No Sure Bets in NG PONs
That's a question we set out to answer recently in a survey of almost 100 network operator executives, and the results – just published in Heavy Reading's new report, "Next-Gen PONs & Fiber Access: A Market Perception Study" – make for thought-provoking reading.
We defined next-gen PONs to include the ITU 10G standard (XG-PON), the IEEE's 10G-EPON standard, and WDM PON. And respondents to our survey reported strong interest in all three variants – at least in principle – with more than half saying they were investigating or actively monitoring developments in these areas.
Getting more bandwidth to high-end residential users, and to business customers, were the key catalysts for moving forward, respondents said, with end-user bandwidth demand expected to grow at 40 percent per annum over the next five years (though this average conceals wide variations in opinion). Most took the view that demand would look after itself.
But that does not mean a transition to NG PONs is imminent. The big obstacle – one that came up time and again in our survey – is cost. Unless the cost can be held down as low as possible, NG PON is a non-starter for now, except in a few niche markets.
As a result, we think that widespread deployment of NG PONs is pretty unlikely before 2013 – and the longer it takes, the stronger the potential position of WDM PONs, a more radical alternative that is not yet standardized. Survey respondents told us 10G looks like the way to go for now, especially for FTTH, but sentiment can change fast.
And as in other areas of the FTTB and FTTH market, the situation will vary enormously from country to country, with a few pioneers – KT Corp. , NTT Communications Corp. (NYSE: NTT), China Telecom Corp. Ltd. (NYSE: CHA), perhaps Verizon Communications Inc. (NYSE: VZ) – moving earlier than most, but others holding back or using simpler fixes for high-end residential customers such as 1G "active" or point-to-point Ethernet solutions.
For both wireline operators and vendors, it's a bit of a tricky bet, and becoming trickier by the month. Among the many variables that must be built into any business decision: the potential of G.vector and DSM to delay initial FTTH deployment; deep fiber investment by cable MSOs, which could both promote and hinder the case for NG PON; the imminent deployment in some places of LTE, which can also be both positive and negative for PON investment; and the future regulatory and political environment. Not least: Where are the big, fat services to justify NG PON? Can 3DTV or consumer telepresence really drive all that investment – and if not, what can?
I look forward to investigating these issues further in Paris (and discussing it with those of you attending), and reporting back here in a couple of weeks. Watch this space for more.
— Graham Finnie, Chief Analyst, Heavy Reading