Broadband CPE: No More Just Modems

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The broadband consumer premises equipment (CPE) market is at the threshold of a major change. CPEs are no more just bland modems; they have become gateways-technically and literally. Unlike modems, which only facilitate Internet access, these gateways can do much more. These gateways can help subscribers make VoIP calls, provide wireless Internet access besides networking their TV and other electronics. So for consumers, CPEs are now a gateway to a networked world.

Globally, shipment of standalone DSL and modems has been showing a decline or growing at a much slower pace than residential gateways. According to a report by In-Stat, shipments for broadband routers were up by 11%, boosted by shipments of routers with VoIP capability. Standalone DSL modem shipments declined in 2005 as DSL service providers move to gateway premise equipment in selected markets.

The Changing Trends
“The convergence of voice, data, and video services is driving CPE growth, particularly voice-enabled CPE, residential gateways and, in the long term, IP set top boxes,” says Jeff Heynen, directing analyst for Broadband and IPTV at Infonetics Research. Service convergence is also driving the consolidation of disparate capabilities into highly intelligent, multifunctional CPE designed to simplify the subscriber experience.

The growing maturity of convergence services and the consequent rise in demand for triple play or voice, data and video services is surely the biggest of this change. With consumers across the world increasingly showing interest in networking their homes and looking at integrating their Internet, TV and other electronics, there is a definite move from two-box solutions, such as modem/router combinations, to one-box residential gateway deployments for home networks. This essentially means convergence of Internet access and consumer electronics. In the developed markets such as US and Europe, growing consumer adoption of wireless and VoIP is driving the transition from modems to gateways. As such, the new broadband CPE features include VoIP support, along with wireless and video.

"As broadband becomes available for all, simple DSL and Cable CPE are becoming commodities" -Paresh Shah GM, Sales Engineering, UTStarcom

		"With service providers getting into broadband, the Indian broadband CPE market would soon touch 2 mn" -G Rao, director, VoIP, D-Link India

The trend towards one-box residential gateway is not just limited to the DSL broadband access. Even the cable broadband CPE market is moving in that direction as consumers begin adopting VoIP services being offered by cable modem service providers. E-MTA (embedded multimedia terminal adapter), a voice-enabled cable modem is finding favour among US cable broadband subscribers wanting to use VoIP. According to In-Stat, in 3Q05, E-MTAs comprised over 30% of cable modem shipments.

According to Ron Levin, marketing manager, Home Networking, ECI Telecom, the basic requirements of next generation CPEs on the hardware side include xDSL WAN, one Ethernet LAN port, most likely going up to four-port Ethernet on high-end CPEs, one USB LAN port for legacy connections and Wi-Fi WLAN support on high end CPEs. The USB LAN port might be removed on future CPEs. On the software side, Levin says, CPEs would have advanced quality of service (QoS) capabilities enabling the simultaneous operation of high-speed data, voice and video, all over an IP network, comprehensive remote management capabilities.

In order to overcome the expected operating expenses that come hand in hand with mass deployment of advanced triple-play services, broadband CPEs would also have strong security, starting with stateful packet inspection (SPI), firewall including denial of service (DoS) detection and prevention, besides advanced features such as access and parental control as well as anti-virus/anti-spam capabilities.

From a CPE vendor perspective, it's the commoditization of CPEs that is forcing them to add more functionalities to CPEs. Broadband service providers are also equally important as they strive to get more out of their subscribers by offering services such as VoIP or networking their homes. In fact, the increasing pressure on telecom carriers to offer a bundle of voice, data and video services is an important factor forcing CPE vendors to offer new features.

"Multifunctional CPEs with plug-n-play capabilities are expected to become more user friendly requiring little installation expertise"
-Michael Kuhner, MD, Siemens Public Communication Networks, India

Eye on Future
Paresh Shah, GM Sales Engineering, UTStarcom, observes that as broadband becomes available for all, simple DSL and Cable CPE are becoming commodities. As such, Shah says, vendors are striving to add more and more functionalities or consolidating various CPEs into one all in one box like a resident gateway, which has a set top box, Ethernet Switch and VoIP functionalities. In other words, these CPEs perfectly fit into service providers foray into voice, data and video triple play services. The new broadband CPEs are also becoming user-friendly. Emphasizing the omnipresence of converged voice, broadband data and video services delivered through an integrated CPE, Michael Kuhner, managing director, Siemens Public Communication Networks, India, says that multifunctional CPEs with plug-n-play capabilities are expected to become more user friendly requiring little installation expertise.

The growing demand for next generation broadband CPEs is surely good news for CPE vendors. “Though some broadband CPE will become commoditized, the integration of VoIP, security, home networking, and multimedia capabilities will generate new revenue for CPE product vendors,” says Richard Webb, directing analyst at Infonetics Research. “In addition, new flavors of DSL and faster 802.11 wireless speeds will continue to drive CPE replacement purchasing,” he adds.

The Indian broadband CPE market has not been left untouched by these developments. Heavily dominated by modems today, it is also beginning to transition towards gateways. Even though it is still early days, it's only a matter of time before the Indian CPE market follows the shift that's growing significantly in the more developed broadband markets. In India, growing awareness of wireless is largely driving the current transition from modems to gateways. Broadband service providers such as BSNL and Airtel are of course playing an important role. Drop in gateway prices have been a big driver.

According to KVSSS Gunneswara Rao, director, VoIP, D-Link India, as all service providers are getting into broadband, the Indian broadband CPE market would soon touch 2 mn units per year. A significant portion of these would sure be multi-functionality CPEs given the fact that some of the broadband service providers are offering wireless broadband CPE for as little as Rs 1800. Observing that broadband service providers in India are bullish on gateway products, Adil Doctor, India sales manager, Linksys, says that gateway products that would offer triple play services would be the order of the day. Doctor adds that Wi-Fi gateways would soon be the main gateways at home.

According to data compiled by the Telecom Regulatory Authority of India (TRAI), the number of broadband subscribers as reported by ISPs was 6.1 lakh at the end September 30, 2005, as compared to 3.9 lakh on June 30, 2005, thus registering a growth of 54% over the previous quarter.

“The broadband CPE market in the current year must have been about 1.2 to 1.5 mn. In the year 2006-7 the market is expected to be over 5 m. With consumers in India becoming more techno savvy and the products being available at affordable prices, the growth would be multifold,”says Nita Mehta of Telenet Systems.

However, given the disparate nature of consumer demand it is unlikely that all-in-one CPEs would completely dominate the market so soon. As consumers continue to connect to different service providers for different services, gateways would co-exist with modems. “There are boxes that give all three in one box, or any of the two services in one box or all three separately if the service provider chooses to promote that option to his subscribers,” says Kannan Krishnan, sales manager, Motorola. He points out that it is important to understand that broadband CPE devices connect to specific but different devices for different services. It could be the TV for video, PC for data and telephone for voice services. A single service provider or different ones could provide all the three services.

Ravi Shekhar Pandey
vadmail@cybermedia.co.in