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VoIP-enabled DSL gateway growth fueled by IPTV

VoIP-enabled DSL gateway growth is being fueled by IPTV, but deployments are predominantly in Europe.

In this interview, Dell'Oro principal analyst Steve Nozik discusses VoIP-enabled DSL gateways and how IPTV is affecting their deployment. The firm recently released "The Dell'Oro Group Quarterly Access Report."

Question: What did the study look at, and what were the top-line conclusions?

Nozik: We track DSL customer premise equipment by vendor. We have three segments: simple modems, routers or gateways that are data-only, and routers and gateways that are voice-enabled. We survey the vendors and get their shipments for each of the three segments. Based on fourth-quarter numbers, we saw a pretty significant increase for revenue and total units shipped for the voice-enabled products. It has been increasing throughout 2006. The third and fourth quarter were stronger than the first part of the year. Service providers in Europe are going ahead and deploying services that require this kind of gateway. For example, France Telecom has a service that utilizes Livebox, which is a voice-enabled gateway supplied by Thomson and Sagem. And there is BT with the BT Hub. I'm seeing others. KPN in the Netherlands has been deploying VoIP to some of its installed base. That's driving shipments of [voice-enabled] gateways over there. We saw strong growth, especially in the second half of the year, especially in Western Europe in countries such as France, Britain, the Netherlands and others. This [study] is mainly residential, [though] there are some business uses.

Question: Is this happening in North America?

Nozik: There is not too much in the U.S. in terms of major deployments. VoIP in the states right now is by cable and companies like Vonage. We don't track the Vonage-type of adapters and don't include them in the numbers. If we look at DSL penetration rates [historically], Western Europe lagged North America by a year or two. This area now is ahead in deploying advanced services, but I would expect this to spread into North America. A lot of manufacturers think so, as well. One reason Europe may have a head start is that [the devices are deployed] for video services such as IPTV. In Europe, the requirements for IPTV bandwidth are less than North America. Some of the infrastructure is in place utilizing ADSL 2+ that can really be sufficient in the shorter term for IPTV deployment.

Question: Why is there such a discrepancy between Western Europe and North America?

Nozik: In North America, there is a much higher bandwidth requirement for IPTV because they have to compete with cable companies. Many places have to put a whole new infrastructure closer to the end user to get the required bandwidth. It's in the process of happening. AT&T Lightspeed, [for instance], is a project to provide television services to its customer base. It's really taken a while to get the infrastructure in place and to test the technology. I believe it will happen, but the technical requirements in North America are more bandwidth-intensive and more complex than some of the areas of Europe.

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