Abstract

The problems that MSOs experienced when they first started to roll out VoIP service three or four years ago have now been put behind them. In North America, low prices and package services have enabled Cablevision and Time Warner to rapidly build up their VoIP subscriber base and raise their ARPU. With the price of VoIP equipment continuing to fall, MSOs that introduce VoIP service can expect to see a significant increase in operating revenue. As a result, the number of MSOs that have launched VoIP service is rising steadily.

With MSOs all over the world rolling out VoIP service, demand for E-MTA that integrate voice service capabilities has risen dramatically. By the fourth quarter of 2004, E-MTA equipment already accounted for 30.4% of global cable modem shipment volume. In 2005, MSOs in North America, Japan, Korea and Western Europe are planning to continue their rollout of VoIP to serve not only new subscribers but also tens of millions of existing cable TV and broadband subscribers. It is therefore anticipated that, by the end of 2005, E-MTA products will account for approximately 50% of global cable modem shipment volume, replacing two-way data modems as the mainstream. A new product lifecycle is thus beginning in the cable modem industry.

In the fourth quarter of 2004, the rapid increase in demand for E-MTA products led to a shortage of supply of cable modem ICs. With demand outstripping supply, chip suppliers have been able to raise the price of their cable modem chips; this price increase will have a negative impact on the production costs and shipment volume of Taiwan's cable modem makers.

High demand for E-MTA products will ensure that the impressive shipment volume performance that Taiwan's cable modem manufacturers achieved in the third and fourth quarters of 2004 will continue into 2005. With E-MTA gradually establishing itself as the mainstream cable modem, the Taiwanese cable modem industry's ASP will continue to grow slightly in 2005. Comcast has announced that it will be providing a 16-hour back-up power supply for its VoIP subscribers. As Comcast plays a bellwether role among cable operators, other MSOs can be expected to follow suit by changing their E-MTA specifications to require that two batteries be incorporated into the device, providing a further boost to E-MTA ASP.

Appendix

Research Scope

This report focuses on cable modems, which can be divided by function into three broad categories - two-way data cable modems, wireless cable modems and VoIP cable modems. The geographical scope of the report is limited to the production of cable modems by Taiwanese makers in Taiwan and in other parts of Asia.

Definitions

Business Types

OEM

The OEM business model entails carrying out product manufacturing or assembly according to specifications supplied by the customer. The OEM business model emphasizes production efficiency; thus, in order to lower costs, customers outsource manufacturing to OEM providers. This cooperation forms a division of labor among design, manufacturing, and sales.

OEM production for WAN includes shipments in both PCB (Printed Circuit Board) form and bundled with desktop and notebook PCs. Manufacturing undertaken for leading international vendors is also included.

ODM

The ODM business model entails undertaking product design and manufacturing, but not direct retail sales or brand promotion. ODM providers either collaborate with customers on product specifications or independently design products according to customer specifications; the ODM provider then receives manufacturing orders upon customer approval. The ODM model links the sales capabilities of the ODM customer and the design and manufacturing capabilities of the ODM provider, developing a cooperative division of labor throughout the product's value chain.

Retail Channel

Business from retail channels includes orders from brand-name retail channel players, such as Linksys or Netgear, with whom Taiwanese makers cooperate on design. Business from retail channels also includes private label shipments to end-market retailers.

Products

Cable Modem

Cable modems are devices that operate over CATV RG-58 coaxial cables. By hooking up to PC and CATV systems, cable modems operate with a shared bandwidth, ring-type network architecture. TCable modem performance can vary due to the utilization of the shared cable line in the surrounding neighborhood; however, 500 Kbps is the typical data rate. 

CMTS

A CMTS (Cable Modem Termination System) is a cable modem head end device that communicates through television channels with cable modems located in subscriber homes, creating a virtual LAN (Local Area Network) connection. The modem transfers IP packets from the Internet into MPEG frames and transmits them to subscriber cable modems via an RF (Radio Frequency) signal. The reverse process is then performed for signals issued by the subscriber modem.

MTA

An MTA (Multimedia Terminal Adapter) is a cable modem integrated with voice function.  This device follows CableLabs' PacketCable standard and utilizes VoIP technology.

E-MTA

Embedded MTA (Multimedia Terminal Adapter) in a cable modem integrated with voice function.  This device also follows CableLabs' PacketCable standard and utilizes VoIP technology.

Shipment Destinations

''Asia Pacific'' does not include Japan or China, but includes Australia and New Zealand. Russia is included in ''Europe.''

Glossary of Terms