The Future of Broadband CPE: Part I

The network-terminating CPE device provided by the access network service provider is at an inflection point: it’s at the intersection of service providers’ business drivers and emerging technologies. What’s at stake is control of the entire home and all the revenue generating up-sell opportunities, including emerging Internet of Things services. Access network service providers must decipher this paradigm or risk being usurped by the web companies.

Customer Premise Equipment or CPE historically meant customer owned equipment. In the case of a T1 circuit the service provider would terminate the network with a CSU/DSU and would connect to the customer-owned access router. If there was an issue, the SP would perform a loop-back test to the CSU/DSU and if it passed the test they were done with support. The same is true with legacy home telephony. If there’s a dial tone at the Network Interface Device, the gray box attached to the outside your home, the telco is “done.” If you still have issues beyond that it’s your home wiring, which the ILEC’s no longer manage (for free anyway).

In the early days of broadband, the service provider, telco and cable company would terminate their connections with a DSL or cable modem. The premise facing interface was Ethernet (Layer 2 interface). When consumers wanted to connect more than one device to the Internet they would acquire a Wi-Fi router (Layer 3) through the retail channel.

Today, service providers are combining the modem functionality with the Wi-Fi routing functionality in to a single device. Interesting to note is the SP is taking ownership of the Wi-Fi network, something historically they were loathed to do and could not do for regulatory reasons. The more functionality an SP takes ownership of the more they are responsible for. This leads to the inevitable increase in help calls.

Competition is forcing them take ownership of the total customer experience. A poor experience combined with lackluster customer support is the number one reason for customer churn. Now the CPE or broadband gateway is taking on the dual role of terminating the network and controlling the home network and ultimately the devices and things in the home.

This is not without precedence. The set-top box has always had this dual personality. It terminated the SP’s video network and controlled the home video experience. This is even more prevalent with whole home DVRs. As far as cable companies were concerned the STB was part of the network when it was convenient and CPE when that was convenient.

Now and in the future the SP provided CPE device needs to do two things well. First, it must terminate the access network (Layers 1 and 2), hence the term network terminating CPE. Second, it must control and manage the entire home experience (Layers 3-7+). It can and will do the network terminating part well, but it also MUST do the home experience well or risk churn where competition exist or having a web company usurp them.

In future articles we will address numerous issues including:

1. Virtualization Options and Realities

2. IoT and Smart Home Implications

3. Distribution of Intelligence (Cloud, Network and CPE)

4. Distribution of Intelligence (CO/HE, Outside Plant and CPE)

5. Wi-Fi & LTE Convergence

6. Business Models, Value Chains and the N-Dimensional Ecosystem Dynamics

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