Fiber-to-the-home (FTTH) subscriber connection costs and capabilities have evolved considerably in the last 15 years. Fiber installation techniques such as micro trenching and public-private partnerships leveraging existing right of ways and improved regulatory policies have all helped to reduce FTTH construction costs. Innovations in fiber optics and improvements in fiber connection and distribution methods have reduced the cost to connect a FTTH subscriber from several thousands of dollars per home to as low as a few hundred dollars today. Passive optical network (PON) technology innovation, Moore’s Law, and economies of scale have greatly increased capabilities while at the same time reducing the cost of an FTTH connection. The days of $500 optical network terminals (ONTs) and optics connected to expensive two-port optical line terminals (OLTs) have given way to $50 ONTs and high-density 16-port OLTs. Fiber access nodes have evolved from supporting dozens of 30Mbit/s residential services to supporting thousands of 100Mbit/s and gigabit residential and business services – all on a single access node. It should be noted that this decade-worth of increased FTTH service differentiation or utility has all occurred using gigabit PON (GPON) and Ethernet PON (EPON) technology paired with innovations in the cost and scale of Ethernet switching, electronics packaging, and pluggable or integrated fiber optics. So how much further can we improve the business case for fiber and how will that occur? Will additional small steps in ONT cost improvement or higher-density OLTs be enough to persuade broadband service providers operating within broadband underserved areas to deploy more FTTH or will a bigger step in innovation be required to spur further investment?
10x more in 10 years
Conservatively speaking, peak service bandwidth is growing at approximately 25% per household per year. Annual growth rates as high as 50% have been cited by many, but an annual growth rate of household internet usage at peak times of 25% (25.9% more precisely) equates to the easy-to-remember definition for growth: 10 times in 10 years. So around the time the European Commission is reviewing its progress toward the gigabit society 2025 goal, the average household peak usage will grow from around 5Mbit/s or 10Mbit/s to 50Mbit/s or 100Mbit/s per connection. So how will gigabit PON technologies fare as more and more households shift to multiple 4k and 8k devices, whether TVs, smartphones, security and IoT cameras that use tens of Mbit/s per stream? Cloud gaming platforms use uncompressed video to support the low latency requirements and require 25-50Mbit/s when operating in 1080p HD streams. What will 4k cloud gaming require?
Some forward thinking GPON and EPON network operators chose to incur a higher cost per home passed or home connected by reducing the typical 64 homes shared per feeder fiber (i.e., 64 splits per PON) to 16 homes could make out fine if they need to support 50 to 100Mbit/s per home, but barely. Just one bandwidth-hungry business PON customer would impact the quality of experience for all of those same 50-100Mbit/s residential customers. Many FTTH service providers rely on lucrative business customers, especially in a world where a residential gigabit broadband service tops out at $100 per month. To support the need for bandwidth, additional FTTH capability is required, not just further cost reduction.
FTTH operators need to be able to garner more customers and deliver higher-value services across their fiber optical distribution networks (ODN), otherwise, they will be relegated to reduced returns on their fiber ODN investment as they reduce the revenue potential per PON from 64 customers to 16 to support the 10 times growth (or more) that is forecast to choke their networks over the next 10 years.
Gigabit: De facto definition of broadband
Regulatory bodies, consumer pressure and operator competition are driving the market to ubiquitous gigabit broadband. Gigabit broadband will enable us to realize the incredible benefits afforded by the tactile internet, critical cloud services, massive industrial IoT, smart home automation as well as augmented and virtual reality applications. FTTH has been and will continue to be, for the coming decades, the most capable broadband access medium providing the service provider a competitive advantage through increased differentiation or greater utility. However, as copper, coax and wireless technologies continue to evolve, gigabit is becoming more mainstream, even a little pedestrian, and therefore, less of an advantage for the FTTH network operator. Gfast over copper phone lines, DOCSIS 3.1 over coax TV cable and millimeter wave wireless can all support gigabit and their services are rolling out in earnest across the globe. This is great news as these innovations increase the pace at which we move toward the gigabit society goal, however, what does gigabit mainstreaming mean for the FTTH network operator? It all depends on whether the FTTH network is leveraging a gigabit PON technology like GPON or EPON or a 10-gigabit PON (10G-PON) variant like 10G-EPON, XGS-PON or NG-PON2.
Standing out from the crowd
For many new FTTH operator entrants or expanding FTTH network operators the choice to use XGS-PON technology is as simple as having the ability to disrupt the market by offering gigabit rates as the entry-level service and 2, 5, and even 10Gbit/s residential service rates as options. Having the ability to advertise higher speeds than those supported by competing DOCSIS3.1, 5G or Gfast market rollouts protects market share and provide differentiation versus these competing single gigabit service offers.
Beyond this marketing clout, XGS-PON technology offers the scale, reliability, and flexibility to realize a future world of converged residential and enterprise applications. XGS-PON provides improved operational profitability by supporting the convergence of many service segments across a common access network, while affording the fiber broadband provider the ability to economically deliver multi-gigabit residential services. Deploying XGS-PON technology extends the life and profitability of PON network infrastructure. It has more capacity to support 4k and emerging 8k streaming video and other download services and much, much more capacity to support intensive upload services such as always-on home monitoring video and bandwidth-intensive cloud gaming service now being offered.
Exponential network capacity upgrades are nothing new for fiber networks. In the point-to-point or active fiber world, enterprise access and metro transport markets alike have seen Ethernet services speeds evolve several times by factors of 10. 10Mbit/s Ethernet LANs were upgraded to 100Mbit/s and then to 1 gigabit (1000Mbit/s). Metro transport moved from 10Gbit/s SONET/SDH or 10G Ethernet interconnections to 100Gbit/s and then 1Tbit/s (1000Gbit/s) Ethernet. This increase in magnitude also came with a price increase, and that was passed on to the consumer, usually in the range of a three times cost increase for 10 times the speed of the previous service. Ten times the capacity for three times the price was a pretty fair deal. For example, if your $1,500 per month 100Mbit/s E-Line service was becoming congested a $4,500 per month 1Gbit/s service was your next step. But this pricing model does not work well for mass-market, residential broadband. The price ceiling for disruptive bandwidth levels is lowered as they become commonplace. A 100Mbit/s broadband service might be $65 per month, while the 1Gbit/s service is $80 per month. In short, the residential FTTH service provider cannot bear a substantial price premium for 10G-PON, therefore XGS-PON broadband needs to be price competitive with GPON. Economies of scale represent the classic source of cost reduction allowing acceptable ROI for XGS-PON infrastructure in place of traditional PON technologies.
Marginal added cost for material added opportunity
1Gbit/s services delivering PON technologies like GPON and EPON have served us well for over a decade, but they are quickly approaching end of life. As FTTH network capacity requirements grow over the next decade and alternative access technologies make gigabit services commonplace, the differentiation once garnered by 1G fiber service will be lost. XGS-PON and its marginal cost delta versus GPON or EPON creates a material market opportunity. XGS-PON has the capacity to support additional residential gigabit broadband services doubling the useful life of an ODN, regardless of the rate of bandwidth usage growth. It can effectively support multi-gigabit services differentiating itself against single gigabit services. And last, but not least, XGS-PON, unlike GPON and EPON networks, not only supports but dictates, multi-vendor ONT and OLT interoperability. This removes the closed or proprietary FTTH supplier system that locks an operator from benefiting from an expanded supplier choice when it comes to customer device options. Also, XGS-PON was designed to co-exist transparently with GPON and EPON creating a natural migration path. XGS-PON services can be delivered over the same fiber strand that is currently being used to deliver GPON and EPON services. It does this by occupying a different set of wavelengths to allow a clean separation of the two PON technologies, services, and customers.