The business case for GPON in FTTP networks

GPON gives cable operators an edge in the consumer and enterprise markets

The case for gigabit passive optical networking (GPON) is a simple one: in order to remain competitive, service providers
need more capacity to carry bandwidth-intensive applications; fiber is the ultimate carrier of bandwidth, and GPON is one of
the most cost-effective ways for a provider to deploy fiber.

Although video-on-demand (VOD) is still a relatively new service in many U.S. households, it’s fast becoming popular: 36
percent of cable subscribers have used VOD, according to a summer 2007 survey of 1,300 households by Leichtman
Research. That’s up from 10 percent three years ago.

Other recent studies have found even higher VOD usage among digital subscribers: In 2006, 54 percent used VOD, up from
35 percent in 2004, according to a February 2007 CTAM study. The CTAM study also found growing usage of and interest
in high-definition (HD) VOD: Two-thirds of cable HD subscribers have used HD VOD, while 19 percent of digital cable
customers said they’re likely to subscribe to HD in the next six months in order to get HD VOD.

Figure 1: Throughput requirements for a variety of services.

There’s also a booming market for linear HD programming . A July 2007 CTAM study found that the number of cable
customers with an HD set nearly doubled over the previous year, to 29 percent.

What all of those numbers add up to is an opportunity for cable operators. But meeting growing consumer demand for HD
and VOD requires a network capable of supporting bandwidth-intensive services. Figure 1 summarizes the throughput
requirements for a variety of services.

That capacity is also key for targeting the enterprise services market, which is another major growth opportunity: Enterprise
services drove about $1.2 billion in revenue in 2005 for North American cable operators, according to estimates by Ovum.

WHY GPON?
Cable operators have a variety of options for deploying the capacity necessary to support bandwidth-intensive consumer
and enterprise video and data services. But one stands out: GPON, which provides downstream speeds of 2.5 Gbps and
upstream speeds of 1.25 Gbps. That’s ample bandwidth for a variety of consumer and enterprise applications, ranging from
HD VOD to HD videoconferencing. Deploying GPON from the beginning allows cable operators to upgrade their
infrastructure to also accommodate new high bandwidth services that will come on stream in the future.

Throughput is particularly important for enabling triple-play services (voice, video and broadband). For example, a
household with broadband service, two standard-definition (SD) TVs and one HDTV uses between 16 Mbps and 26 Mbps.
Add in more demanding HD services, and the bandwidth requirements grow to between 59 Mbps and 85 Mbps per
household.

Falcon Broadband of Colorado Springs is one example of how cable operators are using GPON to gain a competitive edge.
Over the past year, satellite providers have marketed their HD line-ups to differentiate themselves versus cable and telco
TV. By providing the bandwidth necessary to offer an extensive HD line-up, GPON is giving Falcon another way to attract
and retain customers – not just against satellite, but also against other cable operators.

“The primary thing we’re using that bandwidth for at this time is HD,” says Mark Ewell, director of marketing and sales at
Falcon Broadband, which currently offers about 35 HD channels in areas where it has deployed GPON. “We’ve dramatically
expanded our HD offering. It certainly differentiates us from Comcast and Dish.”

GPON is the fastest commercially available member of the PON family of technologies, which also includes Broadband PON
(BPON) and Ethernet PON (EPON). Table 1 summarizes the three technologies.

Besides ample bandwidth to support long-term growth in services and subscribers, GPON has several other key benefits.

GPON is a proven technology, with standards finalized in 2005. The first commercial, full-rate GPON deployment in North
America launched in June 2006. This and subsequent real-world deployments have proven GPON’s ability to support
mission-critical carrier and enterprise applications.

GPON easily supports a mix of voice, video and data services, so it’s an ideal foundation for triple-play services. In fact, the
ITU created GPON with multiple services in mind. Triple-play services are increasingly important to cable operators because
they increase average revenue per subscriber (ARPU) and because the more services customers get from a single
operator, the less likely they are to churn.

GPON leverages fiber, including a variety of implementations, such as fiber-to-the-home (FTTH). Unlike copper-based
technologies, GPON doesn’t suffer from decreasing performance over distance, so subscribers located within 20 km of the
centrally located optical line terminal (OLT) enjoy the same performance as those located next door. The OLT typically
receives data – including video – via a high-capacity metro ring or long-haul transport facility. So as long as the transport
can be arranged, GPON can provide high-bandwidth services to smaller population centers that previously were too remote
to meet the ROI requirements of large operators. GPON also leverages fiber’s cost, which is comparable to that of copper.
However, fiber is more cost-effective over the long run because it has ample headroom to support future services, while
copper will never have the same capacity as fiber.

GPON leverages PON’s low opex and capex, including low subscriber-equipment costs. PON subscriber equipment and
network infrastructure also are passive, which translates into low maintenance and replacement costs because there aren’t
active components to fail. All of these savings improve the cable operator’s ability to price its video and broadband services
competitively yet profitably.

GPON is inherently secure, with wiretapping and other hacks nearly impossible. That security is a major asset when selling
into the enterprise services market.

In addition to providing the most efficient transport of packet data such as Ethernet (see Table 1), GPON’s standard
protocols inherently support synchronized TDM services such as voice and T1 lines, providing additional flexibility to
accommodate the types of business services cable operators offer, including legacy TDM and evolving applications such as
Ethernet connectivity to cellular base stations.
 Table 1: PON comparison.

GPON supports higher infrastructure density than point-to-point fiber deployments, saving valuable space in headends and
other facilities.

GPON equipment is available from a large and growing number of vendors, and it’s standards-based. This combination of
vendor support and standardization gives cable operators peace-of-mind because going with GPON doesn’t mean being
locked into a small vendor universe.

Telco providers are among a variety of other service provider types deploying GPON, so cable operators aren’t carrying this
technology by themselves. That wide adoption also increases equipment volumes, which in turn drive down costs.

GPON supports both IPTV and RF video. That flexibility lets MSOs maximize their existing investments in headend
equipment without impeding their migration to IPTV. Operators that deploy both IPTV and RF video typically use the RF
video for basic channels to avoid the need for set-top boxes, and use IPTV for premium channels, VOD and other services
requiring upstream communication to the headend. The GPON standard includes a 1310 nm upstream wavelength, which
provides a superior mechanism for upstream communication compared to RF return schemes that require additional
equipment at the headend and proprietary capabilities at the subscriber’s premises. The wavelength division multiplexing
(WDM) technology used by GPON to accommodate simultaneous upstream and downstream communication paths
eliminates crosstalk between the paths – a characteristic of fiber optic technology and an asset for RF video deployments.

These benefits are driving the GPON market, which is already experiencing strong growth despite being a relatively new
technology. By 2011, the worldwide market for GPON optical network terminals (ONTs) and optical line terminals (OLTs) will
be worth $4.7 billion, according to a May 2007 Light Reading Insider report. Part of the reason for this outlook is declining
ONT costs, which the firm expects to drop below $200, and declining OLT costs, which it forecasts dropping below $100 per
sub (see Figure 2).

Another reason for this outlook is that GPON is gaining traction worldwide, which translates into a global cost structure with
enormous equipment volumes. Although most GPON deployments thus far have been in North America, Light Reading
Insider estimates that by 2011, GPON will be used in about half of all fiber-connected households in Europe and about one-
third of fiber-connected households in Asia/Pacific.

Some cable operators see GPON as critical for achieving the cost structure they need to compete against satellite and telco
TV. For example, Falcon Broadband recently won the right to be the exclusive provider of choice for voice, video and
broadband for residents of Banning Lewis Ranch, a Colorado community that will open early this year. Falcon beat out
Comcast and Qwest partly because GPON allows it to price its triple-play services competitively.“The deal that we cut was
for a significantly lower rate than what we would sell those services for to the general public,” Ewell says. “Without doing it
this way [with GPON], there’s no way we would have been able to meet the price point that was necessary to win the
business.”
GPON also has the flexibility to provide cable operators with a solid network foundation for at least the next several years.
For example, WDM technology could be used to carry additional “layers” of GPON, thanks to the virtually unlimited capacity
of the fiber optic medium. That design means that cable operators can continue to leverage GPON well into the next
decade.

Figure 2: Excerpt: ‘Forecast global market value for GPON active electronics.’

 DEPLOYMENT OPTIONS
GPON is an especially good fit for greenfield deployments. For example, a cable operator could deploy GPON in order to
relieve bandwidth bottlenecks in targeted areas such as new residential and mixed-use developments without resorting to an
overbuild. An overbuild is typically the secondary initiative for an operator, although with the increasing need for bandwidth
beyond the capacity of the hybrid fiber/coax (HFC) plant, overbuilds in selected existing areas are often justified to relieve
bottlenecks.

A variety of factors should be considered for GPON greenfield deployments. Two are market size and location, which relate
to the full utilization of the system components. Location refers to the proximity to high-bandwidth trunking facilities such as
a metro or regional fiber optic ring. A third consideration is the market’s demographic make-up, such as the percentage of
the population that uses or are potential customers for services such as HD, VOD and broadband.

Other key considerations are:

• Is there a minimum number of housing units necessary to justify deploying GPON? The OLT typically accommodates
between 1,000 and 2,000 subscribers, depending on the manufacturer and configuration. The rule-of-thumb is to have a
pool of potential customers within the OLT’s 20 km range to fully utilize that OLT.

• Who does the wiring? Cable operators generally prefer to control the configuration of the outside plant cabling, especially
as it ties into their existing cable plant. Inside-the-home cabling, known as “structured wiring,” is typically done by contractors
– typically working for the building contractor or developer – that specialize in low-voltage wiring.

• What network options are there? Major FTTx architectures include GPON (2.4 Gbps downstream, 1.2 Gbps upstream),
GEPON (1 Gbps symmetrical) and point-to-point active Ethernet (1 Gbps symmetrical). Headends can be RF, IP or a
combination. GPON supports an overlay for RF video transport: a 1550 nm wavelength multiplexed onto the fiber with the
1490 nm downstream wavelength and the 1310 nm upstream wavelength.

Some operators that started with a BPON deployment use the RF video overlay because the video doesn’t count against the
downstream bandwidth, which is reserved for data and voice. GPON provides enough bandwidth to carry all video, data and
voice on the 1490 nm downstream wavelength. Because GPON can also accommodate the RF video overlay, some
operators are deploying a combination of RF video for “basic cable” channels and using IP video for premium channels,
VOD and pay-per-view.

Cable operators also should choose a vendor capable of delivering an end-to-end GPON solution from the source to the
subscriber: not just equipment, but also project feasibility, technology assessment and billing. The operator may already
provide some of these services, but having all elements in place at the beginning will reduce the network’s time to market.

The bottom line is that GPON provides the cost structure, flexibility, support for bandwidth-intensive services and room to
grow that cable operators require for both the consumer and enterprise markets.