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Global MSO Spending on DOCSIS Infrastructure Declines by 3.5% in 2015

Operators took advantage of low downstream channel prices and boosted 2015 shipments of converged cable access, cable modem terminal and Edge QAM platforms to lock down their footprint ahead of the DOCSIS 3.1 upgrade. However, the bargain hunting pushed worldwide per-port spending down 21% for the fourth quarter and overall spending down 3.5% to $505.4 million.

Total DOCSIS channel shipments jumped 25% for the full year to top 6 million, according to SNL Kagan estimates. The fourth quarter, which is generally the strongest of the year as operators flush their budgets, met our expectations, increasing 56% from the third quarter, though down 5% year over year.

The collection of core infrastructure elements for the cable industry is part of SNL Kagan's expanded coverage, which will result in quarterly tracking of converged cable access, cable modem terminal and Edge QAM volumes, revenue and vendor market share.

Downstream channels delivering bandwidth to broadband service groups represented 83% of total DOCSIS shipments for the year. Cable operators continue to focus on ramping up downstream bandwidth to stay ahead of growing FTTH deployments by telcos and other ISPs, including Alphabet Inc.'s Google Fiber and municipal fiber networks.

ARRIS Group Inc. dominated revenue share in 2015, collecting $929.2 million in revenue and holding 52% to 56% of the market on a quarterly basis throughout the year, according to SNL Kagan estimates. ARRIS benefitted immensely from the focus of its primary North American customers, including Comcast Corp. and Time Warner Cable Inc., on dramatically increasing throughput to remain competitive with Verizon Communications Inc.AT&T Inc.CenturyLink Inc., Google Fiber and upstart ISPs.

The imminent availability of DOCSIS 3.1 linecards and full-spectrum channels won't slow the continued purchase and deployment of current DOCSIS 3.0 channels as cable operators must continue to increase throughput to reduce the likelihood of churn among their broadband subscribers. In years past, spending slowed ahead of new technology releases, particularly during the transition from DOCSIS 2.0 to DOCSIS 3.0. But with downstream channel prices at historic lows and channel density per linecard at historic highs, MSOs have a strong incentive to keep spending.

Downstream channel pricing has followed a downward trajectory for years, with technology shifts resulting in more significant declines. A combination of improved channel density per linecard and aggressive pricing by the major converged cable access platforms suppliers met in 2015. Suppliers were motivated to win key deals and ensure they could retain or expand their network footprint as MSOs spend 2016 preparing for DOCSIS 3.1 deployments.

What will be interesting as DOCSIS 3.1 products become available is how suppliers and MSOs price channels. Currently, pricing is based on 6 MHz downstream channels that each deliver around 40 Mbps of bandwidth. DOCSIS 3.1 does away with that model and instead allows operators to take 200 MHz blocks of spectrum and divide them up into hundreds of smaller subcarriers. What this will likely result in is a pricing model based on the sale of individual, physical RF ports, rather than QAM channels. On a relative basis, the cost per channel will clearly head down once again. However, the metrics used to quantify the market will likely be changing.

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Aug 09, 2016