During 2007, the world's telecom carriers connected another 9 million homes to optical fiber; by 2010, if current trends continue, the number of homes connected to FTTH will pass 50 million. A massive transition to all-fiber access is now all but inevitable everywhere. Yet the road to FTTH is full of twists and turns that make it difficult and frustrating for vendors to negotiate – not least in determining what technologies will be used, where, and when.

For a start, despite the strenuous efforts of GPON cheerleaders such as Alcatel-Lucent (NYSE: ALU), there's no chance that GPON is going to dominate global FTTH deployment any time soon. In fact, as we reveal in Heavy Reading's new report, FTTH Worldwide Technology Update & Market Forecast, the deployed bases of the three main FTTH technologies – GPON, GEPON, and active or point-to-point (P2P) Ethernet – are likely to be more or less equal, by which time around 90 million homes will be connected to fiber.

Given the hyperbole that has swirled around GPON over the past two years, this might seem a surprising conclusion. But the fact is, there is no "global" FTTH market today, and there will be no global FTTH technology – at least, not in the foreseeable future.

Why so? First of all, no two national markets are the same – and even within a single city, one technology may not fit all needs. In Japan, by far the world's biggest FTTH market with more than 11 million connected homes, GEPON is universally used to connect single dwellings, while active Ethernet dominates in multi-dwelling units (MDUs), and there's little sign that a shift to GPON in either case is imminent.

Given the size of the Japanese market, that alone means that GPON cannot win the race in terms of sheer numbers any time soon. And although GPON looks certain to be the technology of choice for major incumbent telcos in both the U.S. and Europe, active Ethernet is actually more widely deployed in Europe today – and is likely to maintain that position right through 2012.

The truth is that although the International Telecommunication Union (ITU) Full Service Access Network (FSAN) group has worked very hard to establish GPON as the worldwide reference for FTTH, its strengths – high downstream speeds, carrier-class features, and low opex, among other things – haven't convinced everyone that it is the right technology everywhere, at least not yet. For now, GEPON gear is cheaper and more widely deployed – persuasive qualities in its Asian homeland.

Meanwhile, active Ethernet advocates point to their technology's simplicity, low-cost CPE, and suitability for use in so-called "open access" networks, such as those being built by municipalities and utilites worldwide. Advocates such as Cisco Systems Inc. (Nasdaq: CSCO) argue that incumbents that deploy GPON would in effect be making it more difficult for regulators to ensure that the new fiber networks can be used on equal terms by other service providers – an argument that certainly carries weight in regions such as Europe, where DSL unbundling has driven a vibrantly competitive market.

There is plenty of room for argument around the edges. For example, which way will China jump? China has already brought fiber into or very close to apartment blocks serving at least 15 million homes – far more than anywhere else. Almost all of it is simple Ethernet switching with very little PON deployed to date, but the big Chinese telcos are all preparing to move to PON. While GEPON currently has the upper hand, the longer the Chinese telcos delay, the more likely they may opt for GPON – potentially tipping the scales decisively in its favor.

Widespread deployment of GPON elsewhere would certainly help to make the case in China, since mass deployment will drive down the cost of equipment, and cost is the big issue there: Telcos are seeking a combined price for ONT and OLT of $200 per customer – less than half the typical current price.

However, widespread deployment of GPON probably isn't coming in 2008. While most GPON vendors are bullish about the medium term, it's been a long, slow haul, with many projects running late. Verizon Communications Inc. (NYSE: VZ) has slipped behind its original schedule for GPON; Orange (NYSE: FTE), the biggest European telco committed to GPON, is also behind schedule; and vendors themselves are mostly cautious about the coming 12 months, betting that scale deployment won't really begin before 2009.

It's a Catch-22 that can only be resolved by time – and based on current trends, within a few years, carriers and vendors will need to be thinking about the next generation of technology. In addition to higher-speed P2P Ethernet, WDM PON and 10G PON are both being prepared for launch around the 2012 time frame.

Yet for all the current frustrations, this is a market manifestly worth pursuing and investing in. The transition to FTTH is a once-in-a-generation infrastructure overhaul, and the winners over the next five years will be very well placed to reap continuing benefits for years to come. FTTH is a 20-year project that will entail hundreds of billions of dollars of telco spending, with the aim of achieving domination of wireline networks for decades to come. By any reckoning, that's a prize well worth pursuing – despite the twists and turns in the road ahead.

– Graham Finnie, Chief Analyst, Heavy Reading