Verizon & Vodafone Challenge NG-PON2 Vendors on Price

Some of the world's largest service providers have complained that equipment costs for the emerging NG-PON2 standard remain far too high.

Iain Morris, International Editor

October 24, 2017

4 Min Read
Verizon & Vodafone Challenge NG-PON2 Vendors on Price

BERLIN -- Broadband World Forum 2017 -- Verizon and Vodafone have put further pressure on NG-PON2 vendors to lower equipment costs as they gear up for investment in the nascent fiber-network technology.

Both operators remain committed to the standard, which has emerged as one of several next-generation network technologies that have grabbed operators' attention. But they continue to complain about the cost of the optical equipment being designed for NG-PON2 networks.

In a presentation at today's Broadband World Forum in Berlin, Vincent O'Byrne, a technology director at Verizon Communications Inc. (NYSE: VZ), said the optics ecosystem still needed more options to help drive down costs.

His remarks were later echoed by Marco Boselli, a fixed access engineer at Vodafone Group plc (NYSE: VOD), who told attendees that costs still remained too high despite some evidence of progress.

Much of the concern centers on the expense of the tunable optical transceivers that are used with NG-PON2. In theory, these should give operators more flexibility and capability than the fixed optics used in XGS-PON, an alternative standard that some operators prefer as a short-term solution.

Yet while shipment volumes remain low, equipment prices currently remain "prohibitive," according to Boselli.

The issue is now critical for Verizon, which aims to deploy services based on NG-PON2 for its business customers either this year or next. Indeed, O'Byrne had raised concern about optical equipment costs this time last year, at the Broadband World Forum event in London, but expressed optimism that it would be only "a matter of time" before prices fell to an acceptable level. (See Service Provider Split Emerges Over NG-PON2 Upgrade.)

Broadband equipment vendors including Adtran Inc. (Nasdaq: ADTN), Calix Inc. (NYSE: CALX) and Nokia Corp. (NYSE: NOK) have acknowledged there is a cost challenge when it comes to NG-PON2.

Speaking to Light Reading on the sidelines of today's event, Ronan Kelly, the chief technology officer of Adtran, said that NG-PON2 transceiver shipments would have to rise dramatically, ultimately hitting a "tens of millions" mark, to bring costs down to a level that would satisfy some operators.

Ana Pesovic, the fixed networks marketing director for Finland's Nokia, said the industry should take encouragement from what happened with GPON, an older fiber-network technology now in widespread use.

"In the beginning GPON was very expensive," Pesovic said during a workshop at the Broadband World Forum. "More than ten years ago the ONT [optical network terminal] was $700 and today we are at $50. As the volumes have been growing the price of the ONT has been declining."

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Despite arguing that costs remain too high, Vodafone's Boselli reckons that optical line terminal costs have been dropping as operators bypass other technologies and as more vendors launch products.

He also thinks progress on equipment interoperability -- something operators are desperate to realize as they try to avoid vendor "lock-in" -- could help to reduce prices.

For all the wrangling over equipment prices, NG-PON2 has now won backing from some of the world's biggest service providers, including not only Verizon and Vodafone but also European and US cable giant Altice .

Luis Alveirinho, the director of engineering and network operations for Altice subsidiary Portugal Telecom SGPS SA (NYSE: PT), said his company was already installing NG-PON2 and would soon launch a gigabit-speed consumer offering based on the technology.

Nevertheless, some operators, including Verizon rival AT&T Inc. (NYSE: T), believe that investing in XGS-PON in the short term before migrating to NG-PON2 at a later stage makes greater commercial sense.

Adtran's Kelly says that operators taking the NG-PON2 plunge want to avoid having to go through more than one upgrade cycle. They hope to realize cost savings and efficiency improvements by running their enterprise, residential and mobile backhaul services over a single NG-PON2 platform, he says.

Doing the same with XGS-PON would be more difficult, says Kelly, because that technology does not offer the same degree of flexibility.

— Iain Morris, News Editor, Light Reading

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About the Author(s)

Iain Morris

International Editor, Light Reading

Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).

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