Service provider strategies for deploying residential gateways are being driven by the need to support multiscreen video distribution throughout the home, as well as the ability to roll out new applications like home automation that can give revenue streams a boost. Eventually, gateways will have modem, set-top and home networking functions rolled into one; however, a lack of interoperability needs to be solved first.
According to Infonetics Research, residential gateway revenue (typically driven by operator-supplied modems) has increased 7 percent in the past year, as operators more heavily rely on them to deliver managed services. As a result, operator-provided residential gateways continue to cannibalize retail routers: broadband router revenue and shipments declined in the first half of 2014.
"Like broadband CPE, home networking devices continue to grow as fixed broadband subscribers increase around the globe,” Jeff Heynen, principal analyst for broadband access and pay TV at Infonetics Research. “The types of services being delivered over data networks are growing as well, with the most important being multiscreen video.”
The survey found that multiscreen video is growing quickly with 55 percent of operators offering it today, via hybrid IPTV service, TV Everywhere or similar initiatives. The arena has seen exponential growth: it compares with just 6 percent at the same time in 2013. Four-fifths of survey respondents told Infonetics that they plan to offer it next year. As a result, all-in-one devices are increasingly in demand.
"Residential gateways have quickly become the new gatekeeper for high-margin traffic," Heynen said. "Service providers are increasingly relying on residential gateways instead of basic modems to deliver voice, data, and video services because they can be remotely managed, have an open application layer to add on new features, and offer higher throughput, greater security features and the ability to monitor revenue-generating traffic within the home network."
The Evolution of the STB
In addition to multiscreen Internet video, next-generation TV-centric functions are in demand too, driving uptake for IP set-top boxes (STBs), which combine broadband access and linear TV into a single unit.
"For set-top box vendors, the challenge is finding the right balance between adding new technologies and features while reducing costs to meet service providers' demands and remain competitive," said Heynan. For instance, home networking options for one are driving increased investment in next-generation CPE on the part of operators.
"Operators in North America and Western Europe are deploying higher-end gateways and set-top boxes with integrated wireless and wired technologies to distribute video to multiple devices in the home, driving a secondary market of MoCA set tops and HomePlug adapters for connecting TVs, Blu-ray players, game consoles and a growing list of peripherals to home networks," Heynan said.
When it comes to wireless, 802.11n dual-mode and 2x2 MIMO are currently the most widely-used Wi-Fi technologies on IP STBs, though 802.11ac will show the biggest gains going forward, the research has revealed. In fact, the standard is expected to grow from installations on 6% of boxes today to a whopping 67 percent next year. A majority (85 percent) of operators moving to it in 2015.
Even though there is a lack of available products, the survey also revealed optimism for G.hn as an in-home networking technology. Though no respondents currently use G.hn, 45 percent expect to do so in 2015.
The networking options pave the way for new strategies that offer new revenue streams. In fact, remote programming via tablet or mobile device heads the list of applications for IP STBs in the Infonetics report, rated highly by 67 percent of respondents, which up 6 percentage points from last year's survey.
TR-069 capability for remote device/service-level management was a close second.
And, home security and home automation also represent a significant opportunity for pay-TV operators looking to grow in saturating market conditions. In fact, according to a report from ABI Research, nearly 30 percent of North American households are expected to have a managed smart home automation system installed by 2019, via either a residential gateway or IP STB with gateway functionalities.
Fragmentation Hampers Unified Gateway Market
Increasingly, some IP STBs also have home gateway capabilities. And a Holy Grail for the industry is the vision of broadband modems, Wi-Fi routers and STBs being be collapsed into all-in-one, cost-effective devices within the home.
However, ABI Research noted that selecting technologies and overcoming standards fragmentation continues to represent a sizable investment for operators. Tighter integration between set-top boxes and broadband gateways will not occur until some of these issues are addressed. For now, vendors tend to build standard solutions instead of custom ones for each service provider.
"Interoperability is a key challenge facing not only the service providers but any company working in the IoT [Internet of Things] space," said ABI practice director Sam Rosen. “Market-wide interoperability will come from open software frameworks and protocols. This will help devices and services communicate with each other instead of individual silos – truly making it the Internet of Everything."
A significant number of initiatives and alliances have formed to solve this problem but the market is still quite diverse. iControl's OpenHome Partner Program helps third-party device manufacturers ensure interoperability with service provider IoT implementation, while the AllSeen Alliance (AllJoyn) has secured some early support from LG (connected TVs). Other platforms such as Imagination's FlowCloud, openHAB, Technicolor's Qeo (also working with AllSeen), Nagra's JoinIn and Prodea Systems' ROS are all taking various approaches to the same goal – making services, applications, and devices work together.
ABI senior analyst Michael Inouye added: "Roles for the wireless networking technologies are still evolving along with the guidelines around interoperability. Looking further into the future, the next evolutionary stage will come from the integration of services, applications, and technologies – this includes virtual assistants, indoor positioning and connected CE. The market still has a Wild West feel, but it's moving quickly and companies need to work together to ensure the market lives up to its potential."
It’s worth noting that not all markets are demanding gateway functionality, added Infonetics’ Heynen. "In China and India, low-cost IP STBs with fewer features, lower functionality, and more localized content are enough to meet customers' needs, but in North America and Western Europe, there's a growing appetite for more advanced STBs, like video gateways, which require a higher bill-of-materials cost and the addition of more advanced features."
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