PON Futures Up, DOCSIS Declining

PON Futures Up, DOCSIS Declining

Early North American sales numbers for PON equipment are up in the second quarter of this year, making for a “surprising” upside, according to the latest industry research. Future years for PON are expected to be up over the next five years. DOCSIS equipment sales are expected to peak in the next two to three years as cable providers continue their shift to all-fiber networks.

“When it comes to equipment sales into service provider networks, things have been relatively slow in 2023, and also extending in the first quarter of 2024,” said Jeff Heynen, Vice President Broadband Access and Home Networking, Dell’Oro Group. “We’re expecting 2024 total spend to drop about 9% [due to inventory drawdowns in 1H24]. I’m going to raise that a little bit, so maybe it will decline about 7%, but clearly there’s a lot that’s going to happen in 2025 and beyond, with BEAD funding shovel-ready projects and a reinvestment cycle now that Tier 1 operators have gone through their inventory correction.”

Heynen expects continued growth in the North American PON equipment sector, comprised of OLTs and ONTs, to be up 2% year over year over the next five years, due to $130 billion in federal spending on fiber broadband by 2030 with private capital by investment firms and operators “dwarfing” that amount, continued growth in data consumption at a normalized 18% compound annual growth rate from 2027 through 2026, more use cases for PON including IoT and edge transport, and the unknown impact of generative AI and other data-intensive applications.

DOCSIS equipment makers are a more modest run, with Tier 1 cable providers investing in DOCSIS 3.1+ and DOCSIS 4.0 through 2027 as they replace legacy equipment and upgrade their outside plant to compete with fiber offerings, but the future beyond that is much less optimistic as cable providers overbuild their own territories with fiber due to competitive and economic reasons.

“We expect cable share to decline from 64% of total broadband subs in 2022 to around 55% by 2028,” said Heynen. “The reason being in the Tier 2 and Tier 3 market. We hear a lot about smaller cable operators moving away from having to make the decision with DOCSIS 3.1 to DOCSIS 4.0, taking advantage of the reduced operational costs that PON and fiber networks bring, going ahead, making sure that they protect their existing territory by having a fiber offering. Too many variables for them to risk jeopardizing their business by not moving to fiber.”

If that wasn’t enough to make cable equipment manufactures worry, Heynen said that MSOs survey their outside plant every year and 3% to 5% find that their equipment has aged to the point where it becomes “cost parity” to replace everything with fiber rather than refreshing everything with coax and its associated electronics.

To learn more about PON’s bright future and cable’s steady embrace of fiber, listen to the latest Fiber for Breakfast.

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