RESEARCH STRATEGY REPORT HARNESSING … Consumer services Enterprise and M2M Regional markets...

Harnessing the value of TWDM-PON

© Analysys Mason Limited 2015

RESEARCH STRATEGY REPORT

analysysmason.com

HARNESSING THE VALUE OF TWDM-PON

RUPERT WOOD



KEY QUESTIONS ANSWERED IN THIS REPORT WHO NEEDS TO READ THIS REPORT

GEOGRAPHICAL COVERAGE VENDOR COVERAGE

Worldwide

Focuses on highly developed

economies, where GPON is

already in place

Adtran

Alcatel-Lucent

Huawei Technologies

ZTE

2

This report examines the next-generation PON technology, TWDM-

PON, and its commercial potential.

The report also provides recommendations for operators that are

considering how to maximise the monetisation of FTTP.

It is based on several sources:

Analysys Mason’s internal research and forecasts on the scale

of opportunity in various network services

interviews of stakeholders from the vendor side.

About this report

How much will TWDM-PON cost and what are the implementation barriers?

How far should TWDM-PON influence the network strategy decisions that

established players and new entrants are taking today?

How much additional revenue (over GPON/EPON) could the

implementation of TWDM-PON bring from: fixed broadband and

backhaul, mobile backhaul and fronthaul, and enterprise services?

What are the synergies between TWDM-PON and cloud-RAN (C-RAN) or

5G?

What are the financial risks for operators?

What sort of operators will roll out TWDM-PON first and why?

Executives in operator CTO offices who responsible for strategic planning

of networks, especially those that have rolled out FTTP or FTTB, or are in

the process of doing so.

Executives in wholesale divisions of major operators, because TWDM-

PON represents a way to re-establish themselves as major players in the

market for backhaul services.

Vendors for an independent view of the potential of TWDM-PON.



CONTENTS CONTENTS

EXECUTIVE SUMMARY

TWDM-PON: MATURITY AND COSTS

TWDM-PON: NEW SERVICE OPPORTUNITIES

TWDM-PON: ECONOMIC BENEFITS

APPENDIX

ABOUT THE AUTHOR AND ANALYSYS MASON

3



Figure 1: Convergence of fibre access and mobile

4

TWDM-PON is not just about supplying the bandwidth needs of

some distant point in the future – it is an opportunity for

operators to create a pivotal role in fostering the digital

economy of the future.

FTTP for broadband is gaining ground, but its full revenue potential

is not met by GPON alone, and payback times are typically over 10

years.

TWDM-PON is an emerging technology/standard, the central

benefit of which is that it can enable operators to provide ultra-

high-volume clear bandwidth at something closer to shared

bandwidth costs by re-utilising the FTTP network to support

enterprise and wireless. TWDM-PON should deliver faster pay-

back on connectivity than GPON, although this will not be

dramatic.

However, this misses the strategic importance of the technology.

TWDM-PON’s maturity will coincide with a number of telecoms-

related trends: virtualisation, software-defined networking (SDN)

and cloud delivery; 5G mobile; the Internet of Things and new

B2B2C business models.

Thus TWDM-PON will enable fibre operators to support – and be in

a crucial position to change – the economics of, and thereby

foster, many parts of the emerging digital economy.

Executive summary

Source: Analysys Mason

TWDM-PON

FTTB/FTTdp

and G.fast

GPON

VDSL

Data centre

Virtualised

COs, pooled

BBUs

5G C-RAN

Small cells LTE-A

LTE

2015 2020s

Dis

tan

ce

Dis

tan

ce



Figure 2: TWDM-PON system overlaid on GPON or EPON

5

Building out full optical distribution networks is slow and

extremely capital-intensive, and building up subscribers can be

a slow process. TWDM-PON promises more flexibility than GPON

or EPON, enabling operators to provide more enterprise and

wholesale services. The synergies between new fibre access

and wireless and enterprise are too great to ignore, but will

require a change of mindset among established operators.

TWDM-PON boosts capacity (typically shared between up to

64 access lines) from 2.5/1.25Gbps to potentially 40/10Gbps.

Broadband alone will require this enhanced level of capacity only

in the very long term. Much more importantly, TWDM-PON will

enable operators to offer, in addition to retail broadband,

symmetrical and synchronous services based on discrete optical

wavelengths to enterprises and/or datacentres, wireless operators

and service providers.

These offer new sources of revenue that could bring forward the

pay-back period for the network. However, established operators

will worry about cannibalising legacy Ethernet revenue. We believe

operators should be bold and embrace the opportunities,

becoming part of an ecosystem that fosters rather than merely

supplies the services based on ultra-dense networks of the future.

Payback on connectivity alone is only marginally better than

simple GPON, but the upside is that the service layer has great

potential, and inertia will lead only to erosion of value.

TWDM-PONs are about service flexibility more than capacity, and new

opportunities outweigh the risk of service revenue cannibalisation

T1

T2

T3

T4

TWD

M-P

ON

med

ia a

cces

s co

ntr

ol

λ1 λ2 λ3 λ4+

GPON/

EPON DS

R5

R6

R7

R8

λ5 λ6 λ7 λ8+

GPON/

EPON US

λ1

λ2

λ3

λ4

λ5

λ6

λ7

λ8

TWDM-PON OLT

10Gbps

10Gbps

10Gbps

10Gbps

2.5Gbps

2.5Gbps

2.5Gbps

2.5Gbps

TWDM-PON

ONU

TWDM-PON

ONU

TWDM-PON

ONU

TWDM-PON

ONU

GPON ONU


Sp

litte

r(s)

GPON OLT



0

50

100

150

200

250

300

350

400

450

500

550

20

15

20

16

20

17

20

18

20

19

20

20

20

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20

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20

24

20

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26

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27

20

28

20

29

20

30

Rev

enu

e (U

SD

mill

ion

)

Broadband Wireless Enterprise

Capex NPV NPV GPON only


Figure 3: Potential basic wholesale connectivity revenue for TWDM-PON by service type,

TWDM-PON capex, and NPV for TWDM-PON and GPON only, hypothetical urban deployment,

2015–2030

6

Note: See the appendix for details of the assumptions used for this forecast.

Section 1 assesses the status, maturity, rationale and costs of

TWDM-PON.

Section 2 qualitatively assesses the upside and downside of

TWDM-PON for each of these possible service groups: additional

capacity for fixed broadband access and backhaul; new enterprise

connectivity streams; the potential to support future wireless

services, including small-cell/HetNet backhaul, C-RAN fronthaul

and the opportunities associated with 5G.

Section 3 takes a brief look at the economics of TWDM-PON in a

large urban deployment. We have used a simple net present value

(NPV) model to assess its value and compare it with simple GPON.

The section also explores the strategic benefits of TWDM-PON for

established wholesale players.

This report assesses the value of implementing TWDM-PON to support

fixed and mobile services

Incumbent retail upside

Incumbent wholesale downside

Additional capex on TWDM-PON


© Analysys Mason Limited 2015 7

Recommendations

1 Incumbent operators must exploit the many synergies between fibre access and other service lines.

Rolling out optical distribution networks (ODNs) is a time-consuming and costly process. TWDM-PONs offer a way

to build up the revenue base faster than first-generation PONs, and the value will be substantially greater in the

long term. Operators need to think proactively about the location of ODN deployments in order to maximise usage

and revenue. ODN roll-out should target street furniture, high-footfall public spaces and buildings.

2 Operators should dovetail their investment in fibre with that in 5G.

The case for TWDM-PON will really take off when 5G arrives. This will coincide with the roll-out of more virtualised

C-RAN networks, especially small-cell-based C-RAN. 5G will support services that require ultra-low latency and

massive highly localised clear bandwidth, but it will also need lower cost points than dedicated fibre.

3 TWDM-PON offers a long-term possibility for incumbent operators to reposition wholesale services for growth.

Incumbent operators have wholesale divisions that are generally shrinking as their traditional sources of revenue

dry up. TWDM-PON will enable operators to re-establish themselves in wholesale connectivity in a higher-volume,

lower price-point business. Through optical grooming, TWDM-PON keeps some of the value associated with

managed wholesale services, but avoids the downward spiral of managed wholesale services based on bandwidth

pricing.



CONTENTS CONTENTS

EXECUTIVE SUMMARY

TWDM-PON: MATURITY AND COSTS

NEW SERVICE OPPORTUNITIES

ECONOMIC BENEFITS

APPENDIX

ABOUT THE AUTHOR AND ANALYSYS MASON

31



About the author

Rupert Wood (Principal Analyst) is lead analyst for Analysys Mason’s Fixed Networks and Wireless Networks research programmes. His

primary areas of specialisation include next-generation networks, long-term industry strategy and forecasting the dynamics of convergence and

substitution across fixed and mobile networks. Rupert regularly contributes to the international press on a wide range of telecoms subjects and

has been quoted by The Times, The Economist, Business Week, Telecommunications Online and La Tribune. Rupert has a PhD from the

University of Cambridge, where he was a Lecturer before joining Analysys Mason.



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RESEARCH STRATEGY REPORT HARNESSING … Consumer services Enterprise and M2M Regional markets...

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