What we’ve learned
In this fifth and final installment we will examine what questions remain that prevent accurate forecasting of PON deployments in China.
We feel the greatest question is whether the apartments, the overwhelming bulk of new construction in China, will have fiber connections to each unit. This has a dramatic impact on the amount and type of equipment that is deployed, and therefore an essential element in determining who will benefit.
FTTN vs. FTTH
Fiber to the Home (FTTH) is a grossly abused term when used in reference to multi-tenant dwellings. Many would classify all the following scenarios as being FTTH, when many are clearly Fiber to the Node (FTTN).
Scenario one requires an ONU chipset for each customer. Scenario two requires per-customer VDSL silicon and less PON silicon. Scenario three doesn’t even use fiber to serve individual customers, and those FTTH subscribers are really using DSL SLICs instead. It’s clear that not only are some FTTH customers really Fiber to the Node, but that there is not a 1:1 relationship in subscribers to components consumed. Existing market research reports do a horrible job of clarifying this.
Considering the vast majority of Chinese customers will be in apartments, determining the impact of multi-tenant dwellings on FTTH deployment is of crucial importance.
In Japan, roughly two in five of the NTT FTTH subscribers are apartment dwellers. NTT runs fiber to some, and uses VDSL to serve others. Landlords or Apartment Associations sometimes refuse to allow NTT to install the fiber, though such resistance is slackening as fiber connections in Japan have become the new ‘Cool Thing’ to have, and property owners don’t wish to be left behind their peers. While exact numbers are difficult to obtain, it does not appear VDSL has been used in substantial numbers.
However, China is a whole new ballgame with a different set of economic constraints. It is very unclear which of the above five scenarios will dominate.
Regardless of this uncertainty, we must have a model for forecasting FTTH in China. It is a straightforward model build on the fact that most new construction in China will have fiber installed, and that the rate of new construction will be proportional to long-term migration trends. Adjacent to this, we expect overall (including FTTH) penetration to follow historical adoption trends among the urban population of China.
This report is a high level summary of our thoughts on China’s impact on broadband deployment and the resulting impact on component and equipment suppliers. Please contact us directly for more in-depth analysis and actionable investment conclusions.