Forecast: Broadband spending to remain strong to 2025
January 28, 2021
The Dell’Oro Group has published a 5 year forecast report for the broadband access and home networking market. The following are some key takeaways shared by Jeff Heynen, Vice President and Analyst.
Subscriber and Bandwidth Growth Will Remain Key Catalysts
Global spending on broadband access equipment and CPE is expected to drop only 2 per cent in 2020, a significant improvement from our July 2020 forecast, which anticipated spending dropping by 7 per cent in 2020. The combination of significant residential subscriber growth and increased capacity utilisation rates noted by global broadband providers nearly offset the negative impacts of trade tussles, component shortages, and labour limitations.
In the first half of 2020, The Dell’Oro Group heard from countless service providers that their projected capacity utilisation rates for the entire year were reached by March or April. A second surge in consumption in the fall, driven by children returning back to school and attempts at re-opening economies forced many operators to add even more capacity. With much of the world still dealing with the impacts of the Covid-19 pandemic and with remote work and online education continuing well into 2021, we see no slowdown in broadband capacity utilisation, forcing service providers to once again balance accommodating traffic growth with managing overall spending. Continuing RAN investments will force service providers to spend judiciously on their broadband networks. In certain cases, this will mean delaying longer-term strategic projects and focusing on addressing immediate capacity upgrades and onboarding a higher-than-average volume of new subscribers.
PON Equipment Spending Expected to Remain Solid
The Dell’Oro Group’s five-year CAGR for PON equipment has been increased to 3 per cent from just under 1 per cent. China, which has historically accounted for anywhere from 65-80 per cent of total PON spending, has peaked in terms of total ONT units consumed on an annual basis. The Chinese FTTH market has matured, with broadband penetration in the country reportedly nearing 80 per cent. Though 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 are coming down 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 $20B RDOF (Rural Digital Opportunity Fund) programme will help transition a significant number of rural areas to fiber over the next 5-7 years. In Western Europe, major operators including Orange, DT, BT OpenReach, and Proximus are all expanding their fiber rollouts and even moving quickly to XGS-PON for symmetric 10 G services.
Finally in Asia, India, Indonesia, and Malaysia, along with a 10 G upgrade cycle in Japan and South Korea should also help sustain the market.
Cable Infrastructure Spending Set for Growth
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 purchased additional DOCSIS licenses as part of accelerated node split programs to address systems with the greatest need.
Regardless, after two years of under-investing in infrastructure, the overall cable infrastructure market will see a steady increase in revenue throughout our forecast period, as mid- and high-split projects in North America and Western Europe, designed to increase upstream capacity, are accelerated. 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).