Last month, CI&M's co-publication in Endeavor Business Media, Broadband Technology Report, sat down for a Zoom interview with Dell'Oro Group vice president Jeff Heynen, renowned market analyst for the broadband access and home networking market. This episode of The Cabling Podcast delivers the captured audio from that talk, as we seek to give our audience of information and communications technology (ICT) vendors, contractors, and installers the benefit of Heynen's view into the current broadband access market, particularly in the areas of HFC and pure fiber-optic connectivity deployments.
Heynen joined Dell'Oro Group in 2018, and is responsible for the technology market research firm's Broadband Access and Home Networking program. Prior to Dell’Oro Group, he spent over 12 years in broadband and video industry analysis, working with S&P Global Market Intelligence, Infonetics Research and IHS Markit as a research director focused on the broadband access and video segments. Heynen’s research and analysis have been cited in leading trade and business publications including the Wall Street Journal, SDxCentral, Multi-Channel News, New York Times, Light Reading, Los Angeles Times, Investor’s Business Daily, FierceWireless, and Barron’s. He has also appeared as a perennial invited speaker at numerous telecom industry conferences.
Our interview is based on information from Heynen's blog published by Dell'Oro this winter, where he forthrightly predicts that the broadband access and home networking market will remain resilient in 2023. As stated by Heynen in the blog:
"For mature markets, is rare to see consecutive years of double-digit revenue growth. But that is indeed what has occurred, as 2021 revenue growth was 16% and 2022 growth over 2021 is currently expected to be around 12%, reaching just over $18 billion worldwide ... In 2023, albeit nowhere near the double-digit percentage growth we have seen over the last two years...at this point, it is safe to [forecast] 5-7% revenue growth ... Though slower, the revenue growth this year shows the continued emphasis on expanding and improving broadband network capacity by operators, as well as state and national governments."
To begin the interview, Heynen (00:46) is asked to recap his assessment of 2022 in the context of cable MSOs’ broadband initiatives. "There's been a clear focus on fiber investments," he says. "When you talk specifically about [traditional] cable operators, they too are making their own investments in fiber infrastructure, albeit quietly. We're seeing a very steady rise in the purchase of remote OLT modules to be placed in existing optical node locations to start peeling off fiber subscribers in competitive areas and in markets where it makes sense to begin offering fiber services, particularly in new build scenarios. "
Asked about expectations regarding what cable MSOs will do this year (02:42), Heynen adds, "They're going to start preparing their outside plants to support the DOCSIS 4.0 upgrade cycle. The DOCSIS 3.1 mid-split and high-split initiatives to allocate more upstream bandwidth to subscribers, that's certainly going to occupy most of their time this year. We also have smaller cable operators that are converting and cutting over to fiber, in addition to also doing mid-splits and high-splits where it makes sense."
In terms of what challenges cable MSOs and BSPs may face as they attempt to reach these goals (04:11), Heynen remarks, "I think for emerging fiber providers and those that are still in the midst of rolling out fiber, labor shortages are still going to be a challenge, as are supply chain issues."
HFC vs. fiber, FTTH and Wi-Fi prospects
Whereas his blog indicated that there’s a feeling among some on Wall Street that fiber technology is obviating traditional HFC (06:20), when asked what cable operators might do to shift such a perception, Heynen notes, "Just because a competitor comes in with a supposedly better technological option, doesn't necessarily mean that they're going to provide you with the same level of reliability that the cable operators have demonstrated for years, so that's something they're going to have to highlight. They're going to have to expand into home networking offerings, managed home Wi-Fi, really highlighting parental controls, cybersecurity -- all the things that are going to differentiate their service to you as a subscriber."
Next, we ask Heynen to address service provider Wi-Fi 6 technology dominance, and burgeoning 6E uptake vs. Wi-Fi 7 technology emergence (07:52). "We're just now starting to see the 6E gateways, specifically from cable operators, hit the market, and being made available to select subscribers as an option," he notes. "There's still a way to go. Wi-Fi 6 is now the dominant technology in terms of gateways and routers that are sold by service providers or leased by [them], as well as retail units purchased by consumers. 6E still has a bit of time to ramp; the challenge of course, is we just had CES a couple of weeks ago, and all the buzz was around Wi-Fi 7."
When asked for his fiber-to-the-home (FTTH) broadband technology market predictions (10:24), Heynen remarks, "I think again this year is going to be a tale (at least in markets outside of China) of two technologies. GPON still is providing kind of the foundation for most FTTH deployments, but we're seeing an increasing deployment of XGS-PON for multi-gigabit services to subscribers, and that's the way things are going to look for the rest of the year. We'll probably get to the first half the year and GPON will still largely be the dominant CPE technology of choice. And then by the second half of the year, in some markets, particularly in North America, we'll likely see XGS-PON ONT's sort of take over."
Tangential broadband concerns
Meanwhile, with a new Congress in place this year, and some members calling for increased oversight of broadband funding programs, when asked for perspective (11:35) on this issue, Heynen asserts, "I'm not sure that the changes in the makeup of the House are going to have an impact on the programs that are already out there. By nature, government programs are going to take a long time anyway [...] The delays that we've seen historically in these massive subsidization programs like CAF, CAF2, even going back to BIP and BITOP in the broadband stimulus days of '08 and '09 -- some of those funding mechanisms haven't even wrapped up yet. We're already starting to see some arguments around the BEAD program and whether unlicensed fixed wireless should be included or not. There's a lot of heavy lobbying on both sides by the Fiber Broadband Association and WISPA -- logically. "
Speculatively, the talk then turns (13:11) to how, if the goal of all such funding programs is to make broadband access ubiquitous, what might happen to the broadband market in the event this goal is achieved? Heynen is realistic in responding, "At least in the North American market, we're still many years away from actually achieving that goal of truly bridging the digital divide. And that's not just a question of availability, it's also going to be a question of affordability."
To wrap up the interview, we note how Heynen's blog states that subscriber growth is slowing, which will bring ONT growth down to flat or single-digit growth. Given that growth will slow overall for the broadband market, we asked Heynen if he believes the industry will see reduced growth “across the board,” or if certain segments—such ONTs— might dip more than others?
In his detailed response (15:04), Heynen begins, "There are a couple of answers to your question. The first is that new housing starts and movement, people from moving from one state to another, to different locations, that typically drives additional broadband subscriptions. At least through 2022, we've still seen that movement -- but the new housing starts, because of interest rate increases, have certainly slowed."
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