As the new CEO of Arris, Bruce McClelland has some big shoes to fill as he takes on the top job at one of the industry’s top tech suppliers, while longtime company leader Bob Stanzione shifts to the role of executive chairman while remaining chairman of the board.
Multichannel News technology editor Jeff Baumgartner caught up with McClelland as he prepared to assume the CEO post on September 1 and discussed his plans, priorities and vision for the company. An edited transcript of the discussion, which was also distributed last week by Multichannel News in Philadelphia at the SCTE/ISBE Cable-Tec Expo, follows.
Multichannel News: What are your top priorities as you enter the new role, and what can you tell us about your vision for the company?
Bruce McClelland: The big priorities for us over the next couple of 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: On the Pace deal [closed in January 2016], what’s been driving that forward, and what’s the status of the integration?
BC: The big thesis or 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: And you'll have more trips to London, we presume?
BC: We do spend more time in London, no question about it. But as I go back to that international theme we talk a lot about wanting to grow our international business. That's an easy thing to say and a hard thing to do. You don't do it sitting in your office in northern Atlanta.
And international isn't a single market; it’s hundreds of local markets. For us to be able to grow our business I think building our customer intimacy within the international customer base and making sure we're tailoring and designing products that kind of hit the bull’s eye much more clearly that's what we mean when we say we're focused on international.
It’s a long-term strategy, not something that happens overnight.
MCN: DOCSIS 3.1 will continue to be a hot topic at [last week’s] Cable-Tec Expo. We're seeing some early trial work and initial trial work, but how do you see the market sizing up? Do you think 2017 will be the first big deployment year for DOCSIS 3.1?
BC: 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 Gigbit 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 D3.1 products].
MCN: Is there much interest from operators to start seeding the market with DOCSIS 3.1 modems as they prepare the network for D3.1?
BC: Everybody wants one, or ten, or 100, or 1,000. Not everyone wants 100,000 yet. There is a lot of “getting ready” still happening. You have to make spectrum available to put DOCSIS 3.1 in, and that takes effort to groom the channels...because all of the existing devices out there that are DOCSIS 3.0 don't talk DOCSIS 3.1.
MCN: The set-top is still a big part of your business, but we still see headlines that declare that the death of the set-top box is upon us. With the shift toward apps and the virtualization is there still a lot of runway left as we start to shift to gateway-client architectures.
BC: 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 HDR (high dynamic range). It seems that there's more interest these days in HDR because it can be applied to both 4K and HD video. Is that consistent with what you're seeing?
BC: 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 be more focused on set-top hardware and leave the software and apps to others that are more focused on those types of products?
BC: 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, et cetera, 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.
MCN: Arris also recently sold some assets to Watchwith. What's your thinking these days with M&A as you consider either refining the focus of the company or filling any other gaps in your lineup?
BC: Doing a portfolio analysis is a healthy thing for any company to do. certainly as we acquired pace and integrated their product lines we absolutely took a step back and said, what are the things that are working well, what are areas that are struggling and what areas that will be more valuable to somebody else in their hands.
It's not out of the question that we would have other things like that we would do. There's nothing imminent or anything. Similarly, we want to fill any gaps in the portfolio as well as look to expand the addressable market, whether that's new products for existing customers or new segments. We constantly look at those types of opportunities. It's an active part of our strategy.