PON spending to surpass $13B by 2027 – Dell’Oro

Passive optical networking (PON) technology is likely to sustain its grip on the broadband equipment market and widen its lead over cable spending over the next five years, with Dell’Oro Group predicting global PON equipment revenue will reach $13.2 billion by 2027 – up from $11 billion in 2022.

The rise in PON spending is hardly surprising, Dell’Oro Group VP Jeff Heynen told Fierce, given how much focus there’s been on fiber deployments and overbuild projects in the past year. Specifically, the firm noted the PON market will be largely driven by XGS-PON deployments in North America, EMEA and Latin America and the Caribbean (CALA).

As for who’s likely to lead the way in XGS-PON, Heynen pointed to North American operators AT&T, Frontier Communications, Bell Canada and Telus. In Europe, Deutsche Telekom and BT “are really the two that continue to grow their deployments of XGS-PON.”

“We’ve kind of all known over the years that fiber is the future, it’s obviously becoming very apparent now,” said Heynen. “Even if you were to remove China from the overall spend, the growth of fiber…has really spread and has really become dominant.”

One interesting statistic highlights just how large the gap between cable and PON spending has grown. Although North America’s PON spending was noticeably slower than that of EMEA in Q3, Heynen noted optical revenue in that quarter alone surpassed North American cable spending for all of 2022, “even if you factor in both the cable infrastructure as well as the CPE.” For context, total spending on PON equipment in North America increased from around $1.4 billion in 2021 to $1.9 billion in 2022.

Over the next few years, Heynen thinks “North America is still going to lead in terms of XGS. But the EMEA market is going to quickly catch up, just because you have a few major operators that are really just beginning significant fiber upgrade cycles.”

On the cable side, Dell’Oro expects total revenue for cable distributed access equipment – including virtual CCAP, remote PHY, remote MACPHY and remote OLTs – to reach $1.5 billion by 2027. Heynen pegged virtual CMTS and CCAP, followed by remote PHY, to make up the most of that revenue share, as “major cable operators are moving in the direction of distributed access architecture.”

Overall, cable spend is “staying fairly steady” but still growing over the near term due to DOCSIS 4.0 as well as increased fiber-to-the-home offerings.

“We have obviously Comcast and Charter that are now committed to it and there are certainly many others that are just beginning that transition,” Heynen said. “Over time, our expectation is the virtual CMTS and remote PHY devices will be the two largest product categories when it comes to cable infrastructure.”

As for fixed wireless equipment, revenue is expected to hit $2.2 billion in five years, mainly led by shipments of 5G sub-6 GHz and 5G millimeter wave units.

While Heynen sees “short term growth coming” for fixed wireless CPE, spending in that segment “will start to slow” after 2023.

“We actually see the fixed wireless CPE revenue declining over that timeframe,” he said. “Really because 2022 and 2023 are peak levels of spend…the 2022 number is actually $3.2 billion.”