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Summary

Ovum is forecasting a decline in FTTx PON OC (optical component) revenues in 2016 following a record level of revenues in 2015. However, OC FTTx PON revenues are expected to increase in the later years of the forecast as service providers adopt next-gen GPON and EPON in numerous countries.

PON OC market will have a reprieve due to next-gen PON

The PON OC market reached record levels in 2015 due to FTTx network builds by China Telecom, China Mobile, and China Unicom. While FTTx network builds will continue in China, the build rate has begun to slow in 2016. Consequently, the PON OC market is forecast to decline over the next several years as no other PON network build will offset the slowdown in China.

However, the PON OC market is forecast to grow again in the later years of the forecast as deployments of next-gen PON grow rapidly. Many operators are deploying next-gen PON to support both residential and nonresidential customers and applications. For example, many operators in North America and Asia-Pacific are using next-gen PON for business customers and for MBH (mobile backhaul).

One of the key risks to Ovum's forecast is the rate of next-gen PON deployments. Several operators, including Verizon, have announced their intentions to rapidly move to next-gen PON to support growing bandwidth demand. However, it has always been difficult to forecast deployment rates.

Another forecast risk concerns ASPs (average selling prices) for next-gen PON OCs. Volumes typically drive down ASPs in this access market, but with little history for next-gen PON, it is difficult to forecast the rate of decline for ASPs. In addition, several component and equipment vendors are developing new approaches to next-gen PON optics, particularly for tunable optics used in NG-PON2. If their efforts are successful, ASPs for NG-PON2 optics will fall dramatically, thereby spurring this market segment.

Ovum will be paying close attention to next-gen PON deployments, which will open up the next stage in the evolution of access networks.

Appendix

Further reading

OC FTTx Forecast Spreadsheet: 2015–21, TE0017-000070 (August 2016)

Market Share Spreadsheet: 2Q16 FTTx, DSL + G.fast, and CMTS (Revenues), TE0006-001279 (August 2016)

Market Share Spreadsheet: 2Q16 FTTx, DSL + G.fast, and CMTS (Units), TE0006-001278 (August 2016)

"Broadband access equipment market to remain strong in 2016," TE0006-001191 (February 2016)

Faster Payback Will Drive Next-Gen PON Market, TE0017-000059 (December 2015)

2016 Trends to Watch: Wireline Broadband Access, TE0006-001143 (December 2015)

Author

Julie Kunstler, Principal Analyst, Intelligent Networks and Components

julie.kunstler@ovum.com

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