NG-PON2 ecosystem in top form, but lacks scale

Julie Kunstler/Ovum

The NG-PON2 ecosystem passed another major milestone with Verizon's recent announcement that it completed OpenOMCI (ONT Management and Control Interface) specification interoperability with five vendors.

The NG-PON2 ecosystem is well along the path to interoperable PON equipment. The major commercial challenge remains around volumes, with China's noticeable absence from the NG-PON2 ecosystem.

Doing everything right but needing scale

The NG-PON2 ecosystem has been following an open approach, ranging from Verizon's vendor interoperability testing program, involving numerous chip and equipment vendors, to the formal establishment of Broadband Forum's NG-PON2 Council. The NG-PON2 Council combined the efforts of the Broadband Forum and the NG-PON2 Forum, promoting NG-PON2 industry education and product commercialization. Verizon's open and interoperable approach will drive NG-PON2 adoption because it lessens the risks of vendor dependency.

The major criticism of NG-PON2 has been focused on the costs of tunable optics, especially for the highly price-sensitive ONT. However, several optical component vendors continue to make progress toward meeting performance and price targets. However, the most active NG-PON2 optics vendors are not from China, and operators there have yet to support the adoption of NG-PON2.

One can argue that it does not matter if NG-PON2 is not adopted in China. After all, Verizon is sharing its OpenOMCI specification with other operators around the world. However, China has consumed more than 80% of PON equipment – both OLTs and ONTs/ONUs – for the last several years.

Currently, China Telecom is upgrading its installed base of 1G EPON OLTs to 10G. China Telecom's 2017 tender for 10G EPON OLTs was for more than 700,000 ports, an order larger than all 2.5G GPON OLT ports consumed by North America in 2015 and 2016 combined. China Telecom intends to install 10G EPON symmetrical OLTs, given the now minimal cost difference between asymmetrical and symmetrical optics.

Bottom line, China's participation in NG-PON2 would bring scale. This would lower optics prices, eventually leading to lower equipment prices.

Julie Kunstler is a principal analyst at Ovum specializing in wireline/fixed broadband access, particularly next-gen broadband technologies, deployments and monetization strategies.

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