- Dell’Oro said revenue for broadband access equipment dropped 12% YoY in Q1
- Excess inventory and subscriber churn have slowed equipment purchases
- But spending on DOCSIS gear is likely to pick up later in 2024
Wondering how the broadband equipment market is doing? Not great, according to Dell’Oro Group.
In Q1, global revenue for the broadband access equipment market dropped 12% year-over-year to $4.1 billion, as spending in the market reached a two-year low.
What’s the deal? Dell’Oro VP Jeff Heynen said that in some cases, operators are still working through excess inventory they built up in late 2022. That’s a situation still affecting optical networking equipment.
“They had pulled forward orders in order to make sure they could meet subscriber demand or to have equipment ready as they continued their fiber expansion projects,” he told Fierce.
But stockpiled inventory isn’t the only issue in North America. Dell’Oro’s report found North American broadband providers in Q1 reduced their spending on new equipment by 25% YoY.
That’s due to stalled subscriber growth along with increasing labor costs. So, operators don’t need as many modems or gateways, Heynen said.
The Broadband Equity, Access and Deployment (BEAD) program is also impacting new equipment sales in North America. Some broadband providers are slowing their deployments now, he said, “as they wait on decisions by individual states for project allocations.”
Excess inventory and labor costs are also impacting operators in Europe, Middle East and Africa (EMEA), but “to a lesser extent.”
“In EMEA, overall spending has remained stable, largely due to some bigger operators, including BT OpenReach and Deutsche Telekom, being right in the middle of significant fiber overbuild projects,” Heynen said. “Both have signaled pretty aggressive homes passed goals for the year, which should keep OLT and ONT purchases in the region going.”
This is just temporary
Spending on DOCSIS gear isn’t looking great either, at least in the short-term. Dell’Oro found remote optical line terminals (OLTs) and virtual cable modem termination system (CMTS) licenses saw the “biggest declines” in Q1, as spending on DOCSIS infrastructure dipped 24% YoY.
However, the second half of 2024 will likely see “significant increases” in remote PHY, remote OLT and vCMTS purchases, Heynen noted.
“Especially as Charter really begins to move forward with its upgrade, as well as its ongoing rural fiber buildout,” he added.
The outlook for cable shipments in general isn’t as optimistic in the short term – “certainly not in 2024.”
“I do expect to see total units purchased resume growing in 2025, as DOCSIS 3.1+ and DOCSIS 4.0 get rolled out,” said Heynen.
“Plus, I am expecting to see FWA subscriber growth taper off and households returning to cable and/or fiber because of its higher speeds and more consistent performance," he added.
Wi-Fi’s the wave
It’s not all bad news on the broadband equipment front. Fixed wireless CPE spending jumped 29% in Q1, driven by growth in 5G sub-6 GHz unit shipments in North America.
Wi-Fi 6E and Wi-Fi 7 router shipments also continue to do well. For starters, Wi-Fi 6 unit prices have gone down to “more mass market levels,” Heynen said, so perhaps more customers are upgrading their routers.
As for Wi-Fi 7, he expects to see “a bigger ramp in units later this year, driven interestingly by China, where the 6 GHz isn’t even available.”
Operators in China will use dual-band Wi-Fi 7 for fiber-to-the-room deployments, Heynen explained, “rather than the full tri-band options much of the rest of the world will use.”
“Additionally, Comcast will be rolling out its XB10 DOCSIS 4.0 gateway with Wi-Fi 7, which will also boost unit shipments beginning near the end of this year,” he concluded.