Broadband equipment sales will decline again in 2024, says Dell'Oro

Dell‘Oro is predicting continued weak broadband access equipment sales in the first half of 2024, but with good news on the horizon. Things are projected to pick up later in the year as cable operators upgrading their networks and ongoing subsidy programs drive growth through 2025 and onward.

According to the Dell’Oro report, broadband access equipment sales will decline by 1% from 2023. Sales reached a record $19 billion in revenue in 2022, largely fueled by PON spending, but slowed in 2023 during a period of widespread inventory digestion. Jeff Heynen, VP at Dell'Oro, said he expects revenue was down about 8% last year from 2022, although he noted "we don't have the benefit of all the Q4 numbers at this point."

Heynen said 2024 will be a "tale of two halves of the year," as the industry still has some inventory stuff to sort out. Operators will continue to work through excess materials during the first half, and a normal purchase cycle should pick up in the second half of the year.

Cable fiber upgrades, DAA and DOCSIS drive forward

A comforting prospect for the broadband equipment market is that cable providers are still eyeing up big goals like expanding their fiber networks and bandwidth capacity.

As they upgrade to fiber, operators are purchasing PON equipment and combo GPON/XGS-PON ports on the optical line terminals (OLTs) they're buying for "flexibility in which technology and service tiers they offer,” Heynen said. He predicted PON equipment revenue will grow from $10.8 billion in 2023 to $11.8 billion in 2028, driven largely by XGS-PON deployments in North America, EMEA and CALA; as well as early 50 Gbps deployments in China.

Cable operators are also adopting distributed access architectures (DAA), the market for which is forecasted to reach $1.3 billion by 2028 as operators continue their DOCSIS 4.0 and early fiber deployments. That equipment includes Virtual CCAP, Remote PHY Devices, Remote MACPHY Devices and Remote OLTs.

Charter recently pushed back its DOCSIS 4.0 timeline, citing challenges with the “certification of the DAA equipment taking a little bit longer” than it had hoped. Asked whether that could affect other operators' 4.0 progress, Heynen said that Charter’s delay “likely means it might be more difficult for smaller operators to get their hands on DOCSIS 4.0-capable DAA equipment.”

He told Fierce that it was expected that Charter would defer its buildout, as its initial timelines were “optimistic.” Even so, he still anticipates both 2024 and 2025 to see spending increases on DOCSIS infrastructure with the addition of Charter, Cox, Rogers/Shaw, as well as ongoing deployments from Comcast.

Meanwhile, fiber and fixed wireless access (FWA) shares of the market are increasing at cable’s expense, and Heynen said he doesn't expect that to change until 2026, when he predicts FWA subscriber growth will "begin to flatten.” In the U.S., he estimated that FWA technology now accounts for just over 6% of total broadband subscribers, with FTTH at around 18.5% and cable at 64%. 

Revenue for fixed wireless customer premise equipment is projected to reach $2.5 billion by 2028.

Subsidies propel broadband equipment market to 2025 and beyond

Looking ahead, the broadband equipment market will continue to be driven by projects funded through programs like Rural Digital Opportunity Fund (RDOF), the Capital Projects Fund (CPF) and the Tribal Broadband Connectivity Fund.

Those projects involve mainly PON equipment, including OLTs and optical network terminals (ONTs), as well as the Optical Distribution Network (ODN) elements needed to trench and connect fiber to homes and businesses, Heynen said. However, fixed wireless RAN and customer premises equipment will also get a boost, as states decide to use FWA in areas where FTTH “just is too expensive to deploy.”

Equipment vendors haven’t even started to see action from the $42.5 billion Broadband Equity, Access and Deployment (BEAD) program yet. But many states will begin choosing subgrantees for their BEAD money this year. Heyen estimated the program will start to impact equipment vendors in 2025 and 2026.

In some cases, service providers building networks through federal subsidies will have to make sure the equipment vendors they select are on the Build America, Buy America (BABA) list.

According to Heynen, BABA requirements are already starting to impact the market for PON equipment, as more vendors interested in being part of projects have announced domestic manufacturing relationships. For example, Nokia last year announced it would team with longtime manufacturing partner Sanmina to bring production of fiber network electronics to the U.S. state of Wisconsin. Both CommScope and Corning announced expanded manufacturing plans, as well.

Heynen concluded, “I believe those requirements will result in higher ASPs [average selling prices] for equipment, particularly OLTs and ONTs.”