Broadband CPE: No More Just Modems

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