The analyst firm Infonetics came out with a report this week on the Broadband CPE market. CPE stands for customer premises equipment and refers to the home devices attached to a broadband network – everything from modems, to set-tops, and lately new gadgets like femtocells and a variety of home management controllers. Jeff Heynen, author of the report, sees short-term, recession-driven declines in the market, but also projects longer-term growth. I interviewed Jeff for a more detailed account of what types of gadgets he things we’ll see from cable and telco providers over the next several years. Here’s what he had to say.
Interview with Jeff Heynen, Directing Analyst, Infonetics Research
Q. One of the things you mention in your report is that you think we’ll see growth in broadband connections from 2010 to 2013 to support “converged” services – “voice, video, and high-speed Internet now, and home monitoring and automation services later.” What kinds of products do you think will support these services? Will we see more devices like the Verizon Hub and the AT&T HomeManager? They don’t seem to be getting much traction now.
A. Those two products are very early concepts for how home communications systems might work. The traction for those products is bad for any number of reasons, including macroeconomic conditions, their price points, and a general confusion among subscribers as to their utility. I really think both providers missed out on integrating some femtocell capabilities in those devices, rather than introducing separate femtocell gateways with yet another recurring fee. Why not combine the two, increase mobile reception in the home, while providing a low-cost, high-featured VoIP line to increase ARPU on a fixed broadband connection?
In the short-term, we really see growth in digital home gateways, which combine a modem, gateway, IAD (EMTA), and some type of home networking function (MoCA, HPNA, G.hn, etc.). Operators will be able to monitor these devices and their performance remotely and effectively move their sphere of influence into the home to ensure the stable performance of all their services, especially video.
Q. With potential growth in home monitoring and automation services, do you think we’ll see more supporting products (like cameras and home controllers) come to market through retail, through service providers, or through a hybrid retail-product-bundled-with-service model?
A. I think the hybrid approach, where operators distribute their own systems, but also have their own areas within retail stores, selling bundled packages is the likeliest scenario.
Q. Cable and telco operators seem to be expanding into a number of different areas. How successful to you think they can be in the future selling services beyond basic voice, video, and data?
A. I think operators will be successful at selling bundled services, if they can be more tightly integrated and be perceived as providing value to subscribers. That is exactly how the cable operators have been successful with digital voice, which was really a byproduct of having strong broadband penetration. The price for digital voice isn’t significantly different than an all-you-can-eat voice package from an incumbent. But it is discounted enough when packaged with other services that it becomes far more attractive. The phone companies were prepared to let fixed-line voice continue to decrease, while the cable operators swooped in and saw that they could easily get decent market share in an otherwise declining market just through a me-too service. Sound familiar? It’s exactly what the telcos are attempting to do with IPTV. Going beyond those services will be really challenging, however, because they are essentially going after ever smaller potential subscriber bases with those services. In addition, all operators will continue to face the ICP (Internet Content Provider) threat, with the Google Voice service being yet another attempt to reach into the operator market.
Q. I know this isn’t your specific area of research, but do operators run into an issue with bandwidth caps as they introduce or promote more and more broadband-based services? How do they resolve that potential dilemma?
A. No, I think the operators’ bandwidth caps, while currently much larger than the vast majority of users could ever consume in a month, will increase at a price. Of course, many of the services we are talking about won’t count against the cap, which is an entirely different debate.
Should have asked him about the coming bandwidth cap collision with OTT video and how he thought that would shake out…
Glenn- I did start down that path, but it’s not his research focus. My plan is to grill folks at the cable show…