Passive optical networks (PONs) are being deployed throughout Asia and Europe, and three of the four traditional regional Bell operating companies (RBOCs) in the United States (BellSouth, SBC Communications, and Verizon) have recently released a tender for fibre to the premises (FTTP) using PON. The largest deployment to date is in Japan with NTT, but most of the major service providers in Asia are following suit with their own tenders, trials, and deployments.
According to research released at the end of May by Probe Group LLC, the total PON equipment market in 2002 was valued at about USD118 million. This figure is expected to increase at around a 40% compound annual growth rate such that we will have a market exceeding USD1 billion by 2008. The fibre to the building (FTTB) component of this growth alone is expected to be 80% year over year.
A new standard is emerging in the industry for gigabit PON (GPON). In the International Telecommunication Union (ITU), it is being ratified under the G.984.x group of standards. GPON has been defined based on requirements from the major carriers within the Full-Services Access Network (FSAN) organisation for GPON networks capable of supporting their data and voice services. Based on our conversation with these major carriers, we believe GPON will become the deployment choice over the coming years.
GPON offers high-bandwidth availability for the carrier (1.25 Gbits/sec or higher) as well as support for native-mode traffic, meaning that voice and data do not need to be encapsulated into either IP or ATM to be carried over the network. Instead, they can reside on the access network in their native format.
PONs in general and GPON in particular offer service providers savings in their capital expenditures (capex) and ongoing operational expenditures (opex). Due to the fact that an expensive fibre deployment can now be shared among multiple users and this fibre is operating at 2.5 Gbits/sec or higher, the up-front capital savings can be as much as 50% versus SONET/SDH solutions. And because the network is passive (meaning there are no power requirements or active components between the central office and customer), there is little to break or require maintenance, which lowers the operating costs of the network. The resulting savings allow a service provider to provide fibre access to the customers at 50% or more savings versus competing technologies.
The FSAN organisation comprises vendors such as FlexLight Networks and the major service providers (see www.fsanweb.org). The service providers in this committee state their requirements for access networks, then the equipment vendors work to define standards proposals against these requirements for the service providers. Once the service providers decide on a standard, it is sent to the ITU for full ratification and standardisation. FlexLight was part of the group that defined what is now known as GPON against the service providers' service requirements.
GPON as currently defined uses a variant of the generic framing protocol from the SONET/SDH ITU standards. This protocol is simple and requires very little overhead. In typical traffic studies, FlexLight's GPON system can support network efficiencies of 93%, meaning that only 7% of the bandwidth is used for carrying the network traffic and its protocol overheads. This level of efficiency, combined with the raw bandwidth at 2.5 Gbits/sec per CWDM wavelength and the overall cost-effectiveness of PON, creates a compelling business case for the service providers.
Competing PON technologies using ATM or Ethernet have overheads substantially higher than that. ATM-based PONs, known as APON or BPON, as an example, reserve about 30% of their bandwidth for overhead, and the networks generally only scale to 622 Mbits/sec of raw bandwidth. As shown in the Figure, Ethernet PONs, while supporting raw bandwidth of 1.25 Gbits/sec, can sacrifice as much as 50% of that bandwidth to protocol overheads. The resulting comparison of these PON technologies to GPON provides a much higher amount of bandwidth for the service provider to use for revenue services and therefore a much stronger business case for the carriers.
Due to the economics of PONs, most of the major carriers in Asia are trialing or deploying PONs. With the recent RBOC tender, we see that deployment beginning to happen in the United States and further in Europe in the months and years ahead. Eventually, PONs will replace point-to-point fibre deployments as well as SONET/SDH loops for buildings needing service 10, 20, or more kilometres from the city centre where the metro network resides. Although SONET/SDH networks will continue to be deployed in metro networks, GPON provides the economic incentive and returns for access networks.