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PON’s momentum continues: an overview of market dynamics including importance of sustainability

By Julie Kunstler, Chief Analyst, Broadband Access Intelligence Service


Summary

PON-based networks are continuing to grow for both public networks and private networks, reflecting fiber efficiency and energy savings. Furthermore, PON is easy to upgrade without changing the underlying ODN (Optical Distribution Network). The adoption of 10G PON (XGS, XG-PON, and 10G EPON) is well underway by many CSPs (Communications Service Providers) in numerous countries and regions, including China, North America, and Western Europe. Other countries and regions are accelerating GPON network deployments, such as India and Africa. Numerous CSPs have announced 25G PON deployments and initial 50G PON shipments are expected in 2024. In addition, POL (Passive Optical LAN) is gaining momentum, supporting a wide range of verticals, including factories, transportation and logistics facilities, universities, utilities, and government campuses.

PON equipment and optical component forecasts

Omdia’s optical component and equipment forecasts reflect PON’s momentum throughout the world, for example:

  • PON equipment revenues are forecast to exceed $21bn in 2028, representing a CAGR of 11.7% from 2022.
  • The total PON optical component revenue is forecast to exceed $4.9bn in 2028, reflecting respective CAGRs of 2.6% for OLTs, and 16.5% for ONTs/ONUs, from 2022.

All regions and China contribute to the growth:

  • China’s consumption of PON ports reflects upgrades to 10G, FTTR (fiber-to-the-room), 10G connectivity for enterprises and smart city applications, and initial 50G PON deployments.
  • In the rest of Asia and Oceania (RoAO), numerous operators are upgrading to 10G, while other operators are beginning or continuing large scale FTTH network builds.
  • EMEA’s growth rate reflects both network builds and upgrades. Fiber penetration rates will continue to grow in Western Europe and Africa. EMEA’s forecast also reflects the growing presence of overbuilders, such as alternative network operators, particularly in Western Europe.
  • In North America, network builds and upgrades are accelerating among large and small telco and cable operators, along with the reuse of PON infrastructure for nonresidential services and applications. Current and forthcoming public funds are fueling upgrades and new operator entrants, such as utilities, municipalities, and rural co-ops.
  • In Latin America & the Caribbean, CSPs are also investing in PON-based access networks.
  • POL is gaining momentum across a wide range of verticals in many regions throughout the world.

CSPs are offering higher and higher speed tiers backed by fiber-based PON

The average global broadband speed for residential subscribers is forecast to exceed 1G in 2028, compared to 259Mbps in 2022. Reliance on digital applications, amplified during the COVID-19 pandemic, has not vanished. Consumers have become accustomed to receiving reliable and consistent broadband service and are now driving demand for gigabit services. The introduction of metaverse and AR/VR applications into wider public use will require superior broadband quality and low latency connectivity.

Furthermore, many residential subscribers are willing to pay a premium for higher speed services. In some cases, the price difference between 500Mbps or 300Mpbs versus 1G is less than $10 per month but it matters to ARPU. For example, multi-gig is enabling several CSPs to increase consumer fiber ARPU quarter over quarter. In addition, some residential customers are willing to pay “small” premiums for certain services, such as prioritizing gaming traffic.

POL market dynamics

POL is a type of LAN that uses PON equipment for an industrial, enterprise, or campus facility. The use of PON for LANs is gaining momentum for numerous reasons, including:

  • Reliability, redundancy, security, and management. POLs are based on carrier-grade “five 9s” PON equipment. The underlying ODN can be designed to provide redundancy. PON networks are highly secure, they are difficult to tamper with, and meet the security requirements of defense agencies. POL solutions include end-to-end element and provisioning management tools.
  • Bandwidth, ease of bandwidth upgrades, and operations. One key advantage of fiber-based POL is bandwidth. With PON-based POLs, higher bandwidths can be supported, and the upgrade process is simple. In addition, IT directors can decide which ONTs/ONUs to upgrade, based on specific bandwidth requirements. It is simple to bring new ONTs/ONUs onto the network while adhering to security protocols.
  • Capex and opex savings, including power and space. POL enables significant savings in both capex and opex when compared to a traditional LAN. An optical LAN (POL) uses smaller cabling and fewer racks and switches than a traditional LAN. PON is a point-to-multipoint technology, fibers are shared throughout the network, thereby lowering capital costs. The POL saves energy and promotes sustainability. A POL can easily cover 40 km.

Omdia is seeing an uptake in POL deployments by a wide range of verticals and campuses, including:

  • Universities
  • Airports and transportation facilities
  • Factories
  • Electric utilities
  • Office complexes
  • Government facilities

PON and sustainability

During 2023, Omdia covered the topic of PON and sustainability since broadband connections and speeds are continuing to increase and this is leading to growing energy consumption. Adopting energy efficient PON technologies is crucial for CSPs as they seek to lower operational expenses, reduce their carbon footprint, and meet regulatory guidelines and requirements. Consequently, it is essential for the broadband industry to support bandwidth growth without increasing power consumption at the same rate.

Energy consumption per gigabit: Omdia’s first report analyzed energy consumption per gigabit of bandwidth. Next-generation PON technologies, such as XGS-PON and 25G-PON, are more energy efficient per gigabit than GPON. Omdia reviewed “Broadband Communication Equipment Codes of Conduct” from the EU’s European Commission (EC) along with Nokia’s data. XGS-PON is a faster and more energy-efficient technology per gigabit than GPON, consuming half the power while supporting 4× the downstream speed and 8× the upstream speed of GPON. This energy saving leads to reduced opex for CSPs along with a smaller environmental impact as bandwidth demand continues to grow. CSPs can reduce energy consumption without compromising on broadband service performance or quality by adopting XGS-PON.

Omdia also looked at 25G PON’s energy consumption, relying on data provided by Nokia. Nokia stated that its 25G-PON solutions are 5× more power efficient than GPON and 2× more power efficient than XGS-PON when power consumption per gigabit supported is compared. This represents a significant improvement toward more sustainable and green broadband solutions.

PON versus P2P: Omdia’s second report focused on PON’s sustainability advantages compared to Active Ethernet P2P broadband solutions. P2P FTTP operators are at a crossroads. P2P is an expensive FTTP solution, requiring dedicated fiber and optics per endpoint, or subscriber, served. P2P has several advantages compared to PON, with no splits, P2P can carry an optical signal further. However, the costs of a dedicated fiber per user become significant as FTTP deployments increase. In addition, many more fibers need to be managed and terminated. P2P is also expensive in terms of energy consumption compared to PON. Once again, Omdia reviewed the EU’s European Commission Broadband Communications Equipment Code of Conduct report. The energy consumption targets for XGS-PON OLT ports are higher than those for P2P. However, on a per-subscriber basis, XGS-PON uses less power and the power per user declines as the number of users increases, reflecting PON’s energy efficient topology and technology.

Omdia included Iskratel’s analysis of PON versus P2P from a kWh perspective. For example, focusing on a 250Mbps commercial package, a GPON OLT consumes approximately 4.2kWh (or 1.04kWh with an oversubscription of four), while a GE P2P OLT consumes 15.3kWh. For 100,000 subscribers, this translates to 1.44GWh per year, solely due to the difference in the type of OLT used. If central office air conditioning power consumption is added, the energy consumption could increase to 1.8GWh per year. This 1.8GWh could equate to 500 tons of CO2 in the EU, on average.

Green Bond Financing: Omdia’s third report focused on green bond financing for the building of fiber-based access networks highlighting Allo Communications and PON vendor Calix. With support from Calix, ALLO Communications (ALLO) set up a Fiber Sustainability Financing Framework that follows the Green Bond Principles guidelines established by the International Capital Market Association. Since a commitment to sustainability is of increasing importance to the financial investment community, Moody’s Investors Service has assigned a score of “very good” to ALLO Communication’s Sustainability Financing Framework.

In July 2023, ALLO secured $650m in sustainable financing. Calix is supporting CSPs like ALLO as these operators move from legacy copper and coax cabling networks to greener, fiber-based infrastructure. Calix’s solutions include the in-home experience, developing CPEs with extensive self-management troubleshooting capabilities, thereby reducing emissions-producing truck rolls and often eliminating unnecessary replacement of CPE devices. In addition, Calix has shown that more than 90% of customer homes can be covered with a single Wi-Fi gateway, which leads to lower power consumption.

Omdia will continue to analyze PON’s role in supporting sustainable broadband and will be publishing additional reports, with support from OLT vendors.

Expanding PON ecosystem

The list of PON OLT vendors continues to expand, reflecting demand by CSPs and by corporations and governments for POL applications. An overview is provided below.

 

Different types of solutions are needed to meet operator and enterprise requirements. OLT solutions vary by capacity, physical location, standalone equipment or pluggable approach, combo PON and non-combo, and support for beyond 10G, such as 25G PON and 50G PON.

Summary

PON-based fiber access is growing around the globe. There continues to be new, large opportunities for PON equipment and component vendors. In addition, POL is gaining momentum, reflecting PON’s penetration into the LAN market. The PON component and equipment market continues to be in the “growth” stage.

Omdia is looking forward to numerous meetings during OFC 2024 along with participating in Market Watch Panel IV: Next Generation PON Technologies.

Appendix

Author

Julie Kunstler, Chief Analyst, Broadband Access Intelligence Service

askananalyst@omdia.com

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Posted: 5 January 2024 by Julie Kunstler, Chief Analyst, Broadband Access Intelligence Service | with 0 comments

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