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PON Sales – Flat is Good

There’s plenty of conjecture circulating around the PON market, with questions about the supply chain, the status of large-scale deployments and what the future holds compared to last year’s record purchases, and the impact of Build America Buy America (BABA) through the BEAD program. Dell’Oro Group research summarizing the first half of 2023 has been released and the results aren’t moving the needle, but there’s no need to worry.  

“When we look at a comparison year-over-year between the first half of [20]22 spending and the first half of [20]23, they’re almost identical in terms of overall spend, and that’s a good thing,” said Jeff Heynen, Vice President, Broadband Access and Home Networking, Dell’Oro Group. “Despite all of the challenges that have come to the fore in the first half of this year, it suggests that demand continues to remain high for all kinds of fiber projects in the North American market.” 

In 2022, vendors were dealing with long equipment lead time deliveries on both OLT and ONT gear. Operators purchased additional capacity to have it for their own initiatives, rather than having to wait for it. The flat-line growth in the first half of the year is a result of orders starting to be filled at a more normalized rate, but demand continues to remain high for fiber projects in the North American market. Just don’t expect it to stay that way in the short term.  

“For the remainder of this year, I just don’t see that type of demand,” said Heynen. “Certainly, there’s this phrase now of inventory digestion, inventory drawdown. We’re certainly seeing that. If you talk to all the vendors in the space, they would concur that’s what they’re seeing as well. A lot of that inventory that operators purchased in the second half of the year will be drawn down throughout the remainder of the year. In addition to that, we still were seeing some of the larger Tier 1 operators reduce their expectations this year for homes passed in terms of their goals, but it doesn’t change the long-term forecast for them.” 

Heynen and the Dell’Oro Group expect to see a dip in the second half of this year but remain optimistic on continued growth in the PON market in 2024 and 2025 as BEAD money starts arriving to states and localities buying out networks. To learn more on the “how” and “why” PON sales are expected to continue their growth, listen to the latest Fiber for Breakfast podcast.