It is no secret that cable operators face a growing competitive threat from fiber ISPs and fixed wireless providers in markets that previously faced only DSL competition. Of course, these cable operators have many options to grow their existing HFC plants to increase bandwidth and stay ahead of competitors from a billboard speed and network reliability perspective.
It is also no secret that cable operators are building greenfield networks using fiber and using remote OLT platforms in edge projects, which allows them to address new service areas from existing or new node locations. Charter Communications is a prime example of an operator using remote OLTs to expand its fiber footprint to support fiber delivery in rural and underserved markets. These and other global deployments have led to steady growth in the remote OLT platform market, with global revenues expected to grow from $112 million in 2023 to $164 million in 2024. In addition, cable operators in North America are deploying more traditional OLT platforms at their headend or hub sites to deliver 10 Gbps EPON using DPoE (DOCSIS Provisioning over EPON) or XGS-PON. We estimate that North American cable operators have purchased approximately 30-35K OLT ports per year to support their own FTTH buildouts. These numbers are relatively small compared to deployments by telcos, utilities, and municipalities. However, they are growing as cable operators balance existing HFC upgrade strategies with out-of-market expansion using fiber.
Dell'Oro Group says: In their growing conversations with cable operators large and small in North America, they see current and potential competitive threats from fiber providers taking advantage of federal and state subsidies to overbuild their own HFC and fiber networks, which will only accelerate. In these once-dominant markets, cable operators now face increasing competition from multiple fiber providers that offer similar speeds and service levels using GPON or XGS-PON.
More and more cable operators are either planning to upgrade or are in the process of upgrading the fiber portion of their networks to 25GS-PON so that they can offer true 10Gbps service to their businesses and, eventually, to residential customers. In essence, their strategy is to use 25GS-PON as a deterrent to prevent other market entrants from encroaching on their service areas. The idea is that with the ability to offer symmetrical 10Gbps service across their fiber footprint, competitors won't have as much incentive to overbuild because they will be at a speed disadvantage not only initially but potentially for many years. If the opportunity to acquire subscribers is limited, thus extending the time to revenue, then operators won't have as much economic incentive to overbuild.
One company in the industry recently announced that 200,000 new and existing homes will be installed with XGS-PON and 25GS-PON. Dell'Oro expects similar announcements from other cable operators in North America this year as they look to balance fiber expansion projects with upgrading their existing DOCSIS footprint.
In many markets, cable operators have been the dominant video providers, either through traditional QAM networks or through IP video. Having a video franchise for decades often discourages new market entrants. However, this advantage has eroded over time as subscribers have moved to streaming services or reduced spending by purchasing smaller local channel packages. With broadband now the primary service for all cable operators, protecting their market by deploying 25GS-PON, coupled with the more flexible service tiers they offer customers, can provide similar market advantages they have enjoyed in the past with broadcast video.
The market advantage extends to business customers, too. Historically, cable operators could only offer business-grade DOCSIS service to these customers and add fees for higher SLAs, static IP addresses, and other features. Over the past decade, cable operators have done a very good job of stealing small and medium-sized business customers from telcos, which had more inflexible pricing plans or relied on T1 or business-grade DSL lines. But more recently, telcos and other fiber ISPs have made an effort to win back these business customers by touting fiber's higher reliability and technological advantages. As a result, the deployment of fiber and 25GS-PON gives cable operators a clear advantage because they can offer symmetrical 10Gbps service to business-class customers.