The Momentum of XGS-PON Deployments is Accelerating
The rapid adoption of 10Gbps Symmetrical Passive Optical Network (XGS-PON) solutions is reshaping the technological landscape, with widespread deployment already underway. Omdia, a global analytics and consulting firm specializing in the telecommunications, media, and technology industries, forecasts that XGS-PON will soon constitute 67% of North America’s PON Optical Line Terminal (OLT) shipments.
The global landscape is also witnessing a significant surge in the adoption of XGS-PON deployments, with Omdia projecting a substantial increase in XGS-PON OLT port deployments, rising from 2.3 million in 2022 to an estimated 13.4 million by 2028.
This uptick in XGS-PON volumes indicates its widespread adoption by various operators, each driven by distinct motivations. Established Fiber-to-the-Premises (FTTP) operators find in XGS-PON a tool for competitive differentiation and avenues for upselling. Greenfield fiber operators are drawn to XGS-PON due to its modest cost differential compared to Gigabit Passive Optical Network (GPON), coupled with the fact that the active equipment cost represents a minimal percentage of the overall outside plant rollout expenses.
Additionally, new entrants in the greenfield fiber market seek to establish themselves as market leaders with the latest technology. Governments investing in broadband infrastructure are taking a long-term perspective on the value of FTTP, making XGS-PON rollouts an attractive option that aligns with their overarching investment strategy, avoiding the need for a new investment cycle in the near future. XGS-PON entices wholesale-only operators as it presents the optimal opportunity to attract retail Internet Service Providers (ISPs) to their network. Finally, cable operators recognize the benefits of XGS-PON as a cost-effective and high-performance upgrade to their existing DOCSIS networks.
Operators are deploying XGS-PON for three primary reasons:
Competition
In areas where fiber overbuild is prevalent, XGS-PON serves as a crucial differentiator, highlighting the performance advantages of FTTP over cable and fixed wireless access (FWA). The technology enables operators to seamlessly offer symmetrical gigabit and multigigabit access, a feature that becomes increasingly crucial as more subscribers demand such high-speed connections. By 2027, 32% of global consumer broadband subscriptions are anticipated to be for speeds of 1Gbps and above.
Revenue Opportunities
XGS-PON opens up significant revenue streams for operators, whether from the premium consumer segment, wholesale segment, or increased revenue from enterprise and mobile transport segments.
Network Efficiency
XGS-PON offers operators the advantage of enhanced network efficiency by providing ample headroom for continuous user service upgrades without necessitating network and home equipment changes. Additionally, it delivers improved energy efficiency compared to earlier Passive Optical Network (PON) technologies. The versatility of the XGS-PON network to support multiple applications further contributes to efficiency benefits.
Gaining Competitive Edge through XGS-PON Differentiation
The prevalence of Fiber-to-the-Premises (FTTP) overbuild is on the rise in various markets, both developed and developing. In this dynamic landscape, operators must offer the highest speeds via FTTP and strategically invest in XGS-PON rollouts to secure and uphold a premium market position. Investing in an FTTP rollout to provide an exceptional network, only to be surpassed by a competitor offering higher speeds, becomes counterproductive.
XGS-PON FTTP, delivering multigigabit access, emerges as a pivotal differentiator against alternative broadband infrastructures like cable and Fixed Wireless Access (FWA). For example, DOCSIS 3.1 falls short in competing with XGS-PON’s ability to support symmetrical multigigabit speeds. While DOCSIS 4.0 has the potential to support such speeds, both Extended Spectrum DOCSIS 4.0 and Full Duplex DOCSIS 4.0 require extensive network modifications and substantial investment.
Extended Spectrum DOCSIS 4.0 requires alterations to passive components and amplifiers, and Full Duplex DOCSIS 4.0 demands a new generation of amplifiers. Comparatively, XGS-PON can leverage the existing fiber outside the plant and, in most cases, the same access nodes, illustrating why numerous cable operators are transitioning to 10G PON technologies.
Additionally, XGS-PON exhibits considerable advantages in download and upload speeds over FWA. Not only can XGS-PON offer higher maximum speeds, but it also demonstrates less variability in speeds compared to FWA, which is more susceptible to capacity constraints and factors, such as the local environment, influencing in-building performance.
The chart below illustrates the substantial speed advantage XGS-PON holds over rival technologies. It showcases the maximum download and upload speeds offered by Tier 1 US operators across different technologies, highlighting that operators adopting XGS-PON are strategically positioned to be recognized as the providers with the best-quality network. The fundamental objective of investing in FTTP is to give subscribers a superior network experience, making the upgrade to XGS-PON a logical step that distinctly separates FTTP from alternative infrastructures within the overarching investment rationale.
Empowering Increased Revenue through Premium Services
XGS-PON serves as a catalyst for operators to elevate their residential services by offering gigabit and multigigabit access, thereby delivering premium value to end-users. Omdia’s analysis reveals a substantial increase in the number of operators providing gigabit access, growing from 323 in 2020 to 451 by 2022. Additionally, the number of operators delivering 10Gbps speeds exhibited robust growth, rising from 36 in 2020 to 55 in 2022.
A driver of the increase in bandwidth demand is the escalating prevalence of video content, marked by a trend of “everything becoming video.” This transcends conventional entertainment, extending to areas such as home-based work and education, where video is the preferred format for information dissemination, including user guides and instructional content like cooking recipes.
A consumer survey conducted by Omdia in April 2023 indicated the significance of online gaming, with 34% of Australian adult respondents identifying as console gamers and 31% as PC gamers. Similar figures were observed across other markets. The survey also pointed to the growing relevance of online gaming, particularly among respondents aged 18–24, where 49% identified as console gamers and 46% as PC gamers. This trend suggests a continual rise in the importance of online gaming, further underscoring the need for robust and high-speed connectivity solutions like XGS-PON to meet evolving user demands.
Meeting Growing Bandwidth Demands with XGS-PON
The increasing prevalence of simultaneous video streams within households amplifies the demand for bandwidth. In a consumer survey conducted by Omdia in April 2023, 45% of US respondents acknowledged watching video clips on a device while simultaneously watching TV. Additionally, the trend of different family members viewing distinct video streams concurrently adds another layer to the escalating bandwidth requirements.
With most office tools live in the cloud, users working from home expect access to files at the same speed as if stored on a local hard drive. XGS-PON’s 10Gbps uplink capacity is tailor-made for this purpose, presenting an eightfold improvement over GPON. Operators stand to benefit by targeting home workers, a potentially lucrative segment. For instance, 54% of UK respondents in Omdia’s 2022 Digital Consumer Insights survey expressed willingness to pay more for a working-from-home service prioritizing all work applications to ensure the highest quality.
Moreover, the gigabit and multigigabit speeds facilitated by XGS-PON prove invaluable to end-users dealing with downloading and uploading large files. Notably, the average size of a webpage has surged by 412% since November 2010, as indicated by data from the HTTP Archive. Consequently, downloads can take longer without faster speeds, highlighting the practical significance of XGS-PON in this context.
The imperative for XGS-PON is further underscored by the confluence of growing traffic volumes and operators offering gigabit service tiers. When operators allocate 1Gbps on the PON for an end user conducting a broadband speed test within a gigabit service tier, the remaining bandwidth on a GPON FTTP network quickly reaches saturation levels as broadband traffic continues to surge. This scenario necessitates an XGS-PON upgrade to address the escalating demand for higher bandwidth and ensure optimal network performance.
Empowering Diverse Tariff Strategies for Revenue Enhancement
The introduction of XGS-PON, accompanied by gigabit and multigigabit access, affords operators greater flexibility in crafting tariff-tiering strategies, catering to diverse business priorities and competitive landscapes. Two distinct approaches emerge depending on the operators’ objectives:
Mass-Market Appeal
Operators can position gigabit and multigigabit access as a mass-market offering or an entry-level tier. By doing so, they maximize the allure of the fastest speeds to a broad customer base, enhancing the benefits of subscription acquisition. Examples of this approach include Salt in Switzerland and certain UK alternative network providers (altnets). For wholesale-focused operators, possessing a high-capacity network is pivotal in attracting more retail service providers. A broader provider base increases the likelihood of higher overall subscription uptake on the network, thereby bolstering the business case for wholesale-focused operators.
Premium Pricing Strategy
Alternatively, retail or wholesale-focused operators may choose to price gigabit and multigigabit access at a premium. This strategy aims to increase Average Revenue Per User (ARPU) by capitalizing on the demand among a subset of customers willing to pay more for the fastest speeds. Moreover, pricing at a premium strategically positions operators to leverage the halo effect. Even if subscribers do not opt for the highest speed offer, they are more likely to choose a faster speed than they would have if gigabit or multigigabit access were unavailable. AT&T is a notable example of an operator successfully implementing this premium pricing strategy, as indicated by its 1Q23 earnings call, where it reported an ARPU of approximately $70 for new FTTP customers. By comparison, the retail price of the operator’s 300Mbps plan is $55 per month, and its 500Mbps plan costs $65 per month. This demonstrates the efficacy of the premium pricing strategy in generating increased revenue while offering consumers a range of speed options.
XGS-PON empowers operators with immediate benefits and provides a strategic advantage for upselling over time. Its extended runway for further speed increases without requiring changes in the OLT or Optical Network Terminal (ONT) allows operators to enhance maximum speeds gradually. This flexibility offers operators ongoing opportunities to market higher speeds for premium prices or utilize them as incentives for customer retention, requiring minimal additional investment.
Multi-Use Strategies for Revenue Amplification
Another Omdia survey revealed that over 90% of operators express a desire to leverage their Passive Optical Network (PON) infrastructure for more than just residential services, extending to enterprise services and transport. Adopting a multi-use strategy for PON infrastructure allows operators to maximize the versatility of their networks, translating into increased revenue. Next-generation PON technologies, such as XGS-PON, are pivotal in facilitating this multi-use strategy, as its 10Gbps symmetrical bandwidth supports diverse enterprise requirements.
Additionally, XGS-PON proves adept at accommodating transport applications, including public Wi-Fi traffic aggregation and, in some instances, wireless backhaul. The potential for additional revenue in segments such as enterprise connectivity is substantial, given the high Average Revenue Per User (ARPU) associated with these services. Embracing XGS-PON aligns with operators’ goals of future-proofing their networks and unlocking new revenue streams through a versatile, high-performance infrastructure.
Efficient Network Operation and Sustainability with XGS-PON
XGS-PON delivers extended speed increases and stands out for its cost efficiency, ensuring long-term value with minimal incremental investment. Operators investing in XGS-PON ONTs today can seamlessly continue using them as subscribers gradually migrate to higher speeds. This proven approach, previously successful with GPON networks, is particularly relevant as GPON networks near their maximum capacity, necessitating the transition to XGS-PON.
From a network perspective, XGS-PON represents an efficient investment as it requires no modification to the outside plant. Coexisting with GPON on the same optical distribution network facilitates straightforward upgrades, allowing existing GPON subscriptions to transition smoothly to XGS-PON. Moreover, XGS-PON offers investment efficiency by providing the potential to upgrade networks to support 25G PON in the future without altering existing OLT hardware.
The network efficiency benefits of XGS-PON are further evidenced by its support for a multi-use strategy, enabling the same optical distribution network to serve residential, enterprise, and mobile transport applications. This flexibility contributes to operational expenditure savings, enhancing overall network efficiency.
Regarding wholesale strategies, national governments undertaking wholesale FTTP network builds achieve fiber deployment efficiencies by passing a premise just once with fiber, eliminating the need for multiple fiber passings. XGS-PON rollouts in these areas align with policy objectives of providing robust broadband access for all and reducing in-country disparities between rural and urban areas.
Considering sustainability, XGS-PON addresses the crucial consideration of energy consumption. Adopting energy-efficient PON technologies becomes imperative as operators increasingly prioritize sustainable connectivity and bandwidth growth. According to the European Commission’s “Broadband Communication Equipment Codes of Conduct,” an XGS-PON OLT provides four times faster downstream speeds than a GPON OLT, with power consumption only 2.2 times greater for those with fewer than 32 PON ports and 1.7 times greater for those with more than 32 PON ports. In essence, XGS-PON enables greater bandwidth support without a proportional increase in energy consumption, aligning with sustainability goals and reducing operational expenses.
Brief Case Studies
These case studies illustrate how operators strategically deploy XGS-PON to cater to diverse residential and wholesale needs, resulting in significant revenue growth and market differentiation.
Residential Case Studies
Frontier
- In January 2023, Frontier, a major US operator, unveiled its 5 Gig fiber internet service, boasting 125× faster upload speeds, 5× faster download speeds, and 2.5× lower latency compared to cable.
- Positioned as the “un-cable” operator with the fastest upload speeds in the US, Frontier focuses on delivering superior customer experiences, adding a record 87,000 fiber subscriptions in 1Q23.
- Notably, 55% of its fiber subscription acquisitions were for gigabit and multigigabit speeds, reflecting the growing success of Frontier’s strategy.
AT&T
- AT&T expanded its “hyper-gig” fiber offering in March 2022, increasing its highest-speed service tier to 5Gbps to meet growing home bandwidth demands.
- Described as creating “high-speed lanes” for various connected devices, AT&T’s multigigabit speeds have propelled consistent growth, adding over 200,000 FTTP subscriptions every quarter.
- By end-1Q23, AT&T achieved an impressive FTTP subscription take-up rate of 38%.
KPN
- The Netherlands’ incumbent, KPN, launched XGS-PON in September 2021, offering symmetrical upload and download speeds of 1Gbps.
- This deployment provided a crucial differentiator against cable operator VodafoneZiggo, contributing to KPN’s year-on-year growth in fiber broadband service revenue of 10% in 1Q23.
Wholesale and Multi-Use Case Studies
Chorus
- Chorus, a wholesale-only operator in New Zealand, leveraged XGS-PON to offer differentiated services like HyperFibre 2000, 4000, and 8000 to retail service providers, accounting for 33% of residential fiber adds in 2H22.
NBI (National Broadband Ireland)
- NBI, a wholesale-only provider in Ireland, is part of the government’s National Broadband Plan, delivering high-speed broadband to rural areas.
- Onboarding 51 retail service providers, NBI’s initial XGS-PON deployment facilitated the rapid increase of entry-level speeds in its wholesale offers to 500Mbps.
Frontier (Multi-Use Strategy)
- Frontier, operating in 25 states, implemented a multi-use strategy with XGS-PON, offering multigigabit services to residential and business customers.
- This approach resulted in a 19% growth in fiber revenue in the small and medium-sized enterprise (SME) sector in 1Q23, following a 15% growth in 4Q22.
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