The First Quarter Shines on Cable Modems

Carl Weinschenk

Perhaps the most surprising aspect of the latest research released by Leichtman Research Group on cable modems and DSL is that there still are 2.2 million subscribers to be had in the United States.

That's a bit disingenuous, of course, because the figures almost certainly count people who switched between the two platforms. The real news in this SF Gate report on the Leichtman numbers is that the first quarter of 2008 was the first in three-and-a-half years in which cable operators gained more subscribers than phone companies. During the quarter, the 19 largest cable operators added 1.19 customers while the telcos added 1.01 million, Leichtman said.

Results from Ovum, though not precisely on the same topic, tend to confirm the trend. The firm said that shipments of digital subscriber line access multiplexers (DSLAMs) -- the central office equipment that controls DSL connections to premises -- were down 16 percent from the previous quarter and 10 percent compared to the year-ago quarter.

Conversely, shipments of cable modem termination systems (CMTSes), the comparable gear in a cable headend, rose 28 percent from the previous quarter and 54 percent from the year before. The three leading CMTS vendors are Cisco (55 percent), Arris (32 percent) and Motorola (10 percent). The leading DSLAM providers are Alcatel-Lucent (35 percent), Huawei (23 percent), ZTE (13 percent) and Nokia-Siemens and Ericsson (both at 5 percent).

This is a refresher course on how cable modems and DSL work. The biggest difference is that cable modems users share the same cable and thus draw from the same reservoir of bandwidth. This means that, for instance, a bandwidth hog in one house can impact service received by the household next door. DSL is much less vulnerable to this. The piece, though it has valuable information, seems a bit slanted in favor of DSL.

Both industries are aggressive. The telcos, of course, are deploying fiber and are in the process of deemphasizing DSL. The cable industry is looking to reinforce its modem momentum with the introduction of DOCSIS 3.0, the latest version of its cable modem standards that extends overall bandwidth and increases upstream capacity. Earlier this month, CableLabs -- the industry consortium behind the specs -- announced that modems from Amit, Arris, SMC, Cisco and two from Motorola had been certified for the standard. Additionally, two CMTSes from Casa Systems had achieved "full" qualification for the standard.

The battle between the two industries continues, to the benefit of customers. At this point, the real focus is more on pricing and marketing than on technology. Quarterly subscribers counts are an interesting and accessible metric. They are not, in isolation, a good barometer of how each industry is doing, however. Other valuable information includes margins, the length of time the respective industries hold onto customers and -- on a less measurable level -- the role each is playing in various bundles offered by the companies.

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