The manufacturers which produce home gateways for the operators are forced to innovate in order to survive: 10G fibre, the latest Wi-Fi generation, voice assistants, and so on! It is necessary to maintain product value while some features are disappearing (DVD, storage , etc.).
Blow by blow. A few months after the launch of the latest Freebox, on July 18, SFR presented its own box with the latest generation state-of-the-art
technology for which it ultimately charged 5 euro per month in addition to
the subscription, we learned this Tuesday. Among operators, the “box” remains a
crucial element for differentiation. Behind this commercial struggle hides a
frantic race on the manufacturers’ side.
to the general public, there are about thirty manufacturers fighting for a share
on a 12-billion-dollar home-gateway market, representing 250 million users,
according to IHS Markit. TV set-top boxes represent an equally sized second
French manufacturers in the Top 5
groups alone account for two thirds of sales. And among them, two are French – Technicolor, world's number one in the last quarter
of 2018 according to IHS, with 14% market share, and Sagemcom, number 5 with 9% of global sales –
who must face the American Arris and especially the Chinese Huawei and ZTE.
“Our survival amongst Asian providers depends on our ability to
integrate the latest technologies and to customise to the maximum, explains the European player. It is not
about offering off-the-shelf products.”
European operators, and particularly the French, are fond of these custom-made boxes. Technicolor and Sagemcom claim just under a third of the European market. In France, the former supplies Bouygues Telecom, while the latter works with all operators with their latest box ... except for Free , a newcomer in the field which jealously maintains control over the design and production of its Freebox.
manufacturers – as for operators – the key issue is maintaining product value.
An entry-level home gateway costs about thirty euro, compared to one hundred
for a premium box. However, year after year, boxes are losing their appeal.
of the features become obsolete with changes in usage. The DVD player has
disappeared from boxes. The fixed telephone jack is a relic without much
interest. Integrated hard drives no longer fascinate customers. “For most people, cloud options such
as Dropbox or iCloud suffice. And expert users are turning towards cutting edge
storage solutions, which we are not going to offer to everyone”,
explains Mitja Golja, chief technical officer of Iskratel, a Slovenian
manufacturer with a strong presence in Eastern Europe, but also a provider to
alternative French operators.
Even the TV set-top box may be destined to disappear. Young people are using video on demand on the internet. And homes are equipped with smart televisions that only need access to the internet. “4K has given a new lease of life , but the trend is rather downward”, confirms one manufacturer.
growth of 10G
order to resist, one must innovate. The key component is, of course,
connectivity. The best performing boxes – using either cable or fibre
technology – are more expensive. And the race is intense. This year, Free was the first in France
to offer a box capable of handling 10 Gb/s – ten
times the standard data rate offered by its competitors.
“10G technology remains marginal. They are three times more expensive,” relativizes Mitja Golja. “No one uses it yet. It is not necessary for viewing streaming video, even in 8K. In fact, it is currently only used to conduct speed tests… However, with virtual reality, this is going to change. And as soon as big Chinese or American operators roll out tens of millions of 10G boxes, the costs will drop. There will only be a premium of 20 or 30 %.”
The margins are under pressure
In parallel to data rates, much is bet on Wi-Fi. How to offer quality wireless network inside the home? The integration of new standards, such as the one that SFR proposes with its new Box 8, may help. Yet it is still necessary to have smartphones, tablets or other compatible computers. The industry has therefore massively turned to Wi-Fi repeaters as a growth driver.
For manufacturers, it is crucial to attract operators by offering the cutting-edge technology... but also for maintaining their margins, especially with prices of electronic components (such as microchips) soaring. In its latest annual report, Technicolor estimates that this factor alone costs them 45 million euro in EBITDA in 2018, or 2 points of their margin – a sufficient reason to double their efforts to go upmarket again and again.