Julie Kunstler, Ovum principal analyst
AUSTRALIA: It is not surprising that China’s PON CPE (customer premises equipment) vendors are doing well in this highly cost-sensitive market. Building, testing, and qualifying FTTx CPE requires a lots of skilled labor. In addition, China leads the world in consumption of FTTx equipment, providing the PON CPE vendors a strong home market.
However, China’s FTTx CPE vendors are not simply finding cost savings at the margin. A number of them are leading innovations, creating PON ONU/ONT (optical network unit/optical network terminal) devices that cost around 40 percent less than today’s equipment.
These innovations could bring PON CPE costs to within 1.5 times the cost of comparable DSL equipment. When applied to 10G PON, this price reduction may serve as the catalyst for adoption.
Cambridge Industries Group (known as Cambridge or CIG) and Superxon (Chengdu) Technology Ltd, two privately held PON CPE vendors in China that have developed cutting-edge technologies for significant savings are our main focus.
Cambridge pushes BOSAs on board for GPON and takes the trademark
Cambridge is a significant independent supplier of GPON ONTs. Its revenues had grown at a CAGR of more than 125 percent over the past three years.
Cambridge is a leader in the charge to bring BOSAs (bidirectional optical sub-assemblies) on board for PON equipment. Cambridge publicly discussed BOSAs back in 2009 and now holds a trademark for BOB – BOSA on Board. BOSA-on-board ONT designs enable significant cost savings of 40 percent when compared to traditional optical module–based designs. This saving is significant in GPON, where PON ONTs are still at least twice the cost of DSL/VDSL/ADSL CPE.
Bringing BOSA-on-board ONT equipment to market presents challenges, requiring calibration and testing of each ONT device, as well as testing and qualification by system vendors and service providers.
Cambridge claims that its GPON ONTs are interoperable with “practically every” GPON OLT in the industry. It has more than 500 employees and can apply its manpower to BOSA-on-board ONT device calibration and testing. In early June 2011, Cambridge announced its new manufacturing facility, more than doubling its former capacity. Ovum’s upcoming brief on BOSAs will discuss the movement to BOSAs in the PON market along with implications for the ecosystem.
Superxon positions itself for 10G PON, EoC, and intellectual property
Superxon is supplying PON equipment to the major system vendors in China. Based on conversations with component vendors, we believe that Superxon is gaining market share. Its competitive strategy includes BOSA designs for 10G PON equipment.
The major impediment to 10G PON is the cost of the optics and therefore the high cost of equipment. Savings achieved through BOSA-based 10G PON equipment might be sufficient to support the business case for 10G PON. Superxon’s competitive product positioning also includes EoC – Ethernet over Coax.
Products include cable line terminals and cable network units. This positions Superxon to capture market share when China’s cable industry adopts PON for triple-play services – despite delays, we do expect this to happen within the next few years.
The company’s news site is dominated by announcements concerning patent filings and patent grants. Superxon has already been granted 29 patents, an impressive amount for a company that was founded in late 2007. In addition, its website mentions three ISO certifications.
China and beyond
China’s PON CPE vendors are developing cutting-edge technologies leading to significant cost savings. This competitive advantage serves Cambridge and Superxon well in China’s fast-growing PON market. It also works well outside of China, where OEMs and service providers alike understand the business case implications of PON CPE equipment that approaches the cost of DSL CPE equipment.