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Digital Home Residential Gateway Forecast

The number of broadband subscribers around the world continues to surge, fueling the broadband customer premise equipment (CPE) market, which grew 15 percent to $5.6 billion in 2006, according to Infonetics Research.

The overall rise in broadband CPE manufacturer revenue was driven in large part by surging residential gateway sales, which jumped 39 percent between the first and fourth quarters of 2006.

Mutliservice gateways are especially popular: ADSL IAD sales have nearly doubled or more every year since 2002, and EMTA sales quadrupled in 2005 and almost doubled in 2006.

However, intense competition is expected to drive down the price per unit significantly for many broadband CPE categories, particularly ADSL IADs and broadband gateways, which will keep annual revenue growth in the overall market to the low single digits through 2010.

Worldwide revenue for voice CPE, which includes DSL IADs, EMTAs, VTAs, digital home gateways, and broadband routers with integrated VTA capability, jumped 115 percent in 2006, and is now 30 percent of the overall broadband CPE market.

"Right now service providers are competing with each other for voice dollars, which is driving their purchase of EMTAs and IADs. Carriers are shifting their focus to video, though, so phase two of the triple play battle will spur big increases in gateway sales, especially VDSL broadband gateways, revenue for which is expected to quadruple in 2007, and digital home gateways, revenue for which will grow six-fold between now and 2010," said Infonetics Research analyst Jeff Heynen.

Market Highlights:

- Worldwide broadband CPE sales totaled $1.5 billion in 4Q06, up 2 percent from the previous quarter.

- Worldwide residential gateway revenue reached $2.9 billion in 2006, driven by strong multiservice gateway sales.

- Despite plunging revenue per unit for most broadband CPE products, aggressive service provider rollouts of DSL, cable, and fiber networks will keep growth in the overall market at a steady incline through 2010.

- Linksys is the worldwide broadband CPE revenue leader in 2006; Thomson is 2nd, Motorola 3rd.

- 39 percent of worldwide broadband CPE revenue comes from North America, 35 percent from EMEA, 20 percent from Asia Pacific, and 6 percent from CALA in 2006.

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