November 24, 2020

COVID-19 Has Elevated Consumer Dependence on Connected Home Performance

Drives Demand for Next-Gen Ultra Broadband Access Technologies and Open Customer Premises Equipment

 

By Roberto Salermo - Senior Vice President Americas CPE Sales, Connected Home Division of Technicolor

The new normal emerging in the wake of the COVID-19 crisis will leave a lasting impression on consumer expectations for connected home performance in Latin America. Families throughout the region have sheltered-in-place to work, study, access critical health information and engage in social interactions from their home. This is placing new demands on the connected home infrastructure.

As homes throughout the region are transformed into virtual branch offices and classrooms, consumers are counting on their home networks to support unprecedented bandwidth-intensive data traffic to meet their professional and personal needs. This unexpected dynamic is fundamentally altering the relationship network service providers (NSPs) have with their customers.

COVID-19 is the latest and most disruptive development in a series of economic and social struggles that the Latin American region has experienced over the past several years. Leading up to the crisis, consumers were already demonstrating a robust demand for a new generation of broadband-driven connected home services that compared favorably to those offered in North America and Europe.

Moving forward, the challenge for NSPs in the region will be to continue operations in a tough economic environment with traditionally low average revenue per user (ARPU). This has hampered major investments in both infrastructure and CPE, which in turn has limited the opportunities to roll out new revenue-generating services. It has also highlighted the limitations of traditional CPE strategies that are based on closed systems and that feature limited functionality.

Prior to COVID-19, the picture was beginning to change. Advances in ultra-broadband access technologies -- including DOCSIS 3.1 for cable operators and a wide array of fiber optic initiatives, driven mainly by telcos in the region -- were combined with a new generation of open CPE to improve performance while holding the line on costs. Consequently, NSPs were exploring ways to harness these innovative developments to design, develop and deploy a new generation of services for Latin American consumers.

The crisis has, of course, thrown the region’s economy into greater disarray. That said, there is reason to expect demand for low-cost, high-performance connected home solutions to remain, and perhaps even grow.

Managed Wi-Fi Opportunities

There is rising recognition of the role NSPs can play in supporting the complex and confusing connected-home wireless networking environment that will be critical to managing the volume of traffic that is now flowing through the home. In effect, the crisis has actually accelerated the trend toward complexity and high performance in the connected home. The GSMA reports that Latin America experienced a 50 percent gain in mobile device connections between 2015 and 2020. This trajectory is expected to continue into the new decade, adding to the number of devices per household.

Even before the crisis, the ability to deliver broadband performance within the home represented a major opportunity for operators. The challenge faced by consumers is even more acute now. To this end, Wi-Fi management is very likely to emerge as a new area of growth for NSPs in the months and years to come.

Broadband Innovation Fuels Growth

Leading up to 2020, major commitments were made to deploy broadband infrastructure and CPE in Mexico, Brazil and Argentina, even as new initiatives were explored in Colombia, Peru, Chile and beyond. As a case in point, Mexico’s Megacable took the wraps off of plans to aggressively deploy DOCSIS 3.1 to its subscribers. In so doing, they brought to market a new open gateway that is doing far more than simply enabling video services.

Megacable customers are now able to download data at up to 1 gigabit per second, allowing the service provider to support a wide range of emerging applications and services -- such as next-generation gaming, home security and other cloud-based offerings.

Similar CPE is already available to support these services for other broadband access technologies across Latin America -- including fiber-to-the home infrastructures. This is important, because in 2019, over 8.6 million fiber subscribers were added for a total of 23.7 million subscribers in the region -- a 66 percent year-over-year increase compared to 2018. Brazil, in particular, is a strong market for fiber, with over 12 million fiber subscribers after adding 5.9 million in 2019. Pre-COVID-19 market analysis predicted 25 percent year-over year growth in fiber subscribers through 2020 for the entire region.

Because of these developments, NSPs could be in a better position to remotely manage broadband access and wireless network performance for their connected home customers. This will be a critical function for NSPs to master if they are to meet customer expectations for end-to-end connectivity throughout the home. It is a challenge that will grow as multiple devices in the home compete for wireless local-area network resources and access to cloud services. Failure to effectively address Wi-Fi management expectations could expose NSPs to the risk of being bypassed, as frustrated consumers look for off-the-shelf solutions in big box stores.

Open CPE Emerges as Key to Expanding Wallet Share

The ultimate impact of COVID-19 on the region remain unclear. However, when you consider that the average Latin American household budget for network services has traditionally been around $15 a month -- compared to between $25 and $70 per month in North America and Europe -- NSPs will have to look for opportunities to tap into new revenue streams.

These conditions do not lend themselves to traditional proprietary, limited-function CPE strategies of the past. The good news is that the industry -- as a whole -- is moving toward a new generation of open platforms that can support multiple services from a variety of application developers. As a result, Latin American NSPs will have an opportunity to redefine the way they engage with consumers by offering new value-added broadband access, entertainment and smart-home management services that will generate more revenue.