In-Stat/MDR is reporting that the broadband Customer Premise Equipment
market is evolving from one comprised of nearly 100% modems to one where
the CPE is a complete whole-home services delivery device.

As a result, Residential Gateways, with higher degrees of intelligence, network
management capabilities, and network bridging, will increase from 3% of the CPE market in 2003 to one third of all devices shipped in 2007. The high-tech market research firm estimates that the total broadband CPE market, which includes modems, residential gateways, and SOHO routers, will be $5.1 billion in 2003.

"Most broadband service providers have developed or are developing a gateway strategy, allowing them to tier their services for those who want a richer set of services," says Mike Wolf, a principal analyst with In-Stat/MDR. "Over time we see this higher tier becoming the standard as the cost-curve allows, and as service providers see the gateway as a better way to continually offer all customers more broadband services."

In-Stat/MDR has also found that:

* The cost of residential gateways, while still close to three times that of modems in mid-2003 from a bill of materials perspective, are close to what modems were in price when service providers started large scale broadband rollouts in 1999 and 2000.
* Consumers are showing that if the service providers will not give them home network support in the form of equipment sales, installation and management, they will do so themselves by going out and connecting their broadband connections and multiple PCs together through a home router. Low-cost SOHO routers have hit multi-million unit volumes since 2000 and will continue to sell well.
* Consumers have found great bargains at the retail market for home networking infrastructure, driven by demand and intense price competition among the few key vendors battling it out in this market.
* Most large telcos and cable modem service providers have requested that their CPE partners integrate wireless LAN technology into their high-tier CPE device.
* Over time the SOHO router market will decline as more integrated gateways leave less of a market for aftermarket networking infrastructure.

The report, "The Broadband CPE Big Three: Residential Gateway, Modem and
SOHO Router Market Analysis," looks at the Broadband CPE market in total, including residential gateways, modems and SOHO Routers.

In-Stat/MDR is based in Scottsdale, AZ. For more information visit www.instat.com.