A Parks Associates Whitepaper Developed forA Parks Associates Whitepaper Developed forA Parks Associates Whitepaper Developed for

Priorities for Managed Service Gateways in the Fiber-Connected Home

Priorities for Managed Service Gateways in the Fiber-Connected Home

Priorities for Managed Service Gateways in the Fiber-Connected Home

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The perceived line between data and video services is increasingly blurred.

Internet-connected CE

devices consume video

and data in unprecedented

volumes across wired and

wireless networks. New

devices such as the tablet,

streaming media players,

and the Chromecast are

quickly gaining acceptance

by consumers.

Service providers seek to be the owner of the broadband home and the subscriber relationship. Future gateway devices should provide a primary control point, enable value-added services, facilitate improved support, and leverage the benefits of a wireless home environment.

Priorities for Tomorrow’s Gateways in the Fiber-Connected HomeToday‘s connected home is a place of active change—a complex environment of devices, services, content, and data.

Today’s Connected HomeU.S. broadband households with the following devices

connected to the Internet

© Parks Associates

0% 40%20% 60% 80%

Smartphone

Tablet

Game Console

Smart TV

Blu-ray Player

DVR

Streaming MediaPlayer

GoogleChromecast

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.

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.

Average Number of CE Devices OwnedBy U.S. Fiber Broadband Households

© Parks Associates0.0

1.0

0.5

1.5

2.0 Smart TVSmartphone

Game Console

PVR/TiVo/DVRTablet

Blu-ray Player

Streaming Media Player

Google Chromecast# O

F SP

ECIF

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DEV

ICES

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.

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.

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Tomorrow’s broadband services will be competing at gigabit rather than megabit speeds.

• Swisscom has offered 1 Gbps service since late 2013.

• Japanese ISP So-net offers a 2 Gbps service.

• In the U.S. market, Google’s entry into the FTTH broadband services

arena has spurred AT&T, CenturyLink, Cox Communications, and other

operators to compete at gigabit speeds. Dozens of operators and sev-

eral municipalities now offer gigabit speeds, and fiber optic services are

a key element in that growth.

The Benefits of a Master DeviceTHIN CLIENT DEVICES WILL BE COMMON.

The introduction of whole-home DVR functionality and interconnected CPE devices opened the door to new thinking in residential device architecture.

Delivering functionality from the managed network or gateway de-

vice to client set-top boxes allowed operators to potentially realize sub-

stantial cost savings by reducing costly components in the client devices.

Eliminating local storage, a high-cost component that was also a com-

mon point of failure in set-top boxes, was particularly beneficial.

However, other functions could be shifted as well, including the program

guide, tuners, discovery tools, or conditional access for IPTV services.

For video services, this change also allowed the client set-top box to

potentially have a longer effective life, relying on virtualized features

rather than being limited to its own resources.

Many operators now envision a future where much of the consumer-

facing functionality in the home will be virtualized. In some cases, set-

top boxes could be eliminated completely. Moreover, virtualization will

not stop at the set-top box. Key features of home automation, energy

management, home security, and digital health can also be virtualized,

minimizing the costs for in-home devices to support those services.

Gateways themselves will ultimately leverage virtualized network

management features, expanding their capabilities and extending their

effective life.

QOS AND TRAFFIC PRIORITIZATION WILL BE IMPORTANT.

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

Such a control point will provide advantages beyond traffic management.

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.

Eventually, throughput speed begins to be a less critical dif-

ferentiator as consumers are less able to perceive differences

among various speed-based tiers of service. Instead, consum-

ers will look to their actual experiences online, such as interrup-

tions in watching online video, in order to evaluate broadband

service quality. Latency and performance could help providers

stand apart from competitors. In fact, broadband pricing or op-

erator business models may rely on performance differences,

with operators charging higher speeds for “enhanced” broad-

band 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.

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.

A master control point that has insight into all aspects of data use in the home will be needed in order to opti-mize the flow of household data traffic.

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Differentiation via Value-added Services

INCREMENTAL REVENUES WILL DRIVE FUNCTIONALITY.

As broadband markets and pay-TV services become more competitive, providing down-ward pressure on pricing, new revenue opportunities will be vital to the bottom line.

Many are enhancing their video services as a path to new revenues. Second-screen capabilities, improved discov-

ery, and better merchandising of on-demand content can provide additional advertising and transactional revenues.

Smart home services, including premises security and home automation and control, are among the

most popular trends in value-added services being considered by operators today.

Broadband providers are also experimenting with a variety of additional services, including videoconferencing,

online storage, online gaming, music, digital health, and other services. Those that successfully introduce these ser-

vices will enjoy a higher ARPU in the market, allowing them to pull further away from their competitors.

Popular Future ServicesU.S. broadband households that �nd the following services

highly appealing

© Parks Associates

0% 30% 60%

Free, on-demand access torecently broadcast TV programs

Remote security alerts tomobile devices

Remote control of thermostatvia mobile devices

TV bookmarking / playlists

Managed services gateways must have the appropriate hardware and software resources

to enable these services, including processing power, storage, and memory as well as service-

specific capabilities like home automation connectivity or DLNA support.

While gateways will leverage the operator network for virtualized features, some functions will need to remain local, including diagnostics, connectivity, and security.

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OPERATORS WILL OFFER A VARIETY OF SERVICES.

No single value-added service is likely to have universal appeal.

Although opera-tors will carefully plan their ser-vices and in-home systems for the future, service popularity and technology will change over time.

Rather, subscribers will select subsets of value-added services from the menu

of services offered by operators. As a result, gateways must support a wide variety

of value-added services. However, operators cannot support every possible type

of service and maintain a measure of cost control over the gateway.

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

service features without replacing the existing gateway or requiring site visits.

Perhaps as critical will be the ability to pivot business models, pricing, or service

parameters in order to outmaneuver direct competitors or new alternatives.

Virtualization of features and a software architecture that allows remote,

dynamic updates can provide such flexibility. Both of these approaches allow

operators to quickly introduce new services or make changes to existing services

overnight and to the entire subscriber base at one time. Bug fixes or other issues

can also be addressed promptly and deployed immediately, thus reducing the

risk in introducing innovations and minimizing potential downtime.

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.

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VIDEO DELIVERY TO CONNECTED DEVICES WILL BE EXPECTED.

In addition to wireless connections to the TV, consumers will grow to expect TV content to be accessible on any wired or wireless screen in the home.

Today, awareness of TV Everywhere

functionality is relatively low, even among

subscribers who have access to the service.

In 2011, U.S. telco AT&T launched a set-top box that used a Wi-Fi con-

nection to connect to the home router. Subscribers appreciated the

freedom to move the television anywhere within the reach of the tech-

nology in the home, and demand for the service grew beyond initial

expectations. Within a few years, Bell Canada, CenturyLink, Swisscom,

Telefónica, and others had introduced their own wireless set-top boxes.

Share of Household Video Viewing by PlatformU.S. broadband households

© Parks Associates

TVComputerMobile PhoneTablet

2010 2014

New 802.11ac technologies such as MIMO (Multiple-In Multiple-Out), DFS (dynamic frequency selection), and beam

forming not only provide superior bandwidth but also greater coverage in the home, even in markets such as Europe

where home construction makes reliable use of Wi-Fi problematic.

Operators can now leverage these new 802.11ac technologies to make Wi-Fi a ubiquitous delivery

mechanism throughout the home.

Wireless set-top boxes will begin

as a differentiator before eventu-

ally becoming a must have for pay-

TV providers. The greater flexibility

and convenience of these devices

will make them a popular offering

among subscribers.

In the U.S. market, only about one-quarter of consumers that have access to TV Everywhere are aware that they receive the feature.

Over time, awareness and use of this free service will increase as pay-TV operators seek to stay relevant to younger

consumer segments that watch significant amounts of video on computers, tablets, or smartphones.

Tomorrow’s gateway devices will

include content delivery capa-

bilities to enable access to on-de-

mand and linear content on con-

nected devices, including HD con-

tent today and 4k UltraHD content

in the future.

Content protection technology,

cloud-based user interfaces, and

the ability to host and serve con-

tent will all be necessary in order

to provide the secure, anytime-

anywhere experience that con-

tent partners will allow and that

consumers will expect.

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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 instal-

lation 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.

On their websites, U.S. providers

claim average IPTV installation

times ranging from three to six

hours, depending upon the CPE

involved and the number of rooms.

Eliminating in-home wiring could

potentially reduce installation time

by two to three hours—potentially

cutting installation costs in half.

This translates into a per-

installation cost savings of $110 to

$160. For a fiber operator installing

ten thousand homes in a year, the

cost savings over the course of a

year will reach $1.1 to $1.6 million.

In a high-growth market with

a strong volume of net adds,

annual savings will be even more

substantial.

For consumers, shorter installation and lead times translate

into less inconvenience and a perception that the operator

is quick and efficient—factors which can positively affect

subscriber satisfaction. For operators, shorter installation

times affect the bottom line. Operators are able to activate

more new subscribers in a shorter period of time without

increasing the volume of installation personnel, effectively

accelerating time-to-revenue for new subscribers.

Over the course of the year, the additional revenues generated among those ten thousand homes reach approximately $3.8 million annually, simply by accelerating the volume of installations.

Alternatively, operators can serve the same volume of new subscribers but with a smaller installation force.

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The reach of the gateway’s wireless network is also an important design

consideration that impacts installation.

If the gateway’s Wi-Fi signal cannot adequately cover the entire home, installers

are forced to address uncovered areas with wiring or other solutions.

Furthermore, if the consumer chooses to move the wireless set-top box to a spot

inside or outside of the home that is beyond the gateway’s reach, the operator

is likely to get a support call and, perhaps, a dissatisfied customer, potentially

resulting in additional truck rolls.

Wireless design aspects for the gateway, including use of 802.11ac, the number

of antennae, and technologies such as MIMO, DFS, beam forming, and use of the 5

GHz spectrum range, can extend its reach and effectiveness. They can also produce

an entirely new installation model for IPTV service providers.

OFFLOADING MOBILE TRAFFIC WILL BE INCREASINGLY CRITICAL.

Consumers today actively use Wi-Fi connections to shift mobile traffic to wired networks whenever possible in order to mini-mize mobile data use and out-of-pocket mobile bills.

The increased use of video and other bandwidth-hungry applications on mobile

devices will continue, further encouraging consumers to leverage connections

to wired networks. Mobile operators, particularly multiplay service providers, will

similarly want to make use of mobile backhaul opportunities via wired networks

whenever possible in order to minimize traffic on the mobile spectrum.

Managed service gateways will include specialized features to actively connect

to consumer mobile devices and to provide seamless network handoffs in order to

offload traffic wherever possible. This activity, along with the future use of wireless

set-top boxes, will increase Wi-Fi-related traffic within homes, forcing continued

innovation in Wi-Fi network technologies.

Because operators will have an incentive to add improved offloading of cellular data and improved Wi-Fi features, operator-provided Wi-Fi is likely to outpace consumer-purchased Wi-Fi network equipment in many markets.

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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.

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

call, these tools will have the necessary data and diagnostics ready for the agent, minimizing call time.

Consumers will continue to connect a diversity of

disparate products to the home network. In many

cases, these products will leverage cloud-based ser-

vices or downloaded apps that will enhance features,

change the base functionality, or introduce new use

cases for the product.

The future connected home will have blended wireless and wireline networks, with services and devices that will rely on both. Every connected home will be unique and will encounter unique technology and performance issues.

TR-069 functionality is essential, providing operators

with a look into the home network that CE makers or

web services companies cannot match. Beyond TR-

069, future gateways must provide operators with nu-

anced insight into the home network, network activi-

ties, and the devices that are connected.

Virtual services or complementary software to

TR-069 will need to assess performance and quality of

service throughout the network and to each device

on the home network.

The blend of wireless and wireline network use within the home will require unified in-sight into and management of all networks and connections within the home.

The value of virtualized features and dynamic soft-

ware updates applies to support as well. Cloud-

based services can be continuously updated for any

new connected consumer devices that are introduced

in the market or, more significantly, into the consumer

home. Gateway software and virtualized features can

be updated to accommodate these products, minimiz-

ing subscriber frustrations and support calls. Beyond

just customer support, this expanded visibility can be

leveraged for entirely new levels of support and new

“managed home” services opportunities.

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WHOLE-HOME SECURITY & PARENTAL CONTROLS WILL BE A POWERFUL VALUE-ADDED SERVICE.

Protecting one’s family from online threats or unwanted content will be an increasingly difficult challenge for subscribers in the future.

Computer viruses and malicious hacker activities are more prevalent today than

ever, and consumers can unknowingly invite intrusion by simply clicking on a

website link or opening an e-mail.

Broadband providers need subscribers to feel safe online in order to incent them to ever higher tiers of service.

Maintaining parental control over unwelcome content will also be a challenge.

Various computing and CE devices have their own parental control interfaces,

forcing users to set each separately. Some connected devices have no parental

controls at all. Some online services or web services offer parental controls for a

browser or their own experiences, yet those controls do not address all apps or

online destinations. Furthermore, young consumers are often tech savvy and able

to use guest devices or other means to bypass security and content protections.

Managed services gateways will need to protect home net-works from these risks but also provide an interactive UI that is easy to use and understandable by everyday consumers.

Future gateways will unify parental controls, content filtering, and other protections

for the entire home, providing parents with a single point for addressing risks on

all devices in the home and supplying alerts regarding unwarranted activity.

Gateways can also leverage cloud-based services to enhance or extend this ser-

vice protection. For example, cloud-based services can allow subscribers to ac-

cess and modify parental controls or other security features at any time and from

any location, inside or outside of the home.

A combination of the in-home presence of a gateway device and the reach of

cloud-based features provides unique protection for families and can be leveraged

for applications beyond security.

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Laying the Foundation for Tomorrow’s Service ProviderIn addition to the improved presence and services, potential cost reductions, and opportunities for incremental revenues, tomorrow’s managed services gateways can be a tool to retain and grow the relationship with the subscriber.

MOVING FOR WARD, data will be an increasingly precious commod-

ity, leveraged by innovative companies to provide personalized servic-

es to consumers.

TOMORROW ’S managed services gateways will deliver such data to

operators, allowing them to offer upgrades and premium services to

those consumers who most need them.

BY ENHANCING the support, services, and experiences delivered to consumers, tomorrow’s gateway will help operators maintain and strengthen their position as the subscriber’s trusted provider.

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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 soft-

ware 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

About Parks Associates

Parks Associates is an internationally recognized market research and consulting company special-

izing 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, enter-

tainment and gaming, home networks, Internet and television services, digital health, mobile appli-

cations 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

info@parksassociates.com

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.

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.

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About Calix

Calix is a global leader in access innovation. Its Unified Access portfolio of broadband com-

munications 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/.

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