BTR Interview: 9 broadband industry questions for Dell'Oro Group VP Jeff Heynen

Jeff Heynen joined Dell’Oro Group in 2018, and as vice-president is responsible for the technology market analyst firm's Broadband Access and Home Networking market research program, encompassing cable, fiber, copper, and emerging wireless broadband technologies and trends. Prior to joining Dell’Oro Group, Heynen spent over 12 years in broadband and video analysis, working with S&P Global Market Intelligence, Infonetics Research and IHS Markit as a research director focused on the broadband access and video segments.

Heynen’s research and analysis have been cited in leading trade and business publications including the Wall Street Journal, SDxCentral, Multi-Channel News, New York Times, Light Reading, Los Angeles Times, Investor’s Business Daily, FierceWireless, and Barron’s. He has also appeared as an invited speaker at numerous industry conferences, including Broadband World Forum, Broadband Bunch Podcast, CES, IPTV World Forum / TV Connect, FoE Japan, FTTH Conference, Witz-End Podcast, and the SCTE Cable-Tec Expo.

In a recent blog published by Dell'Oro, Heynen predicts that the broadband access and home networking market will remain resilient in 2023. "For mature markets, is rare to see consecutive years of double-digit revenue growth," he writes. "But that is indeed what has occurred, as 2021 revenue growth was 16% and 2022 growth over 2021 is currently expected to be around 12%, reaching just over $18 billion worldwide."

Heynen goes on forecast that "in 2023, albeit nowhere near the double-digit percentage growth we have seen over the last two years...at this point, it is safe to say that 5-7% revenue growth this year is [likely]. Though slower, the revenue growth this year shows the continued emphasis on expanding and improving broadband network capacity by operators, as well as state and national governments."

As indicated in the quotes excerpted here, Heynen's blog then explains three key broadband trends Dell'Oro is expecting to be a factor in 2023:

1) The great 'DSL displacement' will only accelerate - "Amidst all the hype around fiber network buildouts, one of the biggest drivers for these investments has gone unspoken, perhaps because it is just assumed—and that is that a large percentage of the revenue growth for PON equipment has come directly at the expense of spending on DSLAM ports and corresponding CPE," writes Heynen. "While this substitution is obvious, the amount of revenue shifted from DSL to PON equipment over the last two years is informative in helping to understand just how much PON equipment revenue growth is due to greenfield buildouts and how much is due to overbuilding and the literal retirement of copper and DSL assets."

2) Subsidies will offset the increasing cost of infrastructure builds, but subscriber growth will slow - "We do expect new subscriber growth to slow, resulting in flat to perhaps low single-digit ONT unit growth this year," writes Heynen. "Slowdowns in new housing starts and the purchase of existing homes will also be a drag on overall subscriber growth this year."

3) Consensus in cable architectures is achieved, but obstacles remain - Heynen notes, "With Charter and Comcast now both firmly committed to DAA architectures based on Virtual CMTS and Remote PHY platforms, the supplier industry can breathe a sigh of relief [...] But cable’s biggest challenge this year and beyond is one of managing consumer perception."

For BTR's interview with Heynen, we asked nine questions based on his blog, as stated below and highlighted in the segmented video timeline above. 

Question 1)    Before we look ahead, let’s look back. What’s your assessment of 2022 in the context of cable MSOs’ broadband initiatives?

"There's been a clear focus on fiber investments. When you talk specifically about [traditional] cable operators, they too are making their own investments in fiber infrastructure, albeit quietly. We're seeing a very steady rise in the purchase of remote OLT modules to be placed in existing optical node locations to start peeling off fiber subscribers in competitive areas and in markets where it makes sense to begin offering fiber services, particularly in new build scenarios. "

Question 2)    Looking to 2023, what are your expectations for what cable MSOs will do this year?

"They're going to start preparing their outside plants to support the DOCSIS 4.0 upgrade cycle. The DOCSIS 3.1 mid-split and high-split initiatives to allocate more upstream bandwidth to subscribers, that's certainly going to occupy most of their time this year. We also have smaller cable operators that are converting and cutting over to fiber, in addition to also doing mid-splits and high-splits where it makes sense."

Question 3)    What are the challenges you expect cable MSOs and BSPs to face as they attempt to reach these goals?

"I think for emerging fiber providers and those that are still in the midst of rolling out fiber, labor shortages are still going to be a challenge, as are supply chain issues."

Question 4)    In your blog, you mentioned that there’s a perception among at least some on Wall Street that fiber trumps HFC. Please talk a little about this, and what would you suggest operators do to change this perception?

"Just because a competitor comes in with a supposedly better technological option, doesn't necessarily mean that they're going to provide you with the same level of reliability that the cable operators have demonstrated for years, so that's something they're going to have to highlight [and] they're going to have to expand into home networking offerings, managed home Wi-Fi, really highlighting parental controls, cybersecurity -- all the things that are going to differentiate their service to you as a subscriber."

Question 5)    Can you address service provider Wi-Fi 6 dominance and 6E uptake vs. Wi-Fi 7 technology emergence?

"We're just now starting to see the 6E gateways, specifically from cable operators, hit the market, and being made available to select subscribers as an option. There's still aways to go. I mean, Wi-Fi 6 is now the dominant technology in terms of gateways and routers that are sold by service providers or leased by [them], as well as retail units purchased by consumers. 6E still has aways to go and a bit of time to ramp -- the challenge of course, is we just had CES a couple of weeks ago, and all the buzz was around Wi-Fi 7."

Question 6)    While we’re discussing fiber, what’s your forecast for what we’ll see in fiber-to-the-home technology this year?

"I think again this year is going to be a tale (at least in markets outside of China) of two technologies. GPON still is providing kind of the foundation for most FTTH deployments, but we're seeing an increasing deployment of XGS-PON for multi-gigabit services to subscribers, and that's the way things are going to look for the rest of the year. We'll probably get to the first half the year and GPON will still largely be the dominant CPE technology of choice. And then by the second half of the year, in some markets, particularly in North America, we'll likely see XGS-PON ONT's sort of take over."

Question 7)    We have a new Congress in place this year, with some members calling for increased oversight of broadband funding programs. Do you see any of these programs as being in jeopardy?

Pull quotes

"I'm not sure that the changes in the makeup of the House are going to have an impact on the programs that are already out there. By nature, government programs are going to take a long time anyway [...] The delays that we've seen historically in these massive subsidization programs like CAF, CAF2, even going back to BIP and BITOP in the broadband stimulus days of '08 and '09 -- some of those funding mechanisms haven't even wrapped up yet."

"We're already starting to see some arguments around the BEAD program and whether unlicensed fixed wireless should be included or not. There's a lot of heavy lobbying on both sides by the Fiber Broadband Association and WISPA -- logically. "

Question 8)    The goal of these programs is to make broadband access ubiquitous. Assuming they achieve this goal, what happens to the broadband market then? When might market participants have to concern themselves with this?

"At least in the North American market, we're still many years away from actually achieving that goal of truly bridging the digital divide. And that's not just a question of availability, it's also going to be a question of affordability."

Question 9)    In your blog, you say you see subscriber growth slowing, which will bring ONT growth down to flat or single-digit growth. Given that growth will slow overall for the broadband market, do you believe we’ll see reduced growth “across the board,” or will certain segments—like ONTs—dip more than others?

"There are a couple of answers to your question. The first is that new housing starts and movement, people from moving from one state to another, to different locations -- that typically drives additional broadband subscriptions. At least through 2022, we've still seen that movement, but the new housing starts, because of interest rate increases, have certainly slowed."

Read Jeff Heynen's January 2023 blog for Dell'Oro Group, 'Broadband Access & Home Networking Market—A Look into 2023'