ACG Research

ACG Research
We focus on the Why before the What

Thursday, August 30, 2012

Developing Economies Driving Broadband Market

The Broadband CPE and Infrastructure market was nearly 2.4B in Q2 2012, .4% increase sequentially and 6% Y-Y. The infrastructure market was nearly $1.4M (down 13% Y-Y) and the CPE market was approximately $1B (up 7% y-Y).

The BB market is driven significantly by the number of broadband lines: more than 16M new broadband lines were added in Q1 2012 for a total of 612 M lines worldwide. This growth is driven by the developing economies in Latin America, Eastern Europe, and South/East Asia. DSL continues to be the majority of the market, followed by Cable, FTTx (fiber to the node with copper to the premise) and FTTH, although fiber is growing faster.

The market is in the midst of several technology transitions. The growth of fiber to the node or to the premise is changing the landscape. The biggest issue is the return on investment/payback time on the investment. Most of the FTTH growth is occurring in markets where governments are subsidizing fiber. VDSL and vectoring are growing as companies are starting their first commercial deployments.

In CPE, the trend toward commoditization and high volumes is favoring consumer electronics manufacturers over companies that traditionally sold through service providers players, such as Motorola, Alcatel-Lucent and Technicolor (Cisco’s purchase of Linksys places it in both camps). The Infrastructure segment (CMTS, QAMs, DSLAMs, video processing equipment and video on-demand servers) was down 13% Y-Y. The annual decline was across all segments, although DSLAMs, QAMs and servers suffered the largest declines.

For more information about ACG Research's Broadband CPE contact

David Dines

Tuesday, August 28, 2012

Global Mobile Industry Continues to Invest, Profit, and Increase GDP

The mobile industry and its outlook is the envy of Wall Street and leads innovation in an era where wireline telecommunications generally has become a commodity business.

The global mobile industry continues to invest, profit, and increase worldwide GDP growth by 2 percent. Mobile operators worldwide have generated $1.5 trillion in revenues in the last 12 months, served 6.3 billion subscriptions and by 2015 will employ 10 million skilled workers.

The industry continues to invest heavily in LTE worldwide. Today, there are 90 commercially deployed LTE networks with 40 new LTE launches globally in Q2 2012. By year end 2012, there will be 150 commercially deployed LTE networks globally. The US, Japan, and South Korea today account for 9 of 10 LTE subscribers globally according to GSA. Within the next 12 months, these same markets will have completed deployment and enabled nationwide services. European LTE mobile operators are differentiating with speed-based tariffs. U.S. and Canadian mobile operators are focusing on enhanced services such as premium mobile video, RCS, and multi-device data plan pooling.

Looking forward to Q3 2012, areas to watch will be related to global development and mass usability/validation of voice, video, and rich content services over LTE networks. Apple’s release of iPhone 5 with much anticipated LTE support will create significant load and complexity on Verizon Wireless and other major operators with commercial LTE services. As the “iPhone effect” takes on LTE networks, vendors and operators will continue to focus on optimization, real-time network/data services management, and subscriber services awareness/differentiation.

Market Share ($)

  • Within five years, LTE networks globally will near one billion mobile subscribers.
  • The US, Japan, and South Korea today account for 9 of 10 LTE subscribers globally.
  • Europe is facing fierce competition in LTE, yielding some of the lowest data prices globally.
  • As the “iPhone effect” takes on LTE networks, mobile operators will continue to fine-tune performance, capacity, and network operations.
  • Q3 2012 will see mixed performance by vendors experiencing slow growth in 3G business as CapEx shifts to 4G.
For more information about ACGResearch’s mobility services click here or contact

Friday, August 24, 2012

Macroeconomic Conditions and Technology Transitions Affecting SP Video Market

The SP Video market declined 3.3% sequentially and 4.9% Y-Y.  A loss of pay TV subscribers in North America, Europe debt crisis, and a slow-down in China were big contributors to the decreases.  Product and technology transitions also played a role: slow-down in DTA rollouts; transition from SD to HD and from DOCSIS 2.0 to 3.0; and increasing demand for multi-screen capabilities.

OTT video and TV everywhere continues to grow.  OTT is now 58% of peak fixed access bandwidth utilization in North America and is expected to triple over the next five years. In mobile, data OTT is a bigger factor; currently it makes up 54% of total peak traffic and is expected to quadruple in 5 years according to Sandvine. 

The pay TV market continues to evolve. In North America, the overall pay TV market declined approximately 300k subs, with cable losing 600k and Telcos adding 300k.  Global IPTV subscribers continue to grow, based on strength in China, India and other emerging countries.  Consequently, cable STB revenues declined 10% Q-Q and over 10% Y-Y, while IPTV STBs increased 2.9%/7.5% (Q-Q/Y-Y).

CMTS market was up 2% sequentially but down 2% Y-Y. Most vendors are shipping their next generation of higher density equipment in volume.

Despite the down quarter, SP Video infrastructure spending should pick up in 2H 2012. Many SPs have spent less than half of their 2011 CapEx budget in 1H 2012, and they are projecting flat CapEx spend from 2011 to 2012.

For more information about ACG Research's video services, click here.

David Dines

Thursday, August 23, 2012

Motorola Mobility Licenses Comcast’s RDK

Motorola Mobility just announced that it is licensing the Reference Design Kit (RDK) from Comcast to enhance the development of applications for set top boxes (STBs) and other consumer devices, such as tablets, smart TVs, and game consoles.

The two major reasons given by Motorola: 1) to support Comcast’s key technical initiatives and 2) to provide a tool for Motorola to drive the shift to an all IP infrastructure. Since RDK is a middleware layer, Motorola will also reap the benefit of reducing development time and support effort by eliminating the need to write code for each individual device (device layer abstraction).

My first reaction was that this is a smart move at multiple levels. There are the obvious reasons: partnering with Comcast at a deep level, increasing efficiency/speed of the development team and the ability to support new architectures and devices with minimal effort. Furthermore, on a deeper level, this move signals a potential shift in attitude and suggests receptiveness to more open approaches. That being said, Motorola made it clear they see RDK as an expansion to their portfolio and is committed to having broad platform software solutions.

Given the uncertainty surrounding Home Division since the Google acquisition announcement, it is good to see that the company is moving ahead.

David Dines

Innovator’s Dilemma and Grief Counseling: The Common Denominator

Many entrenched incumbent players’ reactions to significant change in their markets bear a marked similarity to the five stages of grief pioneered by Elizabeth Kubler Ross.

I was researching and writing about the changes that OTT video and TVE everywhere are having on the video industry, particularly cable companies, and I noticed a pattern in how many entrenched incumbent players react to significant change in their markets and exhibit the five stages of grief pioneered by Elizabeth Kubler Ross. Applying this approach to companies and markets is imperfect, but the paradigm is instructive and intriguing. Also, not every company and industry react the same, but many companies that face the innovators’ dilemma of protect the cash cow business while trying to ride the innovation that threatens the old technology or business model. Definitely a conundrum!

First, incumbents deny that the new technology/business model will actually work, that it is an improvement over the existing technology or that customers will understand it or buy it. When Netflix streaming first started, the cable industry and many insiders downplayed it because the quality of experience was poor (many delays, freezes, and pixilation) and the selection was limited.  What they missed was the ease of search/discovery and a pricing model that was appealing to customers.

Try to Block/Smother the Innovation (Anger)
Once the innovation gets a few design wins or successful trials, incumbents will start to make moves to block. Again, some ISPs resorted to throttling Netflix to deal with the congestion on their network, and some would have liked to block it altogether but would have had a riot on their hands as well as run into net neutrality issues.   Recently, most ISPs have instituted caps and tier pricing as a way to try to capture some of the money they are losing on streaming services.

If you can’t stop the innovation, try to partner with a startup or offer a homegrown attempt at a new technology. These rarely work because the entrenched power and cultural inertia behind “business as usual” is typically much greater than proponents’ push for new and unproven technology. This is understandable: the risk is much less; the markets and customers are a known quantity; and the business model is proven. Some MSOs were rumored to have an interest in partnering with Netflix (Apple is also purportedly interested in deals with cable operators for STBs), but so far, these have been rumors or the efforts have gone nowhere. The failure of these talks is likely due to the inability to reach a satisfactory revenue share and account control agreement.

This stage is the realization that the new technology is going to become a dominant force, but senior management has not devised a cogent strategy for coping with or capitalizing on the change. They are still trying to understand business models, technology transitions, market needs, market segmentation and messaging.

And finally management comes to the realization that in order to survive, the innovation needs to be accepted and incorporated in the main offerings.

Based on casual observation, I would put most pay TV operators are in the depression stage regarding OTT and TVE. They are still figuring out business models and technology architectures. A few companies are in the acceptance stage and are proceeding with thoughtful approaches.

Obviously, this is a bit tongue in cheek, and not all innovations become true disruptors and not all companies or industries react this way. Understandably, companies need to determine the likelihood of a technology becoming a true disrupting force before committing major resources. It is a difficult process, and being late to the party or betting on the wrong horse are significant missteps that can become a long-term strategic liability for the company. 

For more information about ACG Research's video services, click here.

David Dines

Tuesday, August 21, 2012

Second Half of 2012 Poised for CapEx Spend

Although there is instability in global economies, demand fundamentals remain intact and network traffic continues to rapidly increase, adding more performance pressure on service providers’ networks. The outlook for the second half of the year is for SPs to spend, invest, and upgrade networks and launch new projects.

The European debt crisis as well as a reduction in service providers’ CapEx spend continues to affect the global router and switching markets. Vendors cited the turbulence in Greece, Spain, and Portugal and decreased demand from service providers as factors that contributed to their weak revenues in Q2. ACG Research still anticipates growth in the Worldwide Carrier Routing and Switching markets by the end of 2012. One factor that will affect growth is the surplus of CapEx, with some operators reporting having spent less than 50 percent of their CapEx thus far. “Growth in network traffic continues to rapidly expand and add more stress on SPs’ networks. Service providers have to make the investments and upgrades in their networks to meet capacity requirements; it’s that simple,” states Ray Mota, managing partner. “In the long term, this bodes well for vendors, and if SPs remain true to being flat or slightly up then the spend in the second half of the year should be positive.”

Q1 Total Worldwide Carrier Routing & Switching market posted revenue of $2.8B. The global market increased 2.7% q/q but decreased 5.1% y/y. Core Routing revenues were down 0.6% q/q and down 11.4% y/y. Edge Routing and Switching revenues were up 3.6% q/q but down 3.3% y/y.

Cisco posted a total worldwide decline of 2.1% q/q but an increase of 2.3 y/y. Cisco reports macroeconomic conditions contributed to the decrease in its Q2 revenues. Brocade posted a significant decrease, 23% q/q but a solid increase of 1.8% y/y. Juniper increased worldwide routing revenue 4.6% q/q but decreased 20.2% y/y; the company stated cautious purchasing prioritization by service providers, which is 64% of Juniper’s revenue, and some large enterprises as factors influencing their quarterly results. Alcatel-Lucent, which continues to institute more cost cutting measures, staff reductions and management restructuring, increased 6.6% q/q but decreased 2.2% y/y. 

Market Share ($)
 Q-Q MS Point +/-

  • Service providers and enterprises are looking at networks that are flatter, that reduce complexity and OpEx, while delivering greater performance and scale.
  • Core network traffic is growing in excess of 50% per year, and new services such as content-rich digital media, cloud and mobile broadband place new requirements on the network for optimal distribution and delivery. Core routers, consequently, must scale rapidly and meet demanding network performance objectives with the lowest possible total cost of ownership.
  • A key driver contributing to service provider router and switching market growth is the increasing demand for mobile broadband and providers investing in wireless networks to meet that demand.

Click here for more information about ACG Research's router and switching service.

Thursday, August 16, 2012

Growth Highlights Q2 Optical Market

The total optical market was up 25 quarter over quarter and there indicators that some operators have held back their CapEx and may spend in the next two quarters.  

In 2008 Alcatel-Lucent had 21% market share and was the number 1 vendor in the optical networking market. Today, Huawei and ZTE combined have 40% of the entire optical networking market share. For the first time, Alcatel-Lucent has dropped to number 3 in overall market share (12.6%). ZTE rose to the number 2 position. 

Spending in the content provider and the enterprise spaces is floating a significant portion of the market, especially for 100G vendors and for smaller vendors that have specific equipment for content delivery or feature sets for enterprises’ low latency networks.

We are cautious about the market for the remainder of 2012 and 2013. Pricing has taken a serious toll on revenues and although discussions about new architectures to improve margin are still in the discussion phase, we are not entirely sure how much savings will occur in the optical space.

For more information about Eve Griliches, click here. For more information about ACG Research's optical service click here or contact 

Tuesday, August 14, 2012

VDI/IDV Differentiation: MokaFive

Solving the Online and Offline Problems of Disconnected Workers

BYOD/C is a hot trend that is being driven by Apple and the iPad as well as by CEOs and executives that want a seamless personal and enterprise experience on all devices. However, these experiences come with conditions; they must be supported by policies that address security issues and enterprise IT to identify unsupported devices.

Traditionally, IT controlled the devices within their enterprise environment. Now, employees are demanding and expecting connectivity to their devices. This reality has changed the role of IT and forced IT departments to consider how they address security for devices that they do not control. How can IT secure what needs to be secured while providing device independence for the users?

A relative new player in the market is MokaFive that offers a container secured by more than 90 policies that can be customized by image for each customer’s business; supports VDI on and offline productivity as well as provides new and disconnected workers from M&A for day-zero integration, contractor workers up and productive in 30 minutes and remote worker productivity.Click here to read more.

For more information about ACG Research's cloud service, click here or contact

Lauren Robinette

Thursday, August 2, 2012

Take Five with Michael Kennedy

Michael Kennedy, principal analyst for ACG Research, worked with the Metro Ethernet Forum when the group was founded. Carrier Ethernet News recently interviewed Michael to get his thoughts on how Software Defined Network technology will make its way into Carrier Ethernet networks and when.  

For more on SDN read Michael's FierceTelecom article "Building a Case for Software Defined Networks for Metro Networks."

Michael Kennedy

Wednesday, August 1, 2012

Core or Edge, Which Is It?

What defines a core router?  An edge router?  The trend has been to make the edge router "smart" and the core router "dumb and fast."  Does this trend still hold true today?  How are service providers using routers? Ray Mota of ACG Research and Sanjeev Mervana of Cisco Systems, discuss what defines core routers from edge routers, the architecture requirements of core, drivers for these requirements, forwarding and control planes, service substantiation and what makes both Cisco's and Juniper's products true core routers.

For additional insight, read "Alcatel-Lucent's New Core Router: Contender or Pretender?"

Click here for more information about ACG Research's router and switching service.