Cisco, Motorola, and Arris Cause Revenue Growth in 2Q04

CMTS Revenue Surges in Second Quarter 2004

The cable modem termination system (CMTS) market showed a robust 18 % jump in revenue from the first to the second quarter of 2004, pushing the segment to $425 million for the full year. This surge is largely attributable to the dominant performances of Cisco, Motorola, and Arris, whose combined market share now covers 87 % of global CMTS sales. Cisco leads both in port volume and revenue, while Motorola holds the second spot and Arris rounds out the top three. Together, these three vendors have cemented their position as the primary drivers of growth in a sector that continues to expand as broadband capacity demands rise.

Quarterly shipments reveal a shift toward higher‑capacity devices. Upstream port shipments climbed 29 %, while downstream ports grew a staggering 63 % compared with the previous quarter. This trend reflects the growing need for asymmetric services - more downstream bandwidth for consumers and more upstream bandwidth for applications like voice and video. Despite the rise in port counts, the industry average revenue per CMTS port is steadily decreasing, falling from over $2,800 in 2002 to $2,240 in Q2 2004. Analysts predict that manufacturers will add voice and multimedia capabilities to maintain a revenue per port above $2,000 through 2007, keeping the business profitable even as unit prices drop.

Geographically, North America dominates CMTS revenue, contributing 60 % of the total. EMEA follows, then the Asia Pacific and Central America regions. This distribution mirrors the concentration of large cable operators in the United States and Canada, where the push for fiber‑to‑the‑home and enhanced IPTV services has accelerated demand. Meanwhile, the growing broadband markets in Europe and Asia Pacific are beginning to pick up pace, though they still lag behind the North American growth rate.

Michael Howard, principal analyst at Infonetics Research, emphasized that cable operators are adding more data capacity and diversifying their service mix to include telephony and multimedia. “Competition with DSL providers - especially the large incumbents - is driving much of the growth in this area,” he said. As the industry adapts to new service demands, the CMTS market is expected to continue expanding through 2007, driven largely by the need for higher bandwidth and richer content delivery.

Beyond the raw numbers, the shift toward higher port counts and more advanced functionalities signals a broader trend in cable infrastructure. Operators are not only upgrading their own networks; they are also looking for CMTS solutions that integrate more services without compromising performance. Cisco’s leadership in port volume and Motorola’s strong revenue presence reflect their ability to meet these evolving needs. Arris, while slightly behind the other two, continues to grow its share, particularly in North America, by offering cost‑effective solutions that support emerging multimedia services. The next few quarters will show whether this momentum persists as the industry moves toward 10 Gbps architectures and beyond.

Cable CPE Market Developments in Second Quarter 2004

Worldwide cable customer premises equipment (CPE) units rose 15 % from Q1 to Q2 2004, and revenue edged up 4 % after a 9 % dip in the first quarter. This rebound follows a steep decline that stemmed from the aggressive price erosion that the segment has faced over the past year. Despite the price pressure, the cable CPE market reached a valuation of over $1 billion in 2003 and is expected to grow by 21 % in unit shipments and 4 % in revenue between Q2 2004 and Q2 2005. The growth trajectory reflects a sustained demand for high‑bandwidth devices that can support the increasing bandwidth and feature requirements of modern cable operators.

Motorola remains the clear leader in revenue market share for cable CPE, thanks to its broad portfolio of modems, routers, and integrated access devices (IADs). The company’s lineup includes high‑speed cable modems that support downstream speeds of 40 Mbps and upstream speeds of 2 Mbps, as well as routers that integrate Wi‑Fi 802.11b/g functionality. Other notable players in the market include Terayon, Ambit, Thomson, Toshiba, and Scientific Atlanta, each offering specialized devices that cater to different operator needs - from low‑cost solutions for emerging markets to premium, feature‑rich gear for advanced service plans.

Cable modems account for 58 % of total cable CPE revenue, with cable routers that include 802.11 Wi‑Fi capabilities and IADs following closely behind. The shift toward Wi‑Fi routers is driven by consumer demand for seamless wireless connectivity within homes and by operators who want to offer bundled services that combine broadband, TV, and voice. IADs, which bundle the modem and router into a single device, are gaining traction as operators look to simplify deployments and reduce hardware costs.

Regionally, North America continues to generate the majority of cable CPE revenue, while Europe and the Middle East (EMEA) accounts for roughly a quarter of the total and the Asia Pacific region for about a fifth. This pattern mirrors the maturity of cable networks in the United States and Canada, where broadband penetration rates exceed 90 %. In contrast, cable operators in Europe and Asia Pacific are still building out their infrastructures, creating opportunities for vendors who can deliver affordable, scalable solutions.

Richard Webb, directing analyst at Infonetics Research, highlighted the significant growth of voice over broadband services, which has spurred a 36 % increase in worldwide cable IAD units and a 25 % rise in revenue in the second quarter. “We estimate healthy double‑digit year‑on‑year unit growth through to 2007 for this segment,” he said, underscoring the continued momentum in this area. Voice over IP (VoIP) is becoming a cornerstone of cable operators’ service portfolios, driving demand for IADs that can handle both broadband and telephony traffic efficiently.

Looking ahead, the cable CPE market is poised to maintain a steady expansion, but price erosion will remain a challenge. Manufacturers will need to innovate further, adding features such as advanced QoS, integrated voice services, and improved wireless capabilities to stay ahead of the competition. The combination of high‑speed, feature‑rich devices and cost‑effective solutions will likely determine which vendors maintain their leadership positions as the market evolves toward higher bandwidth requirements and more complex service offerings.