El Segundo, Calif., Feb. 11, 2009 -- The telco broadband market experienced a significant downturn in new subscriber additions during 2008, according to iSuppli Corp. "New telco broadband subscriber growth saw a 9.1 percent decline in 2008 following double-digit gains during the prior five years," said Steve Rago, principal analyst, broadband and digital Home for iSuppli. "Hardest hit was North America, with new subscriber additions in 2008 amounting to 3.1 million, down 56.1 percent from 6.5 million in 2007. The world's developed regions reached broadband saturation during 2008, while developing regions continued to grow. Of these regions, Latin America experienced the strongest growth. While the number of new broadband subscribers declined, global revenues from broadband equipment sales increased year-over-year by 9 percent."
Getting Your Fiber
Driven by the need to upgrade the broadband access network, new Fiber-To-The-Home (FTTH) connections grew by 90 percent and new VDSL connections grew by 54 percent compared to 2007. In the cable world, many European and American operators introduced DOCSIS 3.0, significantly increasing broadband access data rates.
iSuppli believes 2008 was a milestone in the growth of very high speed access networks. Growth in this segment of the broadband market will continue to accelerate for several years.
Telco TV was a major driver of high-speed access upgrades during 2008. Virtually every telephone company and competitive access supplier deployed or made plans to deploy television services during 2008. Overall telco TV subscribers grew by 8.8 million to end 2008 at a total of 18.5 million.
Telco TV during 2008 transitioned from the early-adopter stage to the growth stage. Global revenues for equipment supporting telco TV ended 2008 at $5.8 billion. Over the next five years, revenue in this segment will grow at a Compound Annual Growth Rate (CAGR) of 20 percent, iSuppli forecasts.
IPTV Becomes Must-See TV
Internet Protocol Television (IPTV), which is a superset of telco TV, will change the way the world views entertainment both inside and outside the home. IPTV represents one of the most significant paradigm shifts in the communications 
world since the rise of the cell-phone market.
The battle for the broadband subscriber bundle between the telephone companies, Multiple Service Operators (MSOs) and Direct-to-Home (DTH) satellite providers picked up momentum during 2008. Regional skirmishes during 2007 transformed into major battles in 2008. North America was the most hotly contested battleground.
MSOs, led by Comcast and Time Warner, added 4.3 million new voice subscribers, most of which were previously telephone subscribers. The MSOs in North America also won the battle for the broadband connection, adding 4 million subscribers compared to 2 million for the telephone companies.
The telephone companies countered with a net addition of 3.3 million television subscribers. The broadband subscriber bundle battle will intensify during 2009, even in the face of economic conditions, and will spread to Europe, iSuppli believes.
Broad Change for Broadband
The broadband equipment landscape also experienced shifts during 2008. Perhaps the largest was in DSL broadband infrastructure port shipments. Alcatel-Lucent, the long-time market leader, saw its share of unit shipments drop 6 points to 27 percent, while China's telecom equipment giants-Huawei and ZTE-gained 6 and 4 points of market share respectively.
On the cable front, Cable Modem Termination Systems (CMTS) leader Cisco increased its hold on the downstream port shipments market, increasing its share by 13 points to reach 59 percent. In contrast, No.-2 player Arris dropped 12 percentage points of share, ending the year at 18 percent. Motorola ended with a 13 percent share.
Market shares in the cable modem segment were virtually unchanged from 2007 to 2008, with Motorola remaining in the No.-1 position followed by Cisco, Arris and Thomson.
DSL silicon also underwent changes during the year. One of the early and dominant players in the ADSL market, Centillium, sold its DSL business to Ikanos and then was purchased by TranSwitch, leaving just three major ADSL chip suppliers: Infineon, Conexant and market leader Broadcom. These three suppliers accounted for 95 percent of the market in 2008.
In the fast-growth VDSL market, Ikanos continued to be the market leader but lost 11 points of share of ports shipped compared to 2007 as new entrants to the market, Broadcom, Conexant and Infineon, made gains.
The (Telephone) Lines They Are A-Changin'
In summary, 2008 was a year of change in the broadband and telco TV markets. Broadband was no longer driven by new subscriber growth but rather by the need to upgrade the access plant to very high-speed connections.
Telco TV in 2008 transitioned from the early adopter stage to the growth phase of its life cycle. Together, both of these markets experienced increased spending even as service providers curtailed overall expenditures on communications equipment. This year will be similar to 2008, with increasing investment on very high-speed broadband, DOCSIS 3.0, VDSL and FTTH and continued growth in telco TV, while spending in other segments will decrease.
