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Arris’s McClelland: Bright Skies Ahead

New CEO says tech supplier is well-positioned for a 1-Gig, virtualized future 10/10/2016 8:00 AM Eastern

Bruce McClelland has some big shoes to fill as he takes the helm as CEO of Arris, one of the cable industry’s top technology suppliers, while chairman of the board and longtime company leader Bob Stanzione shifts to the role of executive chairman. Next TV editor and Multichannel News technology editor Jeff Baumgartner spoke with McClelland as he prepared to assume the CEO post on Sept. 1 and discussed his plans, priorities and vision for the company. Here’s an edited transcript of that conversation.

 

MCN: What are your top priorities as you enter the new role, and what can you tell us about your vision for Arris?

Bruce McClelland: The big priorities for us over the next couple years are around things like broadband expansion and the desire of all the service providers — whether you’re a twisted pair, fiber or an HFC provider — is to continue to drive up additional speeds and race toward this Nirvana of Gigabit per second to broad-based consumers around the world.

 

That’s the foundation of what’s driving our business these days. I feel like we’re fairly well-positioned. Shame on us if we don’t execute well and get our own fair share of that over the next several years.

 

We also feel fairly bullish on the entire video pay TV industry and believe that the service providers and their business around aggregating content and creating a compelling experience for consumers will really win out.

 

MCN: In January, Arris closed its $2.1 billion acquisition of Pace. What drove that deal, and what’s the status of the integration?

BM: The logic behind the acquisition was to continue to gain scale in this crucial industry and keep up with the overall consolidation. We’re also trying to do market expansion. One of the key verticals we didn’t have big exposure into was satellite. And [the Pace deal] kind of checked that box pretty well. And we wanted to grow our international business. Pace … had [more] international customers and a stronger international business.

 

Going through an integration like that where there are overlaps from a product and technology perspective is always a painful process. Synergy is a euphemism for reducing expenses and that ultimately impacts jobs. We tried to go through that in a very thoughtful fashion, but get it done, and get it done quickly.

 

We’re happy to report that it’s mission accomplished — a lot of that is behind us at this point.

 

MCN: With early trial work and initial deployments underway, how do you see the market for DOCSIS 3.1 sizing up? Do you think 2017 will be DOCSIS 3.1’s first big deployment year?

BM: I get a firsthand view of it. I have a DOCSIS 3.1 modem and service here [in Atlanta] from Comcast as one of the early friendlies. I can tell you that it’s addictive. When you have a Gig coming into your home [and] a good WiFi connection, I don’t think you’d ever go back.

 

And it’s not because you need a Gigabit per second sustained to watch TV. It’s the … burst speed that you get, whether you’re looking at your Facebook pictures and they’re just instantaneous. It’s like looking at a magazine.

 

I think we’re seeing a variety of strategies from our customers. Some are all-in; they’re going to move as fast as the technology can allow them to, and they see speed and bandwidth as a strategic weapon in the battle for consumers. Others feel like they have a great service using today’s technology and have a lot of room to grow into the bandwidth that they have available. They’ll take more time to wait for the devices to mature and the costs to come down.

 

There’s no question that 2017 will be a full-scale, volume deployment year, but it’s not like 100% of the new purchases [will be DOCSIS 3.1 products].

 

MCN: The set-top is still a big part of your business, but we still see headlines that declare the death of the set-top box is upon us. With the shift toward apps and virtualization, is there still a lot of runway left as we start to shift to gateway-client architectures?

BM: I like to use the term “expand the box.” It’s really a continued investment in advanced platforms, whether it’s for better WiFi coverage or 4K content distribution, or more storage in the home, more tuners, you name it.

 

These devices are more and more complex in combination with a variety of lightweight client devices in the home. That’s the big trend today. Will it be forever? Maybe not forever, but for quite a while. It’s going to be a strong, vital business for us for years to come. It doesn’t mean it’s going to be a massive growth business, but the idea that it’s rapidly going to decline — we just don’t see it that way.

 

MCN: We’re also keeping tabs on 4K and high dynamic range. It seems that there’s more interest these days in HDR because it can be applied to 4K and HD video. Is that consistent with what you’re seeing?

BM: I think you’d be hard-pressed to find a service provider that doesn’t have a 4K strategy of some sort at this point, whether they are very public and bullish about it or it’s more about getting ready. We have a lot of designs in the pipeline today focused on 4K and HDR. It’s an integral part of our portfolio strategy for most of our customers. They aren’t saying they’ll put a 4K box everywhere, but they really want to use it as a bit of a strategic differentiator for their offering. I think we’ll see that grow really nicely over the next several years.

 

MCN: Arris recently sold its Whole Home Solution product to Espial and struck up a partnership with them. Is this an indication that Arris will focus more on set-top hardware and leave the software and apps to others?

BM: It’s hard to imagine a bigger focus on our hardware platform than we already have. We did take a step back on that product line and tried to determine what’s the right path longer term for our customers. The investment that’s required to innovate on that very complex software technology, stay current, continue to add integrated over-the-top applications, etc., is fairly significant.

 

You hear us beat this drum all the time: You’ve got to have scale. We felt that the best path to get more scale with that software solution was to combine it with somebody that’s just laser focused on that part of the market. It will be the best thing for our customers and ultimately the best thing for employees.

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