Yankee Group forecasts modem shipments to decrease to 17 million in 2009 from 36 million in 2005, while residential gateway shipments will increase to 62 million in 2009 from 39 million in 2005. Most consumers will replace multiple modems with one residential gateway, resulting in a significant decrease in modem shipments and a moderate increase in residential gateway shipments. The same holds true for SMBs because very few routers will replace multiple modems. This causes slow growth for overall CPE shipments.
In addition to the shift in market demand, manufacturing costs for CPE will continue to decline, which affects revenue growth. The decreasing costs of modems coupled with increasingly weak demand will create little revenue opportunity. Although the residential gateway market is more robust, most homes won�t need more than one residential gateway and most SMBs will need very few routers, which hinders revenue growth.