The Fiber Broadband Association (FBA) has issued a very optimistic fiber deployment forecast, which calls for approximately 1.4 million miles of fiber in the top 25 metro markets in the U.S. That’s driven in large part by carriers’ 5G wireless deployment plans, which will require fiber backhaul, especially for small cells.
The FBA, formerly known as the Fiber to the Home Council Americas, promotes fiber deployment to homes, business and “to everywhere,” the organization notes in a new report titled “The Road to 5G is Paved with Fiber.”
The report also makes a case for why the FBA believes fixed 5G as the only connection to a home will not be the norm.
FBA’s Fiber Deployment Forecast:
In the report, the FBA spells out the assumptions that drove its fiber deployment forecast and cites sources for those assumptions:
- While macrocells are roughly .5 to 25 miles apart, 5G will require small cells located between 200 and 1,000 feet apart
- To deliver gigabit peak speeds to each user, the minimum downlink speed to each small cell will need to be 20 Gbps and the uplink peak data rate will need to be 10 Gbps
- 5G may require 60 small cells to cover one square mile
- The top 25 U.S. metro markets cover approximately 174,000 square miles
The 1.4-million fiber-mile forecast could be on the low side if multiple carriers want to build competing networks, the FBA notes.
Pessimistic on Fixed 5G:
“We do not believe fixed 5G to the home – as the only connection to the home – will become the norm,” the FBA argues in the new report. Tell that to Verizon and AT&T which are planning to deploy some form of 5G fixed wireless to residences.
The report’s author notes that home network connections may need to support multiple 4K and soon 8K video streams, hundreds of in-home internet-connected devices and multiple virtual reality and augmented reality (VR/AR) users, which will require higher bandwidths than can be delivered by 5G under current development standards.
Additionally, the report argues that the millimeter wave signals that will be used for some 5G deployments do not penetrate exterior walls and would require a receiver attached to an exterior wall, requiring additional hardware costs and ongoing energy and maintenance costs. It’s worth noting, though, that results from early 5G trials are showing that the technology is not as limited as wireless experts initially expected it to be and both AT&T and Verizon have ambitious plans for fixed 5G.
Separately, Cignal AI reported that North America metro WDM sales grew with increased spending by cloud and colo customers, offsetting weakness in the long-haul WDM market. Cisco and Ciena were the main beneficiaries of this shift to metro WDM, with Cisco realizing double-digits year-over-year growth related to cloud/colo shipments and growth in its NCS 4000 revenue. Significant shipments for metro WDM applications resulted in global coherent 100G port shipments exceeding 100,000 units in the quarter.
EMEA revenue dropped almost 20 percent year-over-year in 3Q17. Huawei, one of the top vendors in the region, experienced a very sharp decline and provided negative guidance into 2018. This data point, as well as others, compelled Cignal AI to reduce its forecast for EMEA for this year and 2018. Cignal AI expects to see weak spending trends among tier-1 customers in the region. Cignal AI also cut its 2018 forecast for China based on ongoing uncertainty tied to regional spending and a stall in revenue growth in 3Q17.
- Last quarter was the weakest YoY revenue growth recorded in China in over 4 years as momentum from 2Q17 spending failed to continue into the third quarter. Spending trends in the region remain difficult to predict.
- Revenue in the rest of Asia (RoAPAC) eased following breakout results in India during 2Q17 though spending remains at historically high levels.
- Quarterly coherent 100G+ port shipments broke 100k units for the first time on a global basis. 100G+ Port shipments in China were flat QoQ and are substantially up YoY
Two years ago, we reported that “Verizon has completed a field trial of NG-PON2 fiber-to-the-premises technology that could provide the infrastructure for download speeds up to 10 Gbps for residential and business customers.”
This past January, Verizon completed its first interoperability trial of NG-PON2 technology at its Verizon Labs location in Waltham, MA. During the trial, Verizon demonstrated that equipment from different vendors on each end of a single fiber—one on the service provider’s endpoint and that the customer premises—can deliver service without any end-user impact.
In an October 16th press release in advance of the Broadband Forum’s Access Summit, Verizon said NG-PON2 represent a paradigm shift in the access space and a more certain path towards long-term success.
“Technologies such as NG-PON2 present exciting new opportunities for vendors, such as delivering residential and business services on multiple wavelengths over the same fiber,” said Vincent O’Byrne, Director of Technology at Verizon.
“Not only does NG-PON2 parse business and residential customer traffic to isolate and resolve potential problems in the network, it can also scale to achieve speeds of 40 Gbps and above,” O’Byrne added.
“Technologies such as NG-PON2 present exciting new opportunities for vendors, such as delivering residential and business services on multiple wavelengths over the same fiber,” said O’Byrne. “Not only does NG-PON2 parse business and residential customer traffic to isolate and resolve potential problems in the network, it can also scale to achieve speeds of 40 Gbps and above.”
At the Broadband Forum’s Access Summit, The Verizon executive will address how the fiber access space is constantly evolving, with emerging PON technology providing solutions to some of the issues around cost and reliability during the Broadband World Forum, at the Messe Berlin on Tuesday, Oct. 24th.
Verizon has been an active participant in driving awareness about how NG-PON2 can work in a real-world carrier environment. The company completed NG-PON2 interoperability with five vendors for its OpenOMCI (ONT Management and Control Interface) spec, bringing it one step closer toward achieving interoperable NG PON systems.
The mega telco plans to offer it’s own OpenOMCI specification , which define the optical line terminal (OLT)-to-optical network terminal (ONT) interface, to the larger telecom industry.
Note 1. OpenOMCI specification was developed and is owned by Verizon, rathr than a formal standards/spec writing body like the ITU-T or Optical Internetworking Forum (OIF). Is this the new way of producing specs (like “5G” used in trials)?
Bernd Hesse, Chair of the Broadband Access Summit and Senior Director Technology Development at Calix, said:
“We will be exploring NG-PON2 in depth and the use cases that underpin the decisions to deploy them. I look forward to the debate, hearing from the experts in the industry and welcoming the community to these new Forum events.”
AT&T Expands G.fast & FTTH Deployments:
In sharp contrast to Verizon’s decision NOT to deploy G.fast, AT&T has announced expansion of its G.fast service for multi-dwelling units (MDUs) and its fiber-to-the-home network (AT&T Fiber).
The mega telco will extend its all-fiber network in two markets — Biloxi-Gulfport, MS and Savannah, GA. AT&T will also be offering its hybrid fiber-coax service for MDUs in 22 metropolitan markets.
The AT&T G.fast deployments will use “fiber runs to the telecom closet on the property, and individual coax runs to each apartment unit,” an anonymous AT&T spokesperson said to Telecompetitor.
Residents of properties served will also be able to obtain DIRECTV service without installing a dish at their individual units. Instead, the video service will be delivered over D2 Advantage, which the AT&T spokesperson described as “a centrally wired satellite dish that is shared among residents in the property.”
AT&T announced eight metro areas where G.fast can be deployed immediately, including Boston, Denver, Minneapolis, New York City, Philadelphia, Phoenix, Seattle and Tampa. In 14 other markets, consumers in target MDUs can order service now for deployment in “the near future,” the company said.
AT&T is one of multiple carriers that are looking at G.fast as part of their broadband strategy. The technology can support considerably higher speeds than DSL or fiber-to-the-neighborhood (FTTN) services – and although bandwidth is lower than it might be for a fiber-to-the-home deployment, the cost is considerably less.
The news that AT&T is deploying G.fast is not surprising, as the company already has conducted a trial of the service in Minneapolis and executives have indicated deployment plans. At this year’s Open Network Summit (ONS), AT&T’s Tom Anschutz told an audience that G.fast would improve the speed and signal quality of data transmission on older, low grade twisted pair, which is used in many MDUs and in condominium complexes (where this author lives). He hinted that market segment would be a focus area for AT&T.
AT&T is extending the reach of its fiber network:
AT&T claims to have the largest fiber network in its 21-state home broadband footprint, reaching more than 5.5 million residential and commercial locations across the 57 markets after adding over 1.5 million sites since January 1st. Plans call for extending service availability to another 1.5 million locations by year’s end, boosting the total to 7 million.
Of those 5.5 million homes and businesses now reached by AT&T Fiber, the mega telco said it has signed up more than 2 million broadband subscribers. The company did not, however, break out how many of those subs are new ones, as opposed to DSL customers who have been upgraded to the new FTTH network.
However, the mega telco ranks #1 on Vertical Systems U.S. Fiber Lit Buildings (Fiber to commercial buildings) leaderboard:
Verizon will forgo using copper-based G.fast (DSL) technology in favor of an all-out move to deploy fiber-to-the-premises (FTTP) to/from multiple-dwelling units (MDUs), according to Vincent O’Byrne, director of network planning for Verizon. Mr O’Byrne spoke August 15th at ADTRAN’s Broadband Solutions Summit in Huntsville, AL.
“Our strategy for G.Fast is not to deploy it,” O’Byrne said at the conference.
“The strategy we’re using today is fiber all the way to the living unit,” O’Byrne said. “There’s some small percentage that we use fiber to the building (FTTP) and then copper inside the building itself, but because we have two vendors on BPON and on GPON meant in those units we had 8 types of different MDU units.”
O’Byrne cited the sketchy nature of the copper network in some places and a history of VDSL2 inter-operability and speed related problems in MDUs.
“The MDU units started to go end of life and for VDSL2 there wasn’t any interoperability,” O’Byrne said. “Even though we worked on it for a year, it became nuisance so we stopped using those common ONTs and concentrated on getting fiber to the living unit.”
Speed is also an issue. “We ended up in a situation where the 13 units of VDSL2 were going end of life as well as lower speed down the surrounding Fios network, which could get up to 1 Gbps,” O’Byrne said. “With G.fast we see ourselves potentially being in the same situation five years from now where we would have to replace the same thing.”
O’Byrne said that bringing fiber directly to each premises is more of a future proof strategy. “It’s a bit more expensive to put the single family unit fiber connections out there, but we have the same kind of service as the rest of the network,” O’Byrne said. “We also found that the trouble report rate is less on the fiber all the way to the living unit.” That’s in sharp contrast to the hybrid fiber-copper technology used by AT&T in its U-Verse triple play bundle (which this author has had for almost 5 years).
Given the diversity and varying condition of copper plant in Verizon’s wider nationwide network, Verizon has applied its copper replacement strategy for the MDU markets.
In recent years, Verizon has been strategically replacing aging copper plant with fiber at its consumer and business locations. The service provider said that this method enables it to reduce costs by not having to perform multiple customer visits when problems arise.
Verizon has been replacing aging copper plant with fiber at its consumer and business locations. Fios to residential triple play customers was the first step, with fiber to commercial buildings and MDUs now well underway.
“At Verizon we were finding the trouble reports on the copper were two to three times more than when we had fiber to the living unit,” O’Byrne said. “For a long time, the copper plant in the Verizon network was not as good as it was in some locations so if we went to G.fast it would be low volume and we would have the same issues five years down the road.”
“We’re skipping XGS-PON single wavelength,” said O’Byrne. “We’re going for a 10G tunable laser solution.”
O’Byrne said driving costs lower and providing a unified architecture that’s inter-operable across multiple equipment vendors are key goals for their strategy. He also mentioned solutions that can maximize use of Verizon’s extensive and somewhat disparate outside wiring plant environment.
Vertical Systems Group (VSG) ranked the leading providers of on-net fiber business connections as of the end of 2016. The research group said that retail and wholesale fiber providers with 10,000 or more on-net fiber-lit commercial buildings in the U.S. qualify for this new benchmark.
VSG’s 2016 U.S. Fiber Lit Buildings LEADERBOARD list includes a mixture of traditional telcos, cable providers and a competitive carrier: AT&T, Verizon, Spectrum Enterprise were the top three followed by CenturyLink, Comcast, Level 3, Cox, Lightower Fiber Networks, Zayo, Altice USA and Frontier.
The Challenge Tier of fiber providers includes companies with lit fiber connections to between 2,000 and 9,999 U.S. commercial buildings. Seventeen companies qualified for the 2016 Fiber Lit Buildings Challenge Tier as follows (in alphabetical order): Cincinnati Bell, Cleareon, Cogent, Consolidated Communications, Electric Lightwave, Fairpoint, FiberLight, FiberNet Direct, FirstLight, IFN, Lumos, Southern Light, Sunesys, Unite Private Networks, Uniti Fiber, Windstream and XO.
Rosemary Cochran, principal at Vertical Systems Group, said the criteria for the leader board list was for network service providers to have fiber installed and fiber transport equipment ready to serve business customers.
“This is commercial buildings and data centers that have fiber in place and there is active service equipment that enables provisioning of commercial services,” Cochran said. “We’re not counting residential fiber or standalone cell towers.”
Cochran added that VSG is not counting near-net buildings where service providers may be passing buildings with fiber but have not connected them yet. “It is either lit or not lit,” she said.
“On-net fiber lit buildings are valued strategic assets that give retail and wholesale providers a competitive edge in profitably delivering services to business customers. A major benefit of a fiber lit building is ready connectivity with provisioning through service orchestration, without the construction cost and extensive lead time required to light a building,” Cochran added.
Acquisitions of Fiber Providers happening this year:
“These dynamics are driving this year’s acquisitions among fiber providers that will significantly impact the U.S. fiber landscape. Eighteen of the twenty-eight Fiber LEADERBOARD and Challenge Tier companies have fiber-related transactions just completed or pending.”
One of the largest out of this group is CenturyLink’s pending deal for Level 3, one that will enhance the telco’s on-net fiber footprint.
CenturyLink’s Level 3 acquisition will increase its reach by nearly 75% to approximately 75,000, including 10,000 buildings in EMEA and Latin America, giving the telco a larger footprint to deliver Ethernet and software-defined services.
By purchasing XO, Verizon gained metro fiber networks in 40 major U.S. markets with over 4,000 on-net buildings and 1.2 million fiber miles.
Cochran said that since a number of these deals have not been completed it remains unclear as to what effect they will have.
Crown Castle, which will gain an additional 22,000 buildings, stands out from the crowd since the service provider has been operating the fiber providers it has bought as separate companies.
However, other pending acquisitions being made by Consolidated Communications, Cincinnati Bell and newer players like Uniti Fiber will have an effect.
Consolidated Communications, which will announce its second-quarter earnings tomorrow, recently completed its acquisition of FairPoint. By acquiring FairPoint, Consolidated immediately established itself as the ninth largest fiber player with a presence in 24 states and 8,000 on-net buildings. This greater density will enable Consolidated to pursue more dark fiber and lit Ethernet service opportunities with a larger mix of business and wholesale customers.
“Out of the companies on the leader board, 18 of them either already completed acquisitions or some are pending,” Cochran said. “Because a lot of deals happened in July with some that are pending such CenturyLink/Level 3, they are not reflected here.”
Strategic importance of Fiber Assets to deliver business services:
Regardless of when these deals are completed, Cochran added that they show how having a large arsenal of fiber is important to compete for business services.
“There’s a lot that happened in the first half of this year and that’s going to shake things up,” Cochran said. “Just the fact that you have more than half of these companies involved in some kind of transaction shows the value of fiber.”
On the fiber leaderboard, 7 service providers have an ongoing spot on VSG’s Carrier Ethernet Leaderboard report. These providers include: AT&T, Verizon,Spectrum Enterprise, CenturyLink, Comcast, Level 3, and Cox.
Cochran noted that the presence of fiber has coincided with the growth of Ethernet in the domestic U.S. market.
“Fiber-based Ethernet is the most widely deployed technology,” Cochran said. “As those upgrades take place, one of the drivers is trying to get more bandwidth so there’s a correlation between higher bandwidth services and having that fiber in the building.”
“Wholesale services are also a big driver, which becomes a question of service provisioning. The work that’s being done at the MEF on inter-carrier provisioning and service orchestration across carriers to automate it with standard APIs would help to accelerate new services,” she added.
Other Fiber Providers:
All other fiber providers with fewer than 2,000 U.S. commercial fiber lit buildings are in the Market Players tier. The 2016 Market Players tier includes more than two hundred metro, regional and other fiber providers, including the following companies (in alphabetical order): Alpheus, Axia, Birch, C Spire, Centracom, Conterra, DQE Communications, EarthLink Business, Fatbeam, Global Capacity, GTT, Hawaiian Telecom, Hibernia, Hunter Communications, Independents Fiber Network, Infostructure, Logix Communications, LS Networks, Mediacom, Monmouth Telecom, Orca Communications, Pilot Fiber, PS Lightwave, Shentel, Silver Star Telecom, Sovernet, Spirit/Palmettonet, Syringa, TDS Telecom, TPX Communications, U.S. Signal, Veracity, Wilcon, WOW and others.
Verizon reported a successful trial of next-generation passive optical networking NG-PON2 technology using the carrier’s OpenOMCI specification. The OpenOMCI specification is aligned with ITU-T Recommendation G.989.3, but there are different versions from several carriers.
It’s important to note that this is Verizon’s own version of the OpenOMCI spec. Verizon, along with ADTRAN, Broadcom, Cortina Access, Ericsson/Calix and Intel, worked together to develop the OpenOMCI specification that led to the successful trial. The specification defines the OLT-to-ONT interface and is aligned with the ITU-T Recommendation G.989.3. Since the initial NG-PON2 trial by Verizon in December 2016 , these companies intend to make their hardware and software compliant and are actively contributing to the OpenOMCI specification.
AT&T also published an OpenOMCI specification just a few weeks ago, based on ITU-T G.988 Managed Entities. AT&T intends to deploy an XGS-PON architecture as part of the overall FTTP solution for its Lightspeed service, hence its OpenOMCI spec differs from Verizon’s FiOS-based one. XGS-PON is championed by Nokia (who is not part of Verizon’s vendor group) and also delivers 10Gbit/s to customers.
The trial at Verizon’s technology center in Waltham, MA involved optical network terminal management and provisioning.
By outlining the tools necessary to model a multi-wavelength PON, Verizon says the OpenOMCI specification optimises the number of managed entities and methods that can be used to implement a particular service function while disallowing vendor-proprietary objects and features that have provided a major obstacle for interoperability efforts until now. The OpenOMCI also includes specific managed entities that, in Verizon’s opinion, improve the stability of PON systems. With today’s PON deployments, telcos are obliged to use the same vendor for both optical line terminals (OLT) and optical network terminals (ONT) which prevents multi-vendor interoperability.
“The NG-PON2 interoperability effort is important, not only for Verizon but for NG-PON2 technology, and is based on lessons learned over the last 13 years of PON deployment and great partnerships,” said Vincent O’Byrne, PhD and director of technology at Verizon. “We see this work as removing a major roadblock and helping accelerate NG-PON2 deployment.”
O’Byrne told FierceTelecom that the OpenOMCI specification will help to ensure the company can deploy an array of OLTs and ONTs in its network. He said:
“Since October 2016 we have been working with the vendors on enabling interoperability to mix and match one vendor’s OLT with another vendor’s ONTs, which is an object we have had since we started deploying BPON in 2004. “We have been working with these vendors and have developed OpenOMCI communications between the OLT and the ONT and how that issue is handled for NG-PON2.”
Along with ONT management and provisioning, the trial investigated transmission convergence layer features that allow support of not only business and residential traffic but wireless transport services. These features are a unique addition to NG-PON2 compared to other PON systems.
“We continuously sought the various contributors’ feedback and constructive input,” said Denis Khotimsky , Distinguished Member of the Technical Staff and Verizon’s lead engineer for the trial. “NG-PON2 technology creates specific challenges for the management layer to handle, such as multi-wavelength operations, pluggable optics and multiple interface enhancements. The Verizon OpenOMCI specification meets those challenges.”
Representatives of several telcos interested in the NG-PON2 technology – including Deutsche Telekom, SK Telecom and Vodafone – participated in the trial as virtual observers, which gave them access to the specification, test plans and readouts.
Following the successful completion of the trial, Verizon shared its OpenOMCI specification with the industry for possible inclusion within the appropriate standards. A copy of Verizon OpenOMCI specification can be found here.
Addendum: On July 18th, Fierce Telecom reported: 5G backhaul spending to reach $2B by 2022, NG-PON2 to dominate
“The technology that will dominate 5G backhaul will be NG-PON2,” CIR stated. “By 2022, more than $890 million will be spent on this technology for 5G backhaul.”
The analyst firm noted that Verizon has selected NG-PON2 for 5G backhaul. Top vendors, including Cisco, Nokia, Huawei, Calix, Adtran, Ericsson and Alcatel-Lucent all have PON solutions for 5G backhaul.
NG-PON2 should remain the most popular technological choice, provided prices come down as expected, based on the development of less costly tunable components, CIR said. Most of the suppliers of those components will be based in China, the firm expects.
CIR also calculated that more than 170,000 fiber miles (280,000 kilometers) of cable is expected to be shipped for 5G backhaul applications in 2022, with major fiber and cable suppliers such as Corning already showing signs of specifically targeting 5G infrastructure with their products.
The firm also noted that the introduction of high-speed wireless may have the side effect of reducing the need for fiber to the premise/home (FTTP/FTTH).
There will be some short-term uncertainty until 5G standards are finally ratified, but CIR concluded that “5G is potentially a massive opportunity for the fiber optics industry, with this taken to include opportunities for the makers of modules and components as well as the fiber/cable manufacturers themselves.”
The U.S. needs $130 billion to $150 billion in fiber network expansion to be fully ready for 5G-based networks and to ensure that the digital economy’s benefits reach all Americans, according to a Deloitte report.
The suggested $130 billion to $150 billion fiber infrastructure investment is required in the U.S. to unleash innovation, close the digital divide, and fully prepare the country for 5G, according to a report from management consulting firm Deloitte. The report says the investment is needed over the next five to seven years to enable ‘deep fiber,’ or fiber infrastructure closer to the end user.
Much of the premise behind the report focuses on 5G, which requires a dense fiber network for backhaul and fronthaul. But it also stresses the discrepancy between rural and urban broadband options. Deloitte is calling on regulators and the broadband carrier community to address this issue, or risk losing leadership for the global digital economy opportunity.
– Future of connectivity remains uncertain in the U.S.; investment needed to ensure U.S. is 5G ready
– Vast discrepancies in choice, affordability and performance exist between rural, underserved and urban geographies
– Deep fiber paramount to unleashing wireless innovation, internet of things (IoT) functionality and immersive entertainment.
“Network infrastructure is among the key factors in a nation’s economic growth potential and status as an innovator, and ultimately in propelling our economy’s gross domestic product and job growth,” said Craig Wigginton, vice chairman and telecommunications sector leader, Deloitte & Touche LLP in a press release announcing the report.
“We see a 5G ready U.S. infrastructure as critical to enabling a range of other adjacent industries to compete globally and safeguard our digital economy.”
The report says the U.S. currently lacks the fiber infrastructure necessary to take advantage of 5G. Many tier one carriers, including Verizon, have expressed their plans to ramp up fiber investments. Deloitte seems to suggest it’s not enough.
The report notes that FTTP reaches less than one-third of U.S. homes, with only 39% of U.S. consumers having access to more than one provider who offers a 25 Mbps speed tier or higher. The situation is worse in rural communities, where 10 million rural homes do not have broadband of at least 25 Mbps. The FCC definition for broadband includes a minimum speed of 25 Mbps. Well sort of. It depends on where you live and whether your carrier receives Connect America Fund (CAF) support.
“It is essential that fiber gets deployed closer to the customer to enable next generation wireless and to ensure affordable high speed connectivity across urban, suburban and rural geographies,” said Dan Littmann, principal, Deloitte Consulting LLP in the press release.
The report calls for $35B to $40B for rural fiber infrastructure and $60B to $100B for what Deloitte calls ‘broadband competition.’ I assume broadband competition means enabling multiple broadband providers who offer speeds of 25 Mbps or more.
Deloitte suggests carriers consider “shared infrastructure” models, a play on open access perhaps. IoT presents integration and security opportunities, that Deloitte says carriers need to get better at exploiting. They also suggest, carriers partner with OTT players, inviting them to fund and own their own fiber optic networks. This author believes that’s highly unlikely!
The report suggests that IP migration and regulatory reforms, while important, will not be enough to create the case for fiber deployment. Wireless, wireline and cable require creative new ways to monetize “last mile” access as an incentive for massive fiber deployment. The report contemplates three potential models:
- Synergies between deep fiber and adjacent services in an “unlimited” world: Gartner predicts that affluent households will have up to 500 connected devices by 2022. In some cases, IoT services offer the prospect of new revenue. However, most connected devices will require low bandwidth or be WiFi enabled and, therefore, may not provide carriers with incremental revenue. In such cases, carriers have an opportunity to increase revenue by offering integration, network security, and traffic management services within the increasingly complex mix of IoT devices and ecosystems.
- Partnership between carriers and OTT players to fund deep fiber: As limited fiber availability constrains increased wireless densification and fiber broadband, over the top players may choose to fund fiber deployment, including owning assets or forming partnerships with carriers.
- Deep fiber as a financial investment: Insufficient supply of deep fiber and overwhelming demand growth are strong fundamentals for fiber investment. As interest grows from nontraditional fiber investors, we expect shared infrastructure models to emerge for last mile fiber access. Fiber as leased real estate could allow carriers to maximize asset utilization.
For regulators, Deloitte offers these suggestions, which on the surface are pretty light on the details:
- Eliminating regulatory barriers that prevent carriers from operating a single IP network, impede deployment of additional fiber assets, or restrict the types of services that may be offered.
- Avoiding regulation that limits carrier innovation in creating new monetization mechanisms.
- Reforming the Universal Services Administrative Company internal operations to meet broader goals of expanding fiber infrastructure and addressing rural internet access to close the digital divide.
By Jeff Heynen of SNL Kagan
After a record year in which total estimated revenue for combined digital subscriber line, or DSL, and fiber-to-the-home, or FTTH, network infrastructure reached $9.77 billion worldwide, 2017-2019 should produce a slowdown in spending. Kagan, a media research group within S&P Global Market Intelligence, is forecasting a trough being driven by expected slowdowns in 1G EPON and 2.5G gigabit passive optical networks (GPON) spending as operators wait for 10Gig technologies, including XGS-PON to become more widely available. Equipment revenue is expected to drop to $9.43 billion in 2017, $8.98 billion in 2018 and $8.80 billion in 2019, as optical line terminal, or OLT, purchases for network expansion slow and prices for current-generation technologies continue to decline.
The vast majority of revenue will continue to come from the APAC region, specifically China, where China Telecom Corp. Ltd., China Unicom and China Mobile benefit from favorable regulatory policies designed to reduce FTTH construction and installation costs to help achieve national penetration and average bandwidth per user goals. Of the 95 million FTTH optical network termination, or ONT, units shipped in 2016 throughout the APAC region, we estimate that 83.5 (80.1 million) shipped to China. We expect total ONT shipments to the main Chinese operators will continue to stay in the 75 million to 80 million range through 2020, as the operators look to replace aging units with more integrated gateway units.
North American FTTH equipment spending was up 30% in 2016, surpassing $1.12 billion in equipment revenue, a first for the region and an indisputable challenge to the assertion that broadband spending in the region has declined. Total spending in North America was driven by 2.5G GPON equipment purchases at Verizon Communications Inc., AT&T Inc., Alphabet Inc.‘s Google Fiber and a growing number of tier 3 operators. Demand for new equipment is being driven primarily by Verizon, which is adding new FiOS subscribers and updating older GPON ONT models, and AT&T, which continues to expand its GPON-based AT&T Fiber footprint. But other operators, including CenturyLink Inc., Windstream Holdings Inc., Frontier Communications Corp. and Telephone and Data Systems Inc., continue to transition a growing percentage of their network footprint to fiber. However, we do believe that some of these initiatives, particularly Verizon’s FiOS upgrades, will slow after the peak in 2016, pushing revenue down to $1.07 billion in 2017 and $999.4 million in 2018.
2.5G GPON remains the workhorse FTTH technology on a global basis, with operators including Verizon, AT&T, China Telecom, China Mobile, China Unicom, Telefónica S.A. and many others relying on the technology for their residential FTTH deployments. We expect 2.5G GPON will remain the leading technology choice through 2021, as ONT shipments to support subscriber growth on existing networks remain high, despite the increased rollouts of XGS-PON and NG-PON2 technologies over time.
Saturation, waiting on 10G, and a focus on 5G will keep revenue growth in check
Though 2016 was a strong year for FTTH equipment revenue, it is likely to be the peak throughout our forecast period. In 2017, revenue is expected to decline from $8.33 billion to just under $8 billion. Chinese operators are expected to slightly slow their OLT rollouts after seven straight years of phenomenal growth. Their focus will be less on new FTTH network expansion and more on continued subscriber acquisition, which will result in continued spending on ONT units. Also, the three main Chinese operators will be rolling out 10G EPON and 10G GPON equipment, as they wait on XGS-PON equipment availability. The focus will be on improving bandwidth in major metropolitan areas, especially among subscribers currently served by fiber-to-the-building (FTTB) + local area network (LAN) architectures, which typically max out at 10 Mbps downstream.
In North America and Western Europe, FTTH network buildouts, measured in the number of new OLT ports shipped, will slow after 2018, when a combination of factors are expected to reduce overall investment levels:
* Many operators will have reached saturation levels within their core FTTH networks. Like Verizon, these operators will hold off on additional territory expansions and instead focus on securing subscribers within their existing serving areas. The net result will be declining OLT shipments and sustained ONT unit shipments.
* Operators will wait until 10G variants of PON technologies become more widely available and therefore less expensive, particularly 10G EPON for cable operators, XGS-PON, which delivers symmetric 10 Gbps of throughput and NGPON-2, which delivers up to 40 Gbps of symmetric throughput.
* Finally, operators will begin shifting their spending toward preparing for upcoming 5G wireless networks. The early stages of 5G network buildouts will focus on metro areas and will rely on existing fiber connections for backhaul purposes.
Beginning in 2020, overall spending on FTTH equipment is expected to pick back up, based on increased shipments of 10G EPON, XGS-PON and NGPON-2 equipment to support upgrades to first-generation FTTH networks, business services and the backhaul of 5G wireless network traffic. By 2022, we expect total FTTH equipment spending to be $8.32 billion, nearly equal to the 2016 peak.
In a change from our October forecast, we now expect XGS-PON to become the leading next-generation technology during our current forecast period. Previously, we had expected that NGPON-2, driven by anticipated deployments at Verizon, China Telecom, and others would become the leading next-generation technology. However, after conversations with service providers, equipment vendors and component suppliers, we do not see NGPON-2 equipment, with its reliance on expensive, tunable optics, becoming widely deployed for FTTH applications until 2021 and beyond.
In our previous forecast, we expected worldwide revenue for NGPON-2 equipment in 2021 to reach $2.20 billion. We now expect it to reach just over $1 billion in 2021, with much of the revenue coming from Verizon, as it upgrades its FiOS network. By 2021, portions of Verizon’s FiOS network will be over a decade old. And with cable operators’ aggressive deployments of DOCSIS 3.1 technologies, Verizon will be forced to switch to NGPON-2 to provide a bandwidth advantage for the next decade. In addition, Verizon is expected to rely on NGPON-2’s ability to deliver multiple wavelengths to support the backhaul of mobile data traffic from its 5G base stations. A single NGPON-2 OLT can theoretically split multiple wavelengths for residential services, mobile backhaul and business services.
While Verizon is expected to stick with its plan to move to NGPON-2, a larger number of operators around the world will opt for XGS-PON, beginning in late 2017, but picking up steam in 2019. XGS-PON uses fixed optics and wavelengths, like current GPON technologies, but also provides an upgrade path to tunable optics for operators that want to move to NGPON-2 down the road.
Many operators have a 5-year goal of getting symmetric 10 Gbps services out to their customers, which would provide them an edge over cable competitors who will likely be stuck with asymmetric services through at least 2020, when full duplex DOCSIS 3.1 equipment becomes available. XGS-PON gives them the ability to deliver symmetric 10 Gbps services at price levels that are currently 4x 2.5G GPON equipment prices, as opposed to the minimum 10x 2.5G GPON costs currently seen for NGPON-2 equipment. FTTH is an expensive proposition as-is, with labor and operational costs generally consuming 70% of the budget. Equipment costs have to be controlled in order to ensure reasonable payback periods for network operators. Right now and for at least the next two years, NGPON-2 equipment will simply be too much cost to bear for most operators. Hence, the growing interest in XGS-PON among operators including AT&T, China Telecom and a growing list of tier 2 and tier 3 operators globally.
For operators with 1G EPON-based deployments — particularly Korea Telecom, Japan‘s NTT DOCOMO access, China Telecom and China Unicom, 10G EPON is quickly becoming the next-generation technology of choice for providing both asymmetric and symmetric 10 Gbps services. 10G EPON equipment shipments and revenue continue to grow, driven currently by China Telecom, which is in the process of upgrading a portion of its first-generation 1G networks to provide more bandwidth to multi-dwelling units, or MDUs.
Longer-term, cable operators in North America and Western Europe will deploy 10G EPON in Greenfield deployments and, on occasion, in overbuild situations, as well as for business services. Of course, MSOs will rely heavily on DOCSIS 3.1 for the bulk of their residential deployments. But 10G EPON will also be an important technology for cable operators for MDU deployments and business services, particularly as fiber is pushed deeper into the network and remote nodes are converted into OLTs.
Our equipment revenue forecasts for 10G EPON have been nearly doubled, due largely to higher-than-expected spending levels seen in 2016 in China, but also due to our expectations that a growing number of cable operators will mix in a higher percentage of 10G EPON for greenfield FTTH buildouts. Altice USA, Inc. has already committed to a full FTTH network buildout across its footprint, which we have now factored into our forecasts. In addition, we expect other North American MSOs to slowly migrate to 10G EPON for both their business and greenfield residential access networks.
VDSL and G.fast spending to sustain DSL infrastructure market through 2019
Global spending on DSL equipment by operators and ISPs is expected to increase by 1.4% this year, with 2017 equipment revenue now expected to rise to $1.46 billion. The primary reason for the increase is a resumption in spending in the CALA region, which saw 2016 equipment revenue plummet to $75.8 million. Economic uncertainty in the region, as well as a decision by Telmex to halt its VDSL rollouts helped to push revenue down sharply in the region. We now expect DSL spending to reach normal annual levels, with 2017 revenue to reach $117.5 million.
Outside of CALA, declines are once again expected this year in North America, where total DSL revenue is expected to drop from $388.3 million in 2016 to $368.9 million in 2017. AT&T’s continued shift for its U-Verse service from very high bit rate digital subscriber line generation 2 (VDSL2) GPON is expected to result in a decline of another 600,000 VDSL ports from 2016 to 2017.
EMEA remains the world’s largest market for DSL infrastructure: 47.2% of global revenue comes from this region, where incumbents such as British Telecom (BT), Deutsche Telekom AG (DT), Orange SA, Telefonica and others continue to rely on asymmetric digital subscriber line (ADSL) and VDSL technologies for the bulk of their residential broadband service offerings. Providers have shifted a small percentage of their broadband networks to FTTH and will continue to do so. However, the cost of widespread fiber deployments, as well as line-sharing obligations will keep the bulk of broadband connections in this region copper-based. Throughout our forecast, the EMEA region will constitute 46% to 48% of global DSL revenue and will continue to be the leading region for G.fast deployments.
Along with the revenue increase expected in 2017, total DSL ports should also increase from 54.8 million in 2016 to 58.3 million. Further increases in total ports are expected through 2020, as service providers continue to shift away from ADSL/ADSL2+ technologies to VDSL2, VDSL Profile 35b and G.fast. From 2021 forward, however, we do expect the total market for DSL ports will decline, as more operators switch to FTTH as a logical progression from their deep fiber deployments to support VDSL2 and G.fast deployments.
G.fast, a high-frequency DSL protocol designed for copper loops of 250 meters that can deliver between 150 Mbps and 1Gbps, will be relied upon by BT, Orange, Telekom Austria Group, AT&T and others in the coming years. CenturyLink already announced a 44-building G.fast deployment in Platteville, Wis. CenturyLink is expected to continue its G.fast deployments throughout 2017 and beyond. But BT is expected to drive the most G.fast port and customer premises equipment (CPE) shipments, with its announced plan to pass 10 million homes with G.fast by 2020.
Until G.fast silicon chips, infrastructure and compatible CPE products are available in volume, VDSL2 will remain the workhorse technology. Vectored VDSL2 can provide 100 Mbps to 150 Mbps service over copper loops of 500 meters and has been used by a large number of operators in North America, EMEA and CALA to remain competitive with fiber over builders and cable operators.
VDSL profile 35b, alternately called Super VDSL or Vplus, provides a niche solution between vectored VDSL2 and G.fast. At loop lengths between 250 and 500 meters, VDSL profile 35b can provide speeds ranging from 200 Mbps to 300 Mbps. Germany‘s DT is the leading proponent of this technology, as the operator has yet to deploy a significant amount of vectored VDSL2 and can therefore more cost-effectively make the transition to the 30 MHz vectoring of profile 35b. Additionally, DT has a large percentage of copper lengths within the 250 to 500 meter range, making it the ideal target for this technology.