Comcast tightens grip on CableOS with eye on X1-esque licensing

Almost three years in the making, Harmonic has finalized the deal of a lifetime – signing up cable behemoth Comcast to license its CableOS platform over four years for at least $175 million in software license fees.

First things first though, Comcast has hinted at a network virtualization project which in the future it would license to cable operators in much the same manner as its X1 platform. If the syndication of a virtualized cable modem termination system (vCMTS) is anything as successful as its X1 licensing business, then the virtualized cable market is in for a shakeup of astronomic proportions. In doing so, Harmonic’s CableOS, which Comcast played a part in the design of, could become not just the dominant virtualized cable software supplier in the US but in Europe too.

When Harmonic announced it had cornered a sizable chunk of the Comcast account back in September 2016, there was little doubt then that the path towards virtualization was in full swing. Vendors like Arris (CommScope), Cisco, Casa Systems and Nokia Gainspeed had been pioneering vCCAP as far back as 2013, making Harmonic’s Comcast win all the more impressive.

Comcast’s increasingly close ties with Harmonic, revealed this week in an 8K filing, come after the operator completed field trials of CableOS last summer and reiterates its commitment to virtualization of network components spearheaded by DAA (Distributed Access Architecture).

At the time of the initial agreement between Comcast and Harmonic, the announcement spoke not about virtualizing the CCAP, but creating a new operating system for CCAP masquerading as CableOS, which implied the use of Software Defined Networking (SDN) putting the control plane in the middle of a network and the data plane out among the forwarding components, like the RF tuners.

But at the warrant announcement the company made it clear that the system can run with a remote or centralized PHY, so that it did anticipate a distributed architecture. So, the COTS (commercial off the self) servers can be in a private cloud or out on the edge or even, for some less conservative operators, in a commercial cloud. Ultimately, the CableOS software-defined CCAP product is about taking the entire cable DOCSIS upgrade footing down to COTS servers.

CCAP itself is the combination of the network server which drives QAM TV with the CMTS which in turn drives DOCSIS connections. Almost all DOCSIS 3.1 is being delivered in CCAP format.

Yet Harmonic CEO Patrick Harshman muddied the waters during an earnings call in April, saying there are “others involved besides Comcast” with regard to CableOS – citing but not naming 4 out of the top 8 North American and European cable operators.

“It’s turned out to be a longer journey than we thought, particularly the end-to-end DAA system involves a lot of other components, not just the virtualized CMTS. So, what’s happened is the pie has gotten larger, but also more complex. That complexity has manifested itself as more time to market. And the good news is the resultant opportunity and the resultant resonance with more than just one operator, have both moved in a very positive direction from our perspective,” said Harshman on Harmonic’s April earnings call.

Harmonic has enjoyed a commendable rise in the converged cable access platform (CCAP) arena to complement the successful compression business, but Comcast being Comcast, it also deployed Arris’ E-6000 Gen 2 modules in early 2018 for CCAP architecture. This was interesting considering the agreement in 2016 effectively made Harmonic the favorite supplier at Comcast.

Faultline Online Reporter contacted both Harmonic and Arris for comment and neither has responded. A switch out scenario is unlikely as such a substantial loss would have been noticeable at Arris and indeed the products can work side-by-side. Arris is known for providing flexibility in CCAP, supporting both R-PHY and R-MAC-PHY. In this instance, Comcast aimed to achieve up to 70% increase in headend service group density without consuming more rack space, with a software-based headend upgrade path to the Remote PHY (R-PHY) DAA.

It seems then that because Comcast was using a first generation CCAP product three years ago when Comcast and Harmonic began developing CableOS, with no R-PHY division, it needed a product overhaul for which Arris duly stepped up to the mark.

Indeed, the flood gates opened in March when The National Cable Television Cooperative (NCTC) began offering the CableOS virtualized cable access product to its group members – comprising 750 tier 2 and 3 cable operators. The aim is to open the door to smaller operators for the migration of broadband services to new DOCSIS 3.1 gigabit internet, using the software-based CableOS product to leapfrog older CMTS platforms.

Only a month ago, Harmonic added a new low-latency mode to its CableOS virtualized cable access platform, enabling double throughput performance using 1-RU Intel servers with a 100 Gigabit Network Interface Card and virtual segmentation with network-wide QoS capabilities. Harmonic says the upgrade ultimately helps operators break out of the cycle of waiting for and purchasing expensive and quick-to-be-obsolete custom hardware-based CMTS platforms.

Harmonic’s next quarterly results are due out in a few weeks and with a $50 million upfront payment from Comcast, the books should be looking healthy. It’s worth noting that Comcast can buy stock in Harmonic, up to 10% of its value, over the next 4 years. Harmonic’s market cap currently sits at around $660 million, spiking sharply after the 8K filing was uncovered, and a rise of more than $200 million since the initial Comcast CableOS agreement three years ago.

Edit: Arris responded in an email to Faultine Online Reporter, “Comcast is a significant I-CCAP customer for us and we anticipate continued ongoing investment in this platform as the migration to the new DAA architecture occurs over several years. We are providing our customers a graceful migration leveraging the installed base of robust E-6000 I-CCAP edge routers as well as fully virtualized version of this field hardened, feature rich product. We are also a major supplier of outside plant fiber nodes, and have a compelling product set and roadmap supporting the key DAA elements (Remote Phy, Remote MACPHY) as capex dollars shift towards the edge of the network in this new architecture, a definite plus for CommScope.”