Dell’Oro: Full speed ahead for broadband tech spending

Noting that broadband subscriber additions continue to grow at a furious pace around the world, analyst Dell’Oro is predicting that global spending on broadband access equipment and CPE will achieve a 3% CAGR (compound annual growth rate) from 2020-2025.

In an update to the Broadband access and home networking 5-year forecast report it published in July 2021, the analyst said the projected growth would represent a “solid” increase from a 0% CAGR in its January 2021 5-year forecast edition. It said the equipment spending slump that the industry had expected to see in 2021 after the increased investment levels of 2020 was not going to materialise.

In fact, it predicted spending to continue to grow this year as operators deal with continued subscribers additions, as well as competitors increasing their investments in fibre, HFC and fixed wireless networks.

Looking at key elements driving growth, the analyst said the combination of continued residential subscriber growth and increased capacity utilisation rates noted by global broadband providers would more than offset the negative impacts of component shortages and labour limitations. Also, it said that even if subscriber growth did slow later in 2021, broadband penetration rates and the total addressable market for broadband service providers would have expanded significantly over the past year.

Subscriber growth was also said to have resulted in improved revenue and gross margins for service providers. As a result, providers are pulling forward some of their upgrade projects, including those involving the transition from copper to fibre.

Drilling deeper into the prospects for specific areas, Dell’Oro said it expected passive optical network (PON) equipment spending to remain solid. The analyst increased its five-year CAGR for PON equipment to 5% from 3%.

China, which has historically accounted for 65-80% of total PON spending, has peaked in terms of total optical network transmission (ONT) units consumed on an annual basis. The study also noted that the Chinese FTTH market has matured, with broadband penetration in the country reportedly nearing 80%. Although subscriber growth is slowing, there is still a tremendous installed base of subscribers that will continue to require new ONTs.

Although China’s ONT volumes were found to be declining from the peak years of 2017 and 2018, additional growth is expected from the rest of the world – particularly North America and Western Europe. In North America, the FCC’s $20bn Rural Digital Opportunity Fund (RDOF) programme will help to transition a significant number of rural areas to fibre over the next five to seven years.

In Western Europe, major operators including Orange, DT, BT Openreach and Proximus are all expanding their fiber roll-outs and even moving quickly to XGS-PON for symmetric 10 G services.The analyst also believes that Asia, India, Indonesia and Malaysia, along with a 10 G upgrade cycle in Japan and South Korea, should also help to sustain the market.

Cable infrastructure spending was also said to be set for growth and the study said the glut of DOCSIS channel capacity that helped push down cable equipment revenue in 2018 and 2019 was actually beneficial to operators in 2020 as they were able to address significant increases in both upstream and downstream traffic during the pandemic with minimal increases in spending.

In most cases, cable operators used the software tools available as part of DOCSIS 3.1 to ensure adequate bandwidth for all subscribers. In other cases, operators bought additional DOCSIS licences as part of accelerated node split programmes to address systems with the greatest need.

Concluding, Dell’Oro said that after two years of under-investing in infrastructure, the overall cable infrastructure market will see a steady increase in revenue throughout the forecast period, as mid- and high-split projects in North America and Western Europe, designed to increase upstream capacity, are accelerated.

It predicted that investments in outside plant equipment, particularly new amplifiers and taps, will also continue as operators begin the multi-year process of preparing their networks for DOCSIS 4.0 and its ability to enable extended-spectrum DOCSIS (ESD), low-latency DOCSIS, and full-duplex DOCSIS (FDD).