The incredible shrinking cable modem termination system (CMTS) sector got even smaller Friday.
Juniper Networks Inc., after buying its way into the CMTS market back in Nov. 2001 by putting up $200 million for Pacific Broadband Communications, has decided to scuttle its G-series CMTS line and form a deal with Arris.
Under the co-marketing deal, Arris will offer Juniper's IP routing gear to cable operators, and Juniper, in turn, will have access to Arris' line of CMTSs, including its flagship Cadant C4, low-end Cornerstone CMTS 1500 and mid-capacity C3.
Juniper did not say specifically why it decided to stop making CMTS products. The equipment had won some international business, but had not gained much traction in the U.S. cable market. Because Juniper's CMTS used its own custom silicon rather than relying on suppliers such as Broadcom Corp., it was also on the hook for those R&D costs.
Juniper said it will support the G-series product and fulfill its "contractual commitments." The company also noted that the decision to discontinue the G-series will necessitate a one-time charge of between $10 million to $15 million for costs tied to layoffs, facility closures and contract terminations.
What remains a bit unclear is how Juniper's decision will affect Scientific-Atlanta, which, through a separate deal, was reselling Juniper's CMTS gear under the Prisma G10 and Prisma G1 brands.
Because Juniper has decided to discontinue its CMTS line, "it would appear that (S-A's) relationship with Juniper would be moot," an S-A spokeswoman said, noting that how everything will shake out remains under discussion. She noted that S-A does not currently have a deal to distribute Arris' CMTS products.
S-A does not break out CMTS revenues separately, but CMTS sales have been insignificant enough that Juniper's decision won't impact S-A's revenue guidance. S-A's only announced sale involving the Prisma CMTS line was with com hem, a Swedish MSO.
Juniper's move was the latest in a consolidating CMTS market, predicted for months by industry analysts such as Patti Reali, principal analyst with Gartner Dataquest.
"Fundamentally, the market was not going to be able to support all of these (CMTS) players," she said. Reali's most recent forecast puts CMTS revenues at $473 million this year, $533.5 million in 2004, and $692.4 million in 2007.
Com21 Inc., as expected, filed voluntary bankruptcy last month. It has since agreed to sell its DOCSIS CMTS assets to Arris for $2.8 million, and to license its DOCSIS and EuroDOCSIS cable modem technology to Taiwan-based CastleNet Technology for undisclosed terms.
The recent consolidations have strengthened Arris' position in the market significantly, she said, noting that Arris' newfound access to Juniper's routing know-how will put it on even more stable footing with CMTS/routing segment leader Cisco Systems.
In addition to Cisco and Arris, the CMTS market continues to be led by ADC and Motorola Broadband. Still on the outside looking in from a market share perspective is Terayon Communication Systems, still the only vendor with a DOCSIS 2.0-qualified CMTS.