OK, let’s first point out that the “Nielsen’s Law” we’re talking about is unrelated to the research and TV ratings company.
Arris hosted its annual investor and analyst conference on Wednesday, laying out the company’s strategy and growth prospects.
One chart in its slide deck caught my eye: Arris plotted the evolution of downstream Internet connection speeds for the last 25 years against Nielsen’s Law, including up to the recent 300 and 305 Mbps tiers announced by Verizon FiOS and Comcast, respectively.
The “law,” posited by Web design guru Jakob Nielsen in 1998, predicts that broadband speeds will increase 50% per year.
It’s held true so far but — wow. Will broadband subs be demanding 73 Gigabits per second downstream by 2030? That seems like a redonkulous amount of capacity. On the other hand, do you remember when people thought 1 Megabit per second cable modems were going to be more bandwidth than anyone would ever need?
In the nearer term, Arris says it’s prepping to hit up to 10 Gbps downstream and 2.5 Gbps in the next few years, referencing the “DOCSIS NG” white paper it co-authored with Cisco, Motorola and Intel that outlines technical strategies to get there over HFC (see A Blueprint for Ultra-Fast DOCSIS).
(As an aside: Google Fiber is literally ahead of the Nielsen curve with the 1-Gig symmetrical service — a good thing, of course, if you are lucky enough to live in one of the “fiberhoods” in the Kansas City area that the Internet giant is selectively hooking up.)
As for what’s fueling that bandwidth usage now and in the future, Arris cited “cloud computing,” including huge growth in Internet video consumption and operator-delivered IPTV, and 4K TVs (see TV’s Next Target: 4K Displays).
The wildcard in all this? How quickly broadband providers will upgrade their networks to keep pace with Nielsen’s curve, and whether that 50% annual growth starts flattening out. As Arris notes in its slides: “MSOs will have to make network investment in order to enhance supply capacity.”
And note: HFC at 750 MHz tops out at around 4.4 Gbps downstream, according to Arris’ chart. If (when?) bandwidth demand goes higher, cable will have to start expanding above 1 GHz or deploying fiber-to-the-home.
The vendor did call out the recent news from Comcast — Arris’s No. 1 customer — that it doubled the speeds of its 25 and 50 Mbps tiers, to 50 and 105 Mbps respectively, for no additional charge. According to Comcast, the bump is the seventh time since 2002 it has increased broadband speeds. It’s worth noting that the MSO’s 305 Mbps tier, at $300 per month, is priced not to move — looks more like anti-FiOS marketing ammo (see Comcast Debuts 305-Meg Internet, Doubles Speeds For Two Broadband Tiers).
Here’s the link to download the 6MB PDF of Arris’s presentation. (Which would have taken around one hour over a 14.4 Kbps modem 20 years ago!) There’s a bunch of other interesting stuff in there.
Meanwhile, Wall Street reaction to the Arris presentation seemed fairly positive.
Raymond James analyst Simon Leopold said he left the analyst meeting “feeling constructive. Although we see some risk to margins from unfavorable mix shifts, sales growth and cash generation look promising. We think sales growth and a developing appreciation for the cable industry’s evolution and Arris’s role in it helps stock sentiment.” Arris projected 10% organic sales growth in 2013, vs. Leopold’s 9% estimate, and expense growth of 3% vs. his 4% estimate.
Jefferies & Co.’s James Kisner said the Arris presentation was “very upbeat,” saying in a research note that the company “reinforced the key points of our positive thesis around Arris. Commentary around Moxi, operating expenses, and CMTS was incrementally positive versus our expectations.”