Is China Poised to Take the Lead in FTTx Subscribers?

By: Lynn Hutcheson, Ovum
(Business News & Technology News, 27 Nov 2008)

China is getting serious with its FTTx installations. At the 2008 Asia Optical Fiber Communication and Optoelectronic Exposition & Conference (AOE) there were two sessions focused on broadband access. The first session focused on the existing status of FTTH and FTTB; the second session comprised presentations on key optical technologies for next-generation FTTH. Both sessions focused on what is happening in Asia, with a special emphasis on China. Concentrating on the Asia market and China specifically was not surprising since Asia has more than 80 percent of worldwide FTTH/FTTB subscribers, with most of those subscribers in Japan and South Korea, while the market in China is showing rapid growth.

China is poised to catch up quickly, and possibly even pass Japan and South Korea; it is aggressively issuing tenders and signing contracts. The Chinese government recently reorganized the telecoms industry into three major service providers: China Telecom, China Unicom (previously China Netcom) and China Mobile. By the end of 2008 there will be approximately 6 million FTTH/FTTB subscribers, with China Telecom having 80 percent and China Unicom the remaining 20 percent. To date China Mobile has not participated in fixed broadband access, but following its success in the mobile market it has lots of cash and is interested in investing some of that cash in the FTTH/FTTB market.

While there was no public statement in any of the presentations regarding how much and how fast FTTH/FTTB will grow in China, in private discussions with China Telecom, three Chinese system vendors and two component vendors we found that estimates range from 13 million to 18 million new subscribers in 2009, with China Telecom and China Unicom installing 70 percent and 30 percent respectively. FTTB will dominate installations, with approximately 90 percent, and the remaining 10 percent will be FTTH. It is expected that Japan and South Korea will have 17.5 million and 9 million subscribers respectively by the end of 2009. That would definitely put China in a leadership role. The only question is how the current economic crisis will affect these plans. The consensus is that it will have little or no impact on China's plans as it continues its quest for worldwide economic dominance.

Is there a role for technologies other than GEPON?
While nearly all of the FTTB/FTTH installations in China have been GEPON, in a presentation at the Asia-Pacific FTTH council meeting in July 2007 China Telecom's CTO publicly stated that it would like to switch to GPON as soon as it has cost parity with GEPON. More recently, at AOE 2008 Chengliang Zhang of the China Telecom Research Institute said that China Telecom would be performing GPON field trials in 2009, but he would not comment on whether it would install GPON systems if the trials are successful. This may be all talk, as China Telecom is not moving very quickly to make the switch, even though companies such as Huawei are ready to sell GPON equipment at or near the same price as GEPON equipment.

It seems the Chinese service providers are committed to purchasing their broadband access equipment from the three large Chinese vendors—Huawei, ZTE and Fiberhome. Both ZTE and Fiberhome are strongly pushing for China Telecom and China Unicom to continue with GEPON and then upgrade to 10G EPON, bypassing GPON altogether. ZTE recently introduced the first 10G EPON prototype at the Nikkei Electronics Asia show in November 2008.

Will there be much GPON deployed in China? The strongest possibility lies with China Mobile, which is interested in investing in the fixed broadband business. It is generating tenders for FTTB/FTTH equipment and is interested in GPON technology, but it has not made a firm decision as to which technology it will deploy.

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