European FTTH debates GPON vs. Ethernet

by Kurt Ruderman

Over the past year, Europeans have gone from wondering if FTTH would happen to debating which access technology-GPON or pure point-to-point Ethernet-is the best and most economical to deploy.

GPON-a passive optical network standard developed by incumbent carriers and vendors within the Full Service Access Network (FSAN) group and ratified as a Recommendation by the ITU-T-aims to cut costs and deliver more bandwidth than BPON. The technology, which delivers up to 2.5 Gbit/s downstream and an aggregate 1.25 Gbit/s upstream, is slowly winning over Europe.

Point-to-point Ethernet-delivered mainly through direct links or via an active hub-based architecture-is the dominant FTTX technology in Europe. As expected, supporters of point-to-point have gone on the defensive. But unexpectedly, the question of how to make infrastructure available to multiple operators popped up during the GPON-point-to-point debate in late 2006.

France Telecom contributed to the debate last January when it dropped plans to deploy VDSL and said it would deploy FTTH GPON networks with equipment supplied by Alcatel-Lucent. The carrier became the first European incumbent and FSAN member to deploy GPON.

However, French regulator ARCEP, concerned about the formation of a new telecoms monopoly, raised questions about France Telecom’s ability to share its proposed access infrastructure. It offered the opinion that GPON is difficult to unbundle, whereas sharing point-to-point is comparatively easier, similar to unbundling today’s DSL copper lines.

“France Telecom did not think about unbundling when it picked GPON,” says Roland Montagne of IDATE, a French consultancy. “France Telecom’s deployment of GPON was based on a technical choice. GPON is well suited for legacy networks; it allows incumbents to reduce the number of MDFs [local exchanges] in the short term, lowering considerably opex.”

ARCEP’s remarks about GPON touched a nerve at Alcatel-Lucent. The newly merged giant prefers to emphasise GPON’s cost savings and the sharing arrangements possible with PON rollouts to lower the cost of passive infrastructure and ensure competition, while giving incentives to invest.

Jean-Pierre Lartigue, vice president, marketing and communications at Alcatel-Lucent’s Access Division, shrugs off the notion that GPON networks cannot be shared. “It can be done using ducts, dark fibre, and at the IP level,” he explains. “Duct sharing is not a problem. It is done in the Netherlands. GPON can be shared with dark fibre as implemented in Japan or more recently [examined] in France.” But he adds, “As regards breaking the access bottleneck and deploying new fibre access networks, the term ‘unbundling’ is inappropriate in the sense that it was a regulatory measure applied to legacy copper access infrastructure built under monopoly conditions. Today’s regulation is built on retail and wholesale relevant market analysis, and fibre per se is not a market.”

During a recent tour of Alcatel-Lucent’s IP Transformation Center in Antwerp, Lartigue discussed Alcatel-Lucent’s decision to foster GPON on top of its existing point-to-point offerings.

“Our strategy is to bank on technologies adopted by standards bodies. This is what we did with DSL,” said Lartigue. “We work closely with standards bodies. This is why we are actively supporting GPON. Today, Alcatel-Lucent has the lead in GPON, with more than 25 operators actively engaged. Moreover, we now have 40 BPON customers [worldwide]. All are going to GPON.”

Based on industry forecasts that Alcatel-Lucent is using, there will be 29 million GPON subscribers worldwide by 2011. According to these forecasts, in 2011 the FTTH market will be 45% EPON, 40% GPON, and 15% point-to-point Ethernet.

“EPON will be mainly used in Japan. EPON was picked by NTT before GPON was available. It’s logical for NTT to continue with EPON for high-speed Internet. However, GPON is also considered and deployed in Japan in the context of triple play,” Lartigue said.

For now, Alcatel-Lucent’s biggest GPON customer is Verizon. Alcatel-Lucent and Verizon’s two other GPON suppliers-Tellabs and Motorola-have become the top suppliers thanks to their hefty contracts with the carrier. Other important global GPON suppliers are NEC, Fujitsu, Flexlight, Calix/OSI, Hitachi, and ECI Telecom.

France Telecom’s deployment of GPON is an important step and marks the start of a trend, says Joe Savage, an independent analyst and president of The FTTH Council North America. “GPON will be the choice of the big incumbents, when they move to an FTTH strategy.” But Savage is cautious about forecasting a timeframe for European GPON rollouts. “France Telecom is committed. But Telefónica will be slow to convert to FTTH; Deutsche Telekom will go FTTN and shift to FTTH/PON in 5 years. BT is so confused, they may never get there,” he says.

Selling GPON in Europe will require wide-scale deployment of FTTH. Europe is behind Asia and the US, Lartigue says. Globally, 80% of FTTH subs are in Asia Pacific, and 90% of those are in Japan. The trend is also clear in North America, where Verizon is driving the market.

Europe’s lag in FTTH deployments, Lartigue says, is due in part to unclear regulations regarding new fibre infrastructure.

“Unbundling is a real obstacle to anyone investing in the modernisation of their access network,” Savage agrees. “With no protection, no one will invest.”

France Telecom, Deutsche Telekom, and Telefónica have been among the most vocal incumbents in calling for clear regulations before they invest in FTTX. The European Commission plans to review the question in 2007. In defiance of the commission, Germany’s parliament has passed legislation exempting German service providers, including Deutsche Telekom, from ex ante pricing regulation of any new broadband access network investments.

A year ago, the German telecoms regulation authority, under pressure from the commission, included VDSL access technology in its broadband wholesale market analysis in order to ensure that competitors gain some form of access to Deutsche Telekom’s FTTN/VDSL networks, once an upgrade of higher-speed services would actually reach the German market.

PON is winning many converts in Europe’s municipality and utility market, which has been dominated by direct point-to-point until now. PON users are joining the ranks of municipal and utility FTTX network builders, which now account for the bulk of Europe’s FTTX networks.

“Cost reduction is the big selling point,” says Jack Bryant, senior vice president, sales, Wave7 Optics. “PON is very cost effective compared to point-to-point Ethernet. With PON, there is a 12% to 15% capex saving from fibre-optic cable and central office equipment. There is also lower opex by having no moving parts in the network.”

Wave7, which focuses on Tier 2 and 3 network providers and master plan communities, won its first European PON contract in March 2006 from Sydfyns Elforsyning, a utility company based in Denmark. Sydfyns is connecting all of its 30,000 electrical customers with the single-fibre PON system.

Sydfyns is using Wave7’s Trident system, which supports EPON and GPON. Sydfyns will use EPON until GPON chips are available later this year.

Wave7 has announced PON agreements with two planned communities in Denmark; plans to announce a PON trial with a utility in Norway; and is also in talks with a couple of municipalities in France.

“Ethernet was a good interim solution and could proliferate in more dense areas. But over the next 3 to 5 years you will see proliferation of PON,” Bryant says. “Cost will be a big factor. Deployments will drive down the cost of silicon.”

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