Priorities for Managed Service Gateways in the Fiber-Connected Home

A Parks Associates Whitepaper Developed for 2 All rights reserved | www.parksassociates.com | © Parks Associates Fiber-Connected Home Priorities for Tomorrow’s Gatewaysinthe wireless homeenvironment. services, facilitate improvedvalue-added andleverage support, ofa thebenefits relationship. Future gateway devices control shouldprovide aprimary point, enable providersService seekto theowner be ofthebroadband homeandthesubscriber by consumers. gainingacceptancequickly and theChromecast are streaming mediaplayers, suchasthetablet,devices wireless New networks. volumes across wired and and datainunprecedented consumevideodevices CE Internet-connected blurred. increasingly isvideo services dataandbetween The perceived line devices, content, services, anddata. Today‘s complex environment homeisaplace connected change—a ofactive of Streaming Media Streaming Game ConsoleGame Blu-ray Player Blu-ray U.S. broadband householdswiththefollowing devices Smartphone Chromecast Smart TV Smart © Parks Associates Google Tablet Player DVR Today’s Connected Home 0% connected to theInternet 20% 40% 0 80% 60% Homes with fiber-based services are particularly complex, with an average number of 7 connectable devices per home, 10% more than in average U.S. broadband households.

The high-speed broadband environment in these fiber-supplied homes is enabling new consumer habits and encouraging adoption of even more connectable devices. While multiscreen video accounts for a substantial share of high-speed broadband traffic, data consumption is also increasing for cloud-based services and features such as VoIP, videoconferencing, cloud storage and applications, and others.

For the IPTV environment in particular, the managed service gateway has emerged as a tool to help operators and their customers successfully cope with the ever-changing connected home.

Average Number of CE Devices Owned By U.S. Fiber Broadband Households

2.0 Smart TV Smartphone

1.5 Game Console PVR/TiVo/DVR 1.0 Tablet Blu-ray Player

0.5 Streaming Media Player

# OF SPECIFIED DEVICES Google Chromecast

0.0 © Parks Associates

Today’s telco operators are assessing the features necessary for managed services gateways that will serve tomorrow’s subscribers. Current market and technology trends suggest several priorities that operators should consider as they plan their requirements. 4 All rights reserved | www.parksassociates.com | © Parks Associates The Benefits of a Master Device The ofaMaster Benefits QOS AND TRAFFIC PRIORITIZATION WILL BE IMPORTANT. THIN CLIENT DEVICES WILL BE COMMON. architecture. in residential device door to newthinking devices openedthe interconnected CPE andfunctionality DVRwhole-home The introduction of gigabit rather thanmegabitspeeds. Tomorrow’s will becompeting at broadband services effective life. management features, their expandingtheircapabilitiesandextending networkGateways themselves will ultimately leverage virtualized thoseservices.minimizing thecostsfor to in-homedevices support management, homesecurity, anddigital healthcanalsobevirtualized, not stop attheset-top features box. Key ofhomeautomation, energy top boxes couldbeeliminated completely. Moreover, will virtualization somecases, set- In inthehomewillbevirtualized. facing functionality Many operators now envision a future where muchoftheconsumer- rather thanbeinglimited to itsown resources. potentially have alongereffective life, features relying onvirtualized For thischangealsoallowed theclientset-top videoservices, box to services. guide, tools, tuners, orconditionalaccessfor discovery IPTV However, aswell, couldbeshifted otherfunctions includingtheprogram mon pointoffailure inset-top beneficial. boxes, wasparticularly componentthatwasalsoacom Eliminating localstorage, ahigh-cost stantial costsavings by reducing costlycomponentsintheclientdevices. vice to client set-top boxes allowed operators from orgateway themanagednetwork Delivering functionality de • • • a key elementinthatgrowth.a key eral municipalitiesnow offer are gigabit speeds, andfiberopticservices operators to compete atgigabit speeds. Dozens ofoperators- andsev arena hasspurred AT&T, Cox Communications, andother CenturyLink, theU.S. Google’sIn broadband market, services into theFTTH entry offers a2Gbpsservice. ISPSo-net Japanese sincelateSwisscom hasoffered 2013. 1Gbpsservice to potentially realize sub - - - Eventually, throughput speed begins to be a less critical dif- A master control point that ferentiator as consumers are less able to perceive differences has insight into all aspects among various speed-based tiers of service. Instead, consum- of data use in the home will ers will look to their actual experiences online, such as interruptions in watching online video, in order to evaluate broadband be needed in order to opti- service quality. Latency and performance could help providers mize the flow of household stand apart from competitors. In fact, broadband pricing or op- data traffic. erator business models may rely on performance differences, with operators charging higher speeds for “enhanced” broadband services.

Intelligent traffic prioritization will be a key element of this type of “enhanced” broadband service. Personalization and flexibility could also be differentiators, for example, allowing consumers to set their own traffic priorities or setting time restrictions on when children can be online.

AN IN-HOME CONTROL POINT WILL PROVIDE OPERATORS WITH A MARKET ADVANTAGE.

Such a control point will provide advantages beyond traffic management. Priorities for Managed Service Gateways in the Fiber-ConnectedPriorities Home for Service Managed In tomorrow’s competitive market, companies are regularly emerging that seek access to the consumer and data regarding video viewing and data use within the home. Ad networks, online services, retailers, manufacturers, and other players currently use website cookies, apps, device interfaces, service offerings, or other means to establish access to consumers.

Companies including Amazon and Google now offer in-home devices that provide them with superior access to consumers. By increasing the capabilities of these devices, these players can establish in-home platforms for services that will compete directly with operators.

By maintaining a central control point within the home, operators can both maintain their position as a trusted provider and establish a platform for new services.

5 6 All rights reserved | www.parksassociates.com | © Parks Associates Differentiation via Value-added Services INCREMENTAL REVENUES WILL DRIVE FUNCTIONALITY. diagnostics, connectivity, andsecurity. features, willneedto remain somefunctions local, including While gateways for will leverage theoperator network virtualized orDLNA support. homeautomation connectivity specific capabilitieslike includingprocessing power,to enabletheseservices, aswell asservice- storage, andmemory gateways services Managed musthave theappropriate hardware resources andsoftware away from allowing themto theircompetitors. pullfurther vices willenjoy ahigherARPUinthemarket, online storage, onlinegaming, music, digital health,andotherservices. Those thatsuccessfullyintroduce theseser Broadband providers are alsoexperimenting beingconsidered by operators today. services most populartrends invalue-added andhomeautomation andcontrol, includingpremises security homeservices, are amongtheSmart revenues.ery, content andbettertransactional canprovide merchandising ofon-demand additionaladvertising asapathMany to are newrevenues enhancingtheirvideoservices ward pressure onpricing, will bevitalto newrevenue thebottom line. opportunities As broadband andpay-TV become markets more competitive, services providing down recently broadcast TV programsrecently broadcast TV Remote control thermostat of © Parks Associates TV bookmarking / playlists / bookmarking TV Free, access on-demand to Remote security alerts to alerts security Remote U.S. broadband householdsthat ndthefollowing services via mobile devices mobile via mobile devicesmobile Popular Future Services highly appealing 0% with a variety of additional services, includingvideoconferencing, of additional services, with a variety 30% . Second-screen capabilities, improved discov- 60%

- - OPERATORS WILL OFFER A VARIETY OF SERVICES.

Rather, subscribers will select subsets of value-added services from the menu No single value- of services offered by operators. As a result, gateways must support a wide variety added service of value-added services. However, operators cannot support every possible type is likely to have of service and maintain a measure of cost control over the gateway. universal appeal. Ultimately, operators must make strategic decisions as to those services most likely to find market success within their unique territories and establish requirements for a gateway that enables those services.

FLEXIBILITY WILL IMPACT PROFITABILITY.

Operators will need the ability to introduce new services or to enhance current Although opera- service features without replacing the existing gateway or requiring site visits. tors will carefully Perhaps as critical will be the ability to pivot business models, pricing, or service plan their ser- parameters in order to outmaneuver direct competitors or new alternatives. vices and in-home Virtualization of features and a software architecture that allows remote, systems for the dynamic updates can provide such flexibility. Both of these approaches allow future, service operators to quickly introduce new services or make changes to existing services popularity and overnight and to the entire subscriber base at one time. Bug fixes or other issues technology will can also be addressed promptly and deployed immediately, thus reducing the risk in introducing innovations and minimizing potential downtime. change over time. Priorities for Managed Service Gateways in the Fiber-ConnectedPriorities Home for Service Managed

The Advantages of Enhanced Wireless Capabilities

WIRELESS CONNECTIONS TO THE TV WILL BE AN ESSENTIAL FEATURE.

For several years, technology companies and pay-TV providers experimented with ways to deliver content to set-top boxes wirelessly via Wi-Fi or other technologies.

Over the past few years companies throughout the industry such as Quantenna have continued to innovate in video-over-Wi-Fi, refining 802.11n systems and collaborating to create a new 802.11ac standard to specifically handle the demands of a pay-TV environment.

The primary challenge is in providing a reliable, sustained wireless signal

that can deliver HD video with good quality throughout the home and without interruption. 7 8 All rights reserved | www.parksassociates.com | © Parks Associates VIDEO DELIVERY TO CONNECTED DEVICES WILL BE EXPECTED. consumer segments thatwatch significant amountsofvideo oncomputers, tablets, orsmartphones. time,Over awareness willincrease anduseofthisfree service whohavesubscribers accessto theservice. isrelatively low,functionality even among Today, awareness of Everywhere TV to beaccessible onany wired orwireless screen inthehome. additionto wireless toIn the connections TV, consumers willgrow content to expect TV mechanism throughout thehome. Operators cannow 802.11actechnologies leverage thesenew to make Wi-Fi aubiquitous delivery reliablewhere makes useof homeconstruction Wi-Fi problematic. forming notonlyprovide bandwidthbutalsogreater superior coverage suchasEurope inthehome, even inmarkets andbeam selection), DFS (dynamic frequency Multiple-Out), 802.11ac technologiesNew such asMIMO (Multiple-In Share ofHousehold Video Viewing by Platform © Parks Associates Telefónica, andothershadintroduced theirown wireless set-top boxes. expectations. Swisscom,Within afew years, Canada, Bell CenturyLink, grewnology inthehome, anddemandforbeyond initial theservice freedom to move thetelevision anywhere withinthereach ofthetech- to to thehomerouter. connect nection appreciated Subscribers the 2011,U.S.In telco AT&T launchedaset-top box thatuseda Wi-Fi con- 2010 U.S. broadband households Tablet Phone Mobile Computer TV are aware receive that they thefeature. consumers thathave accessto Everywhere TV of theU.S. only aboutone-quarter In market, 2014 as pay-TV operators seekto stay relevant to younger consumers will expect. will allow and thattent partners anywhere thatcon- experience to provide thesecure, anytime- tent con to hostandserve the ability andcloud-based userinterfaces, Content protection technology, in thefuture. tent today and4kUltraHDcontent devices,nected includingHDcon mand andlinearcontent oncon bilities to enableaccessto on-de include content capa- delivery Tomorrow’s gateway devices will among subscribers. themapopularofferingwill make and convenience of these devices providers. TV The greater flexibility ally becomingamusthave for pay- as adifferentiator Wireless set-top boxes willbegin will all be necessary inorder willallbenecessary before eventu- - - - - WIRELESS DEVICES WILL SIGNIFICANTLY IMPROVE INSTALLATIONS.

Installation costs and experiences are key considerations for any operator and are areas directly impacted by a managed services gateway.

Gateways that support wireless set-top boxes minimize the amount of drilling, wiring, and other physical changes to the subscriber’s home.

Because installers need not run new cabling into the home, installation times are shortened substantially. IPTV providers particularly benefit. Fiber-to-the-home installations are often more time consuming than installation for cable or even satellite-based services. IPTV distribution may require complete CAT-5 re-cabling of the home. Even in circumstances where technologies like HPNA are used to leverage existing home infrastructure like coaxial cable, IPTV requires unique tools and training for installation and is less flexible or forgiving.

For consumers, shorter installation and lead times translate On their websites, U.S. providers into less inconvenience and a perception that the operator claim average IPTV installation is quick and efficient—factors which can positively affect times ranging from three to six subscriber satisfaction. For operators, shorter installation hours, depending upon the CPE times affect the bottom line. Operators are able to activate involved and the number of rooms. more new subscribers in a shorter period of time without Eliminating in-home wiring could increasing the volume of installation personnel, effectively potentially reduce installation time accelerating time-to-revenue for new subscribers. Priorities for Managed Service Gateways in the Fiber-ConnectedPriorities Home for Service Managed by two to three hours—potentially cutting installation costs in half. Over the course of the year, the additional revenues generated among those ten This translates into a per- thousand homes reach approximately $3.8 installation cost savings of $110 to million annually, simply by accelerating the $160. For a fiber operator installing ten thousand homes in a year, the volume of installations. cost savings over the course of a Alternatively, operators can serve the same year will reach $1.1 to $1.6 million. volume of new subscribers but with a In a high-growth market with smaller installation force. a strong volume of net adds, annual savings will be even more substantial.

9 10 All rights reserved | www.parksassociates.com | © Parks Associates INCREASINGLY CRITICAL. OFFLOADING MOBILE TRAFFIC WILL BE purchased Wi-Fi equipmentinmany markets. network operator-provided Wi-Fi to outpaceconsumer- islikely offloading of cellular data and improved Wi-Fi features, operatorsBecause willhave anincentive to addimproved innovation in Wi-Fi technologies. network set-top boxes, willincrease Wi-Fi-related trafficwithinhomes, forcing continued offload traffic wherever possible. This activity, alongwiththefuture useof wireless to and to consumermobiledevices provide handoffs inorder seamlessnetwork to gateways service Managed will include specialized features whenever possibleinorder to minimize trafficonthemobilespectrum. via wired networks opportunities use of want mobile tobackhaul similarly make providers, multiplay will service to wired operators, Mobile networks. particularly devices willcontinue applicationsThe onmobile increased useofvideoandotherbandwidth-hungry mobilebills.mize mobiledata useandout-of-pocket traffic to wired whenever networks possibleinorder to mini Consumers today use actively Wi-Fi mobile to connections shift providers. service an entirely installationmodelfor new IPTV range, itsreach canextend spectrum andeffectiveness.GHz They canalsoproduce of antennae, andtechnologies suchasMIMO, DFS,beamforming, anduseofthe5 Wireless design aspects resulting inadditionaltruckrolls. calland, perhaps, adissatisfiedcustomer, to getasupport is likely potentially inside oroutsideofthehomethatisbeyond thegateway’s reach, theoperator Furthermore, iftheconsumer choosesto move thewireless set-top box to aspot are forced to address uncovered areas orothersolutions. withwiring thegateway’sIf Wi-Fi signal cannotadequately cover theentire home installation.consideration thatimpacts The reach ofthegateway’s design isalsoanimportant wireless network , further encouraging consumersto leverage connections, further for the gateway, including use of 802.11ac, the number to connect actively , installers - The Impact of Improved Support Features

IN-HOME VISIBILITY WILL FACILITATE SUPERIOR SUPPORT.

For operators, keeping the connected home running smoothly will become an increasingly difficult task.

Consumers will continue to connect a diversity of Virtual services or complementary software to disparate products to the home network. In many TR-069 will need to assess performance and quality of cases, these products will leverage cloud-based ser- service throughout the network and to each device vices or downloaded apps that will enhance features, on the home network. change the base functionality, or introduce new use The blend of wireless and wireline network cases for the product. use within the home will require unified in- The future connected home will have sight into and management of all networks blended wireless and wireline networks, and connections within the home. with services and devices that will rely The value of virtualized features and dynamic soft- on both. Every connected home will ware updates applies to support as well. Cloud- be unique and will encounter unique based services can be continuously updated for any technology and performance issues. new connected consumer devices that are introduced in the market or, more significantly, into the consumer TR-069 functionality is essential, providing operators home. Gateway software and virtualized features can with a look into the home network that CE makers or be updated to accommodate these products, minimiz- web services companies cannot match. Beyond TR- ing subscriber frustrations and support calls. Beyond 069, future gateways must provide operators with nu- just customer support, this expanded visibility can be Gateways in the Fiber-ConnectedPriorities Home for Service Managed anced insight into the home network, network activi- leveraged for entirely new levels of support and new ties, and the devices that are connected. “managed home” services opportunities.

MONITORING AND PREVENTATIVE SUPPORT WILL ADDRESS PROBLEMS EARLY AND PROACTIVELY.

Insight into the home network environment will be an important start, but future gateways must be able to proactively address technical issues, potentially heading off a support call before it happens.

Proactive or preventative support will include ongoing monitoring of device and network status to detect network interruptions or disconnects, latency problems, security issues, device connections, and other areas of connectivity or function.

Software tools will act upon issues before they become consumer-facing problems and can intelligently alert the broadband provider or consumer when intervention is necessary. In the event that a consumer does 11 call, these tools will have the necessary data and diagnostics ready for the agent, minimizing call time. 12 All rights reserved | www.parksassociates.com | © Parks Associates WILL BE A POWERFUL VALUE-ADDED SERVICE. WHOLE-HOME& SECURITY PARENTAL CONTROLS for applicationsbeyond security. cloud-based features provides unique protection for families and can be leveraged A combination ofthein-homepresence ofagateway andthereach device of any location,insideoroutsideofthehome. cess andmodifyparental features controls orothersecurity atany timeandfrom vice protection. For to canallow ac subscribers example, cloud-basedservices Gateways can also toleverage enhance this ser- or extend cloud-based services regarding unwarranted inthehomeandsupplyingalerts all devices activity. for the entire home, providing parents with a single point for addressing on risks Future gateways willunify consumers.easy to use andunderstandableby everyday fromworks butalsoprovide theserisks aninteractive UIthatis gateways willneedto protect homenet services Managed andcontentto protections. orothermeansto useguestdevices bypass security online destinations. Furthermore, young consumersare andable tech often savvy browser ortheirown experiences, yet thosecontrols donotaddress allappsor offer parental orweb controls services controls for atall. a onlineservices Some forcing users to seteachseparately. have devices connected noparental Some Various have computingandCEdevices theirown parental control interfaces, parentalMaintaining control over unwelcome content willalsobeachallenge incent themto ever highertiersofservice. Broadband providers to feel needsubscribers safe onlineinorder to website linkoropeningane-mail. ever, ona invite intrusionby andconsumerscanunknowingly simplyclicking Computer virusesandmalicioushackeractivities future. will beanincreasingly difficultchallengefor inthe subscribers Protecting one’s familyfrom onlinethreats orunwanted content parental controls, content filtering, andotherprotections are more prevalent today than - - .

All rights reserved | www.parksassociates.com | © Parks Associates 13 All rights reserved | www.parksassociates.com | © Parks Associates Tomorrow’s Provider Service Laying the Foundation for trusted provider. strengthen theirpositionasthesubscriber’s gateway willhelpoperators maintain and experiences delivered to consumers, tomorrow’s those consumerswhomostneedthem. operators, allowing themto offer to upgrades andpremium services es to consumers. , leveraged by innovativeity companiesto provide personalized servic relationship withthesubscriber. gateways canbeatool to retain andgrow the incremental revenues, tomorrow’s managedservices potential for cost reductions, andopportunities additionto theimprovedIn presence andservices, TOMORROW’S MOVING FORWARD BY ENHANCING

managed services gatewaysmanaged services will deliver such data to , data willbeanincreasingly precious commod the support, services, and services, thesupport, - - About The Author

Brett Sappington, Director, Research, Parks Associates

As a director of research at Parks Associates, Brett Sappington leads Parks Associates services research team, including access and entertainment services, digital media, OTT, cloud media, video gaming, and technical support services. Brett is an expert in worldwide television and broadband services. His personal research focuses on the activities and trends among operators and the market forces affect- ing their businesses. Brett is a regular speaker and moderator at international industry events.

Brett has spent over eighteen years in the industry as an analyst, executive manager, and entrepreneur. Previously, he founded and served as vice president for Teligy, a software company specializing in software for wired and wireless communications systems. Brett established new divisions for networking and audio/multimedia software for Intelligraphics. He has also been involved in the development and marketing of early-market products for 802.11 wireless networking, VoIP, and other technologies.

Brett holds an MBA from the University of Texas at Austin with a concentration in high-tech marketing and a BA in physics from Baylor University.

INDUSTRY EXPERTISE: International Digital Living Trends, Television Services (IPTV, cable, satellite/ DTH, terrestrial/DTT), Broadband Services, Multiscreen Services, Value-added Services, Cloud-based Consumer Services, Set-top Boxes, Residential Gateways, Electronic Program Guides, Video Search and Recommendation, Video Metadata, Middleware, Technical Support Services

Twitter ID: @BrettsView Priorities for Managed Service Gateways in the Fiber-ConnectedPriorities Home for Service Managed About Parks Associates

Parks Associates is an internationally recognized market research and consulting company specializing in emerging consumer technology products and services. Founded in 1986, Parks Associates creates research capital for companies ranging from Fortune 500 to small start-ups through market reports, primary studies, consumer research, custom research, workshops, executive conferences, and annual service subscriptions.

The company’s expertise includes the Internet of Things (IoT), digital media and platforms, entertainment and gaming, home networks, Internet and television services, digital health, mobile applications and services, support services, consumer apps, advanced advertising, consumer electronics, energy management, and home control systems and security.

For more information, visit www.parksassociates.com or contact us at 972.490.1113 [email protected]

ATTRIBUTION—Authored by Brett Sappington. Published by Parks Associates. © Parks Associates, Dallas, Texas 75248. All rights reserved. No part of this book may be reproduced, in any form or by any means, without permission in writing from the publisher. Printed in the United States of America. 14

Disclaimer—Parks Associates has made every reasonable effort to ensure that all information in this report is correct. We assume noresponsibility for any inadvertent errors. About Calix

Calix is a global leader in access innovation. Its Unified Access portfolio of broadband communications access software, systems, and services enables communications service providers worldwide to transform their networks and become the broadband provider of choice to their subscribers. North America’s most widely deployed fiber access solutions vendor and the leader gigabit service deployments worldwide, Calix solutions power the many of the world’s most advanced broadband services deployments.

Calix has recently introduced the next generation in premises service delivery platforms—The 844G / 854G GigaCenters – and unleashed the power of carrier class Wi-Fi in the fiber connected home. The heart of the gigabit subscriber experience, GigaCenters deliver unprecedented in- home wireless broadband coverage, quality of service, and speed, allowing service providers to deliver carrier class speeds and ubiquitous coverage to wirelessly connected devices in use throughout the subscriber home, and deliver symmetric broadband data rates of up to one gigabit per second (Gbps) to wired devices. An extension of the access network, GigaCenters also establish a new strategic location for service providers in the home, allowing them to rap- idly introduce advanced broadband services and network functions virtualization (NFV), and dramatically change the deployment economics of services like IPTV while maintaining exten- sive control and visibility via Calix Compass software.

For more information on the 844G / 854G GigaCenters, visit the Calix website at www.calix.com/gigacenter/.

For more information about gigabit networks, visit www.calix.com/gigabit/. Priorities for Managed Service Gateways in the Fiber-ConnectedPriorities Home for Service Managed Gateways in the Fiber-ConnectedPriorities Home for Service Managed

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