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Signs of Saturation in Broadband CPE Market

The worldwide broadband Customer Premise Equipment (CPE) market totaled $1.5 billion in 1Q07 -- up only 2 percent from the previous quarter, as broadband connectivity grows while vendor sales margins shrink in some regions, according to Infonetics Research.

The market continues to get a push from service providers seeking to entice customers to subscribe to a "bundle" of voice, data, and video services, and their demand for intelligent CPE to prioritize traffic coming into and out of the home.

"We continue to see a shift away from traditional modems and, to a certain extent, broadband gateways, to IADs, EMTAs, and digital home gateways, all of which allow service providers and cable MSOs to offer bundled services today, but also provide the necessary traffic prioritization and security capabilities to easily layer on home automation, security, and home media services." said Infonetics Research analyst Jeff Heynen.

"The increase in these more expensive devices will balance out the decline in baseline modems and will keep worldwide broadband CPE revenue stable through at least 2010, throughout our forecast period."

I believe that the flat revenue growth for CPE could be an indication that the saturation of the global market for basic consumer broadband access devices may continue -- at least until lower cost service delivery platforms are introduced that would enable carriers in emerging markets to offer still lower-priced broadband -- perhaps placing further pressure on vendor profit margins.

Infonetics market study highlights include:

- Worldwide digital home gateway unit shipments almost tripled in the first quarter of 2007.

- Worldwide revenue for voice CPE, which includes DSL IADs, EMTAs, VTAs, digital home gateways, and broadband routers with integrated VTA capability, is down 13 percent in 1Q07 from the previous quarter, but is up 26 percent from a year ago.

- Thomson leads the overall broadband CPE market with 10 percent revenue share, followed by Linksys, Arris, and Motorola.

- Actiontec leads the digital home gateway market for revenue share, followed by Thomson and 2Wire.

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