Discussion with a number of industry participants revealed an unannounced Broadcom GPON program in advanced stages of development, with a design win at Alcatel-Lucent, the upcoming primary supplier of Verizon’s FiOS hardware as the carrier transitions away from BPON.

Broadcom designed the device internally despite a lack of active involvement in FSAN, the carrier-run group responsible for GPON interoperability that leads the ITU standards body. The device was first prototyped in an FPGA and the company now has silicon samples destined for testing in Alcatel equipment as well as Verizon carrier labs. Target deployment is 2H2009.

The chip includes the MOCA transceiver (revision 1.1) functions required by Verizon and currently supplied by Entropic in a standalone device. Broadcom is not doing the central office (OLT) chip and is initially focusing on a highly integrated gateway device for the customer location that displaces the standalone router and optical ONU terminal.

This is not unlike similar Broadcom products made for the Cable Modem and DSL markets. As cable/DSL broadband growth slows it is no great surprise that it plans to enter the FTTH chipset market. Broadcom and Broadlight, a private chip company which makes BPON and GPON FTTH chipsets, partnered in June 2004 to deliver FTTH chipsets (press release here). This partnership failed to reach any public fruition.

The PON chipset market reached $100M in 2007 but hasn’t reached the growth rates many hoped for. It is clear that Broadcom made the decision to enter this market not for the $100M market size, but for the opportunity to seize the MOCA market and continue to position itself as the chipset supplier for the connected home.

For a discussion of the difference between GE-PON and GPON see here.

Impact on GPON Chipset Vendors

While GPON attracts a great deal of attention it accounted for only 18% of ports shipped in Q108, as deployments on the scale of Asia’s (GE-PON – 60% share) have yet to begin worldwide (source Dittberner Associates). As written before, we staunchly believe the majority of the market for the next 5 years will be GE-PON, due to its dominance of Asian deployments. While the GPON market is smaller Alcatel-Lucent is the lead vendor for Verizon, which is the largest planned GPON deployment.

• Freescale was the incumbent supplier of GPON silicon to Alcatel-Lucent (press release here) and according to checks has been displaced from future designs. It is possible that Freescale is exiting the GPON business as a result of being displaced by Broadcom.
• Broadlight was a successful vendor of BPON (standard previous to GPON) chips to Tellabs and encountered much stiffer competition in the GPON marketplace. Broadlight continues to make forward progress with a GPON design win at Huawei, which is making inroads in the EMEA region. At this point Huawei and Alcatel/Lucent account for most global GPON shipments.
• PMC-Sierra, while a market leader in GE-PON based FTTH chipsets, has not made significant inroads in the GPON marketplace. The emergence of Broadcom in a critical tier-1 account will make it difficult if not impossible for PMC to reach the level of dominance in GPON that it currently has in GE-PON.
• Ikanos occupies a niche within the GPON hierarchy, focusing on hybrid VDSL/FTTH applications that leverage its VDSL expertise. Ikanos also has a moderately successful home gateway chipset (acquired from Analog Devices) that gives it the ability to produce a full GPON system on a chip for the ONU. It also can mimic the features of a comparable VDSL gateway. Broadcom also has VDSL technology, essentially negating any technology advantage Ikanos had.
• Several other vendors such as Conexant and Iamba face yet another competitor.

One can make a solid case that Alcatel-Lucent and Huawei and perhaps Motorola are the only high volume GPON suppliers for the foreseeable future. The win by Broadcom locks up a significant portion of this future market share and will make it difficult for other vendors to reach a dominant position in GPON in the same way PMC-Sierra did in GE-PON. Broadlight appears to be the only viable competitor to Broadcom at this point

Impact on GE-PON Chipset Vendors

We have no information that Broadcom is making a GE-PON device but given its strength in access chips and its efforts in GPON, it is hard to imagine something isn’t in the works. GE-PON accounts for the majority of the market and is closer to moving to a “White Box” model, where equipment design and manufacture is outsourced to Chinese and Taiwanese ODMs. This is how Cisco/Linksys, Logitech, and Netgear get the hardware to sell to consumers. Broadcom excels at this market and has the size and experience to dominate it.

The GE-PON chipset market is more mature, with nearly most chips being supplied by PMC-Sierra and the rest by Teknovus. PMC-Sierra dominates Japan but Teknovus has secured significant share in China.

We’ve speculated in the past (see Teknovus and Passave at a Crossroads) that Broadcom would enter this market. If China continues its trend towards deploying GE-PON it is a certainty.

Impact on MOCA chip Vendors

While GPON chipset market is (was) fragmented there is only one dominant MOCA chipset vendor – Entropic.

Entropic recognized a whopping 75% of their revenue from Verizon FiOS suppliers in Q108, or about $31.5M in quarterly revenue. Entropic provides the MOCA chipsets in equipment used by Verizon as part of it’s FiOS deployment. These chipsets enable the Verizon set-top boxes made by Motorola to communicate with the FiOS FTTH gateway (Tellabs) or home router (Actiontec) over existing in-home coaxial cable. In some cases the set-top boxes connect to the standalone home router, in newer configurations its functions are collapsed into the optical gateway itself.

As Verizon transitions from BPON to GPON the Tellabs FTTH gateway business will transition to Alcatel/Lucent. This is the design Broadcom has secured.

Broadcom’s new GPON chip includes the MOCA transceiver, using technology acquired from Octalica (see Press Release), which eliminates the need for a standalone MOCA device in the FiOS FTTH gateway or a separate chip in the Actiontec router. This is the chip currently supplied by Entropic.

Entropic recognized 39% of their revenue from Actiontec (26%) and Tellabs (13%) i
n Q108. The loss of these sockets as a result of the availability and deployment of an integrated Broadcom device would have a dramatic impact on Entropic’s revenue.

Another 36% of Entropic’s revenue during Q108 was from Motorola. While the Broadcom GPON chip is not a replacement for Entropic’s Verizon/Motorola set-top box application, Verizon will qualify Broadcom’s MOCA technology in their labs prior to deploying the new Alcatel FTTH gateway equipment. Once Broadcom’s Octalica-based technology is qualified in the gateway, it becomes a viable supplier of standalone MOCA chipsets for the Motorola set-top box. At best this would have a downward impact on pricing, at worst Entropic could lose the design.

Broadcom is already a major supplier of silicon to set-top box equipment makers such as Motorola. They supply much of the bill of materials for these systems and can use kit pricing to squeeze other vendors out. Broadcom also has the intellectual property to integrate the MOCA technology into set-top box system-on-a-chips, similar to what they have done with their GPON chip.

Based on Entropic’s Q108 customer profile, 75% of their revenue is immediately at risk once Broadcom’s GPON/MOCA device is qualified at Verizon.

Summary

While the arrival of Broadcom as a GPON supplier is certainly news and will change the lines of force within GPON chipset, it is Entropic that stands to be impacted most. Broadcom will leverage it’s GPON win to dominate the nascent MOCA market. While a single GPON chipset might fetch $20 or so and will generate $40-60M a year in revenue, Broadcom is using this as an entry point to address the larger MOCA opportunity of $125M (and growing 50% a year) currently owned by Entropic.

The larger goal is to seize control of the nascent home networking market. The PON ONU, DSL Gateway, or Cable Modem represents the commanding heights. Broadcom wants to make sure they control the silicon in the set-top box and the Cable/DSL/FTTH gateway because that it the surest way to control the silicon in the myriad number of devices that will appear in the connected home in the next decade.

Author is long ALU, BRCM, IKAN and short ENTR

In-Home Networking

The layer 1 home networking problem is officially solved. There were multiple products all leveraging ZigBee (low bandwidth wireless), HPNA (Coax & Phoneline), MOCA (Coax), HomePlugAV (Powerline), ultra-wide band (high bandwidth wireless) and last but not least – the latest WiFi 802.11n. There is no shortage of ways to move bits around the home and it is clear that physical connectivity is no longer the problem when it comes to the connected home.

These technologies are making their way into everything from home networking systems (Eaton had a nice ZigBee one here) to power strips ( with Ethernet RJ-45 jacks running over the power lines). As predicted last year (see "802.11n is Not About the Speed"), 802.11n went from prototype to mainstream technology in a year.

While everyone at the show was talking HD-DVD vs. Blu-Ray, the match up we found more interesting was MOCA (definition) vs. HPNA (definition). Both networking standards leverage pre-existing in-home wiring to provide a faster and more reliable alternative to 802.11 WiFi. MOCA re-uses the coax wiring that interconnects the televisions in your home while HPNA uses either the phone wiring or coax. At this point most of the carrier industry, with the exception of AT&T, has rallied behind MOCA.

Intellon, the HomePlugAV market leader and Entropic, the MOCA market leader were both at the conference. Both companies are new IPOs and carry the heavy weight of high investor expectations. Entropic’s technology is at the heart of Verizon’s FiOS TV deployment and is the mechanism for set-top boxes to stream video, as well as the mechanism for set-top boxes to communicate with the Verizon ONT in order to transmit on-demand video titles from the network to the set-top box. MOCA (and Entropic) scored a big win with both Comcast and Cisco (Scientific Atlanta) endorsing their technology with a next gen MOCA enabled cable box.

Entropic goes so far to position MOCA as an alternative to DOCSIS and a potential contender for next-gen cable broadband access (see here). This is stretching the limits of believability but does make for a good roadmap story. Entropic’s big problem will arrive once this market gets large enough to attract Broadcom and Marvel and the inevitable integration of MOCA technology in their system-on-a-chip begins.

Once someone can crack the whole-house networking software problem, all of these technologies should allow for rapid and inexpensive connectivity of every electric device in your home. There is a protocol for practically any application.

Vonage – Moving into Hardware

Vonage introduced some new products at the show that do a decent job of shoring up its branding position as well as making VoIP installation easier for your average Joe.

Not your Fathers caller ID box

The V-Portal is a combined VoIP adapter and caller-ID box designed to sit in your home office or kitchen. The box displays caller ID information, provides one-touch access to voicemail, traffic, weather and most importantly – is a simple interface for debugging any issues with the VoIP line. It also puts the Vonage brand front and center. While it isn’t a technical tour-de-force it is a decent effort to take the additional features VoIP provides and make them more consumer friendly. Expect this concept to be extended.

$99 with a $99 rebate

Another Vonage product melded VoIP with in-home networking. The ‘Vonage Whole House Solution’ uses powerline networking (there is that technology again) to turn electrical outlets into phone jacks. The VoIP base interfaces with up to 4 remote jacks using existing in home power wiring.

Both products, as well as future VoIP adapters are all 1-port routers, allowing installation into homes that lack a broadband gateway. The instructions are simple – consumers plug the Vonage box into their DSL/Cable Modem, and plug whatever was connected previously into the Vonage adapter. It is a more simple approach less prone to configuration errors. It also lets the Vonage box police packets to ensure quality of service.

Vonage still has enormous problems as a business entity but it is good to see someone at least attempting mainstream innovation in the consumer VoIP arena. Some VoIP hardware/software innovation will eventually arrive that compels consumers to migrate to VoIP not for cost reasons, but for features.

Sprint XOHM WiMax

Motorola Wimax Modem

There was a very under whelming presence by Sprint’s WiMax division considering they are launching the service this quarter. Little detail was available on pricing other than "It will be like WiFi" and "It won’t be complicated". Xohm plans to do away with contracts altogether, allowing consumers to buy WiMax modems on the open market and plug them in – just like WiFi. This is perhaps the biggest advantage XOHM has over incumbent HSDPA and EV-DO wireless data providers.

I didn’t see anything that changed my mind to believe WiMax would be a sleeper hit given the amount of money required to support a parallel infrastructure rollout in the US. It reminded me of one of the worst investments ever, Metricom.

Human Interfaces

The Nintento Wii and the Apple iPhone have done yeoman’s work introducing the general population to natural interfaces. It would appear natural interfaces are rapidly penetrating every type of consumer product imaginable from voice activated car stereos (Ford SYNC) and GPS navigators to gesture recognition to control TV’s. Toshiba was exhibiting technology allowed people to pause the TV simply by gesturing from the couch with an open palm. Microsoft Surface had multiple demos, and Toshiba also exhibited something similar using projection technology rather than LCD displays. Nuance (NASDAQ: NUAN) is the company that is behind much of the voice recognition.

This technology trend was overlooked by the mainstream press, but is in the very early stages of evolution. Natural interfaces were everywhere at CES though not in an overt way. Expect CES 2009 to feature a bevy of products that use natural interfaces to allow hardware to blend more effectively into our lives.

Thin is In

The TV guys are struggling to repeat the fanfare of the last few years when they eliminated the CRT from the western world. If LCD displays were removed from the show, CES would be 2/3 the size and a lot more meaningful.

It is safe to say that LCDs are getting cheaper, incrementally better, and much thinner. Virtually everyone was showing LCD TV’s with a wireless video connection, eliminating the need for an HDMI connection. Lost on everyone is why this is such a big deal, given you still need to plug it into an electrical socket. As consumers, help us understand why we should care. Also, LCDs are now ridiculously thin. It is an amazing technical achievement but again, once mounted on the wall does anyone care if it is one or three inches thick?

Media Extenders

Another year, another set of media extender products promising to simplify the task of sharing your music, photos and video around the house. No one has cracked this problem yet because it isn’t a technology problem.  The barriers are media companies who all want to do one-off licensing deals and companies like Apple, Sony and Microsoft who are all shooting for market dominance. The appearance of home network-attached storage will be part of the solution. It seems as though the carriers could play a role here though none of them are making an attempt. No widget invented between now and 2009 will provide the answer.

UMPC’s – EEPC, OLPC

The little laptop that could

The coolest mainstream gadget goes to the Asus EEPC, a $299 full-fledged Internet laptop. Everyone has been trying to make a micro PC but no one has targeted the low end as successfully as Asus. The $199 OLPC was on display at the Marvell booth and illustrated what $200 can buy, though the EEPC was a better value. Both computers are perfect for kids, particularly if the goal is teaching old-school computing as both are based on Unix and are very hackable.Get your hands on an EEPC and you’ll understand – the future of computing volume growth is in these cheap terminals.

Phones as Kitchen Sink

CES isn’t the uber-mobile phone show but several companies exhibited new hardware. Most intriguing was Garmin, the GPS company and maker of standalone GPS hardware. They introduced a new SD memory card that you can insert into any mobile phone and immediately turn it into a Garmin-like device, complete with all of the voice and database features of one of their standalone units. It doesn’t take long to realize that such a product is upgradeable on the fly and also has real-time data access. Needless to say this was a really smart move by Garmin, moving them into the software/IP domain and out of the hardware domain, something they need to do to retain such a lofty valuation.

It all seemed a little…bubblesque.

Speaking of lofty valuations, I stumbled upon Garmin IR Manager Polly Schwerdt providing an update to at least 40 investment analysts furiously punching their Blackberries (notice everyone’s head is looking down). There was literally a mass of people jockeying to listen, each trying to distill some unique kernel of wisdom while loud rap music blared from a nearby booth. It was Wall St. herd thinking captured in an image.

LG and Motorola showed off some new high end video and camera phones that could easily displace the digital cameras of non-prosumer users (like yours truly).

Other

• HD-DVD related companies were ghost towns. One month ago pundits claimed the Blu-Ray / HD-DVD war would last another year and that the battle was stalemated. Then, one studio shifts and suddenly the game is over. If you’re looking for a black swan in technology, this is as close as it gets. As predicted, Blu-Ray wins.
• Many of the component companies moved their booths off-site. Broadcom, Marvell had most of the action in the walled gardens.
• CES was definitely not as crowded this year. Cheap rooms were available at last minute. Cab drivers indicated that they were afraid of losing CES.
  Welcome to CES
• Vegas is even more expensive. It makes Manhattan look cheap. I still do not understand this and probably never will. People who say that Vegas is recession proof because people always gamble overlook the fact that much of the hotels fixed cost is now carried by expensive food, drinks, and $500 ‘bottle service’ at a nightclub.