Washington DC | San Diego | Boston | Dallas | Paris | London | Tokyo

FTTx: The Many Roads to Last Mile Fiber

Jason MarcheckPrincipal Analyst, Optical InfrastructureMarch, 2006

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Company Background

Recognized for a Tradition of Innovation2004

Outsell’s Top 10 IT Research List

Deloitte & Touche - Fast 500

J. Swartz Finalist, E&Y’s Entrepreneur of the Year

2003

KMWorld “100 Companies That Matter in Knowledge Mgmt”

Outsell’s “Fastest Growing Company in IT Research”

2002

Deloitte & Touche Technology Fast 500

Competia “Best Information Source”

#4, Washington, D.C. Techway Fast 50

2001

Deloitte & Touche -Virginia Rising Star

1999 - 2000

CIO Web Businesses 50/50 Award

CIO-100 Award

Virginia

Founded in 1997Leading Provider of Competitive Response Solutions80 Researchers & Analysts Worldwide40,000+ Subscribers250 Enterprise CustomersHeadquarters in Sterling, VA; Offices in San Diego, CA; Dallas, TX; London; Amsterdam; and Paris

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Industry Leaders Use Current Analysis

IT InfrastructureTelecomm – Wire Line

Personal ComputingPublic Sector

Printing & ImagingTelecomm - Wireless Business Applications

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Telebriefing AgendaWhat Are We Going To Talk About For the Next Hour?

Why Are We Here?The Alphabet Soup of FTTx

DefinitionsClarification: FTTx ≠ PONGeographic Segmentation

GPON, GePON and What Comes Next?Current State of the ArtWDM-based PONs / 10 GePONs

Who Is In The Game - Who Will Win?Vendor LandscapeVendor Positioning

Parting Thoughts

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Why Are We Here?The Promise of FTTx

From Baseball to Broadband: The Famous “Triple Play”

Enriched broadband servicesCreate stickiness / customer loyalty

Multiple MarketsTelco / cable Consumer / enterprise / muni

Growing MomentumMature deployments in JapanTier-3 market: Start-up havenRBOC RFPs driving new solutions announcementsHuge market worldwide$2.2 billion in systems revenue just for FTTP gear by 2008 (Skylight Research)

FTTx

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FTTx Alphabet SoupBeyond The Jargon and Marketing

At the End of the Day FTTx is a Blanket Term Describing Terrestrial Broadband Access Media.

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What Is FTTx?The Basics

Fiber DeploymentFTTP (aka: FTTH, FTTB) – Fiber to subscriber’s premise; internal wiring is copper-basedFTTN (aka: FTTC, FTTCab) – Fiber to about 3-5 K feet of subscriber’s premise; last mile is copper-based

Signal DistributionPON: Passive Optical NetworkAON: Active Optical Network

Speeds and FeedsBPON: up to 622 Mbps (symmetrical)GPON: up to 2.4 Gbps (1.25 Gbps up / 2.4 Gbps down)AON & EPON*: 1.25 Gbps Gbps (symmetrical)

ComponentsOLT – Optical Line Terminal (content aggregation and transmission)POS – Passive Optical Splitter (PON only)ONT – Optical Network Terminal (CPE device)* 10 Gbps EPONs now in development

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What Is FTTx?How We Got Where We Are Today

StandardsBPON (ITU-T G.983)GPON (ITU-T G.984)AON & EPON (IEEE 802.3ah)

FTTx TimelinePre-2000

FTTx trials (e.g. Japan late 1970’s & 80’s; BellSouth & Qwest 1995-1997)

APON deployments begin in Japan (late 90’s

2001-02

AON, EPON and BPON rollouts begin with IOCs in U.S.; AON with PTTs in Europe

EPON roll-outs begin in volume in Japan

2003

Initial GPON solutions hit the market from FlexLight Networks and Optical Solutions

RBOCs issue BPON RFP

2004-2005

Verizon begins rolling out FIOS based on BPON;

SBC begins “Project Lightspeed” FTTN Program

2006

GPON solutions proliferate

“TRI-BOC” RFP Awards expected

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What Is FTTx?Technology Debates

Active vs. PassiveActive: Longer reach; dedicated bandwidth; simple architecturePassive: More attractive economics – esp. for large deployments

BPON/GPON vs. EPONSame wavelengths (1490 – Down; 1310 – Up; 1550 – RF Overlay)Same distance claims (about 20 km max)*Cost Claims Differ

– EPON: cheaper to deploy; trade off in distance, split ratio– BPON/GPON: robust technology claims; more up front investment

* Realized distances depend heavily on assumptions (e.g. subscriber load; fiber type, services, etc.)

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What Is FTTx?Active vs. Passive Distribution

Common Assumption: FTTx = PONMost FTTx deployments are expected to be based on PON architectureAON (i.e. “Active”) distribution schemes have taken hold in EMEA and should prosper in some Asia-Pac markets as well

Dirty Little (not so) Secret: All FTTx systems have lots of active electronics

Provisioning platforms (i.e. OLTs, MSAPs, etc.)CPE (NIDs, ONTs)

Main Difference: PONs allow multiple customers to be served fromsingle fiber out of the OLT, MSAP, etc.

High Level Pro (PON): cheaperHigh Level Con (PON): architecturally more complex than AON

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What Is FTTx?Active vs. Passive Distribution

PONPros:

Fewer fibers = reduced CapEx & OpExLower power lasers (cheaper)Better economies of scale

Cons: Splitters reduce distance between active electronicsMore users impacted by single point of failureBandwidth to each user decreases as more users added to system

AONPros:

Leverages Ethernet cost efficienciesDedicated bandwidth per subscriberBetter distance

Cons:More fibers = higher CapEx & OpExCan require more right of way agreementsHigher power lasers (more expensive)

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What Is FTTx?TDM vs. Ethernet?

Common Assumption: GPON is the logical evolution of BPON Most telcos deploying BPON will eventually migrate to GPONArchitecturally, GPON very different than BPON

– BPON primarily ATM-based– GPON supports native ATM, TDM and Ethernet

Dirty Little (not so) Secret: GPON Relies Heavily on EthernetUses Ethernet for Layer 2Frames packet differently than EPON for transport over PON network

If both GPON and EPON Use Ethernet, then Why the Debate?GPON still supports QoS for TDM-based voice servicesGPON supports higher line rates, farther reach than EPONEPON is more mature; maintains benefit of faster development cycles

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What Is FTTx?B/GPON vs. EPON

B/GPONPros:

Supports TDM voiceMore available bandwidth (GPON uses GEM framing)Large ecosystem of vendorsBroad Tier-1 support

Cons: More expensive than EPONsGPON systems still maturingSystem complexity hampers cost reduction efforts.

EPONPros:

Leverages Ethernet cost efficienciesEasy interface with carrier Ethernet networksGePON systems more mature than GPON

Cons:“Best Effort” syndromeAON approach competes for “pure Ethernet” mindshareOverhead reduces useable bandwidth

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Where is FTTx?Deployment Preferences by Region

North America:• Passive• BPON migrating to GPON

Central & South America:Up for grabs

Europe:• Active, Considering Passive• AON and BPON/GPON

Asia Pacific:• Japan: Passive• Japan: EPON

• Rest of AP: Largely up for grabs

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What Is the State of the Art?When PONs Roll Out in Force, What Will be Behind the Curtain?

Demands of IPTV Making Choices Clear?

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Video Delivery over BPON

Source: Alcatel

Technically IP video can be delivered over BPON systemBandwidth limitations make RF overlay necessary (1550 nm λ)VoD services still delivered via 1490 nm wavelength

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Video Delivery over GPON

Source: Alcatel

Data requirements of IPTV make GPON (or GePON) preferred choice– Approximately 30-35 Mbps required for each subscriber

Eliminates requirement for third wavelengthClass C ODN allows for more robust video over longer distances

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State of the ArtPerformance and Feature Comparisons (GPON vs. GePON)

All Claims Come with AssumptionsSplits vary depending on take rates; distance considerationsMax distance under optimal conditions; 60 km for GPON assumes no analog video

All Assumptions Must Be TestedMax splits likely to be lower in practiceDistance claims degrade rapidly as number of users per POS grow.

Strong in Japan; Moderate in other Asia-Pac and N. America IOC

markets

Strong among IOCs in N. America; Emerging

elsewhere

Strong among early adopters in N. American

IOC and Asia-Pac markets; Ramp-up

Phase with N. American RBOCS

Deployment Momentum

Native IP (RF possible)Native IP (RF possible)RF Overlay (via 3rd λ)Video (Typical)

1/321/641/32Max. Split Ratio

Up to 20 kmUp to 60 kmUp to 20 kmNetwork Reach

GbEATM, TDM, GbEATM, TDM, GbENetwork Interfaces

MACGEMATMPacket Framing

Symmetrical (1.25/1.25)Asymmetrical (2.4/1.2)Symmetrical (622/622)Bandwidth Support

1.25 Gbps2.488 Gbps622 MbpsMax. Throughput

IEEE (802.3ah)ITU-T (G.984)ITU (G.983)Standard

GePONGPONBPON

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The Game of “One Upsmanship”What Does Tomorrow Hold?

WDM-based PONsA chicken in every pot; A wavelength in every home Anticipation of increased upstream requirementsRequires considerable maturation of componentsReality: more than 5+ years away

10 GePONsConceptually easier to make 1 GbE to 10 GbE jump than B/GPON to WDM-PONInitial testing of 10 GePONs taking placeCommercial products: pegged for 2008

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Vendor Landscape and PositioningWho Is In The Game & Who Will Win?

Many Players, Not All on Equal Footing

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Vendor Landscape and PositioningWho is in the Game?

B/GPONAlcatelCalix/OSIECI TelecomEntrisphereFlexLight NetworksFujitsu (FNC)Hitachi Telecom (USA)LucentMotorolaNECTellabsTerawave

EPONAllOpticFujitsu (Ltd)Hitachi (Ltd) / SaliraNECWave7 Optics

AONAllied TelesynOccam NetworksSiemensWave7 OpticsWorld Wide Packets

Multi-ServiceAlcatelAllied TelesynECI TelecomEntrisphereLucentMotorolaOccam Networks

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Vendor Landscape and PositioningWhat Are Operators Looking For in a Solution?

Solution CapabilitiesVideo channel partnersNetwork optimization and deployment helpSynergistic BB access solutions (i.e. wireless, DSL, etc.)

Overheard From the Trenches: InteroperabilityScalabilitySolutions

Product CapabilitiesProven ONT interop with other OLTsAbility to hit volume run ratesInfrastructure breadth (i.e. Synergistic BB access equipment)Product Evolution

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Vendor Landscape and PositioningHow GPON Solutions Stack up?

Alcatel & Motorola Best PositionedSize supports successServices + Solutions + Sales OrganizationTellabs clearly in advantageous position too

Strong MSAP Support Is AdvantageInstalled MSAP base will support GPON migrations

Limited Support / Traction

Moderate Support / Traction

Strong Support / Traction

FlexLight

Terawave

Siemens

Entrisphere

NEC

Lucent

Fujitsu (FNC)

ECI Telecom

Hitachi Telecom

Tellabs

Calix/OSI

Motorola

Alcatel

B/GPON Product TractionStability/Size

Solutions Capabilities

Multi-Access PlatformGPON Maturity

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Vendor Landscape and PositioningHow Ethernet Solutions Stack Up?

Ethernet Vendors More Narrowly Focused

Specialized solutions limit appeal to Tier-1 carriersSolutions strengths of GPON vendors could swing the balance

Japanese Parents Benefit from EPON Success in Homeland

Large market share due to incumbencyMomentum Asia-Pac IPR to leverage toward GPON products

Limited Support / Traction

Moderate Support / TractionStrong Support / Traction

PacketFront

Occam

World Wide Packets

Wave7 Optics

AllOptic

Siemens

Allied Telesyn

Hitachi Telecom

NEC

Fujitsu (Ltd.)

Product TractionStability/SizeSolutions CapabilitiesProduct Maturity

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Parting ThoughtsWhat Could Drive (Or Hold Back) The Market?

Economics, Solutions, Competition, Et. Al.

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Parting ThoughtsSuccess vs. Failure – The Road Ahead

What Could Go WrongGPON system delaysUnmet Expectations

– Early IPTV performance– Homes passed run

rates– GPON ONT costs

Continued relevance of DSL, Coax

– Not everyone will need 20 Mbps in next 5 years

Market will rationalize (only a concern for the ones that don’t get the business)

What Needs To Go RightEconomics for GPON ONTs have to deliverCompelling Applications

– Interactive multimedia– Value added services

Solutions development– Right equipment for

right scenario– Planning & Services

Continued uptake in early adopter areas

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Parting ThoughtsThe Questions and Battles That Lie Ahead

Products vs. Solutions: One Size Doesn’t Fit AllAssuming products work, service providers want solutionsMore than just an MSAP

Hype vs. RealityDetails of GPON era have yet to be worked out

Creating Additional Revenue for Service ProvidersIPTV holy grail passes most revenue through to content providersNeed for new revenues that carriers can keep

Migration of the Migration PathBPON to GPON one thing; GPON to WDM-PON quite another

Washington DC | San Diego | Boston | Dallas | Paris | London | Tokyo

FTTx: The Many Roads to Last Mile Fiber

Jason MarcheckPrincipal Analyst, Optical InfrastructureMarch, 2006