCSIS 4.0, and FTTP Upgrades that can be found in our Broadband Access Intelligence Service. And then in addition, Omdia also produces forecasts for the cable access equipment market, which again, those can be found in our Broadband Access Intelligence Service. So I hope you found the podcast useful, and thank you very much for listening.

Jaimie Lenderman: Yes, thank you very much, Stephen, and thank you to our listeners. And hopefully, Stephen, this will be first in a series of podcasts that we have coming.

Stephen Wilson: Yes. Thank you very much.

Jaimie Lenderman: Thank you for your time.

Appendix

Further reading

Analyzing the Future of Cable Networks, DOCSIS 4.0, and FTTP Upgrades (March 2023)

Author

Jaimie Lenderman, Principal Analyst, Service Provider

Stephen Wilson, Senior Principal Analyst, Service Provider

[email protected]