Price pressure is hurting PON (passive optical network) vendors and further price cuts could spur further vendor consolidation, according to research from Ovum.
The dire warning came despite growth in shipments of PON ONT and ONU units and VDSL2 ports.
Within FTTH/FTTB PON networks, Ovum noted that shipments of global PON customer premise equipment (ONTs and ONUs) rose strongly as a long wave of OLT installations at the central office has begun to lose steam. Asia-Pacific and China in particular led sales of PON ONTs and ONUs.
However, leadership in shipment volumes often fails to translate into leadership in revenues or profits and even vendors that thrive on price high volumes of lower cost products could suffer, according to Kamalini Ganguly, analyst, network infrastructure practice, Ovum.
“The division that has opened up recently between PON volume and revenue trends continued in 2Q12 due to price wars, particularly in China, and will have an impact on vendor results and strategy,” she said.
“The PON price wars in China and elsewhere are not sustainable. Revenues are not keeping pace with growth in volumes. Vendors – even Huawei – are being pickier about projects and markets. If price pressures continue, there may be more vendor consolidation like that of Calix’s acquisition of Ericsson’s PON portfolio.”
Meanwhile, Ovum said that overall preliminary results for the FTTx, DSL and CMTS markets show a mix of growth and declines in 2Q12 as multiple transitions in fixed access technologies and products continued.
At a global aggregate level, Ovum also noted a a shift from DSL to FTTH/FTTB networks and a deceleration of OLT shipments as the focus swings to customer acquisition and ONT/ONU sales. In 2Q12 overall DSL shipments were down, but VDSL2 volumes recovered strongly to a record 6.3 million. In North America, the proportion of VDSL2 was 57% of all DSL shipments, in EMEA 43%.
CMTS vendors saw volumes drop quarter-on-quarter in 2Q12, but such softness is not unusual at this time of the year. Shipments are still high and were up 10% from the year-ago level.