Every once in a while I see something in the equipment market that surprises me. One of my clients recently got pricing for building a gigabit PON FTTP network from the Chinese company ZTE. The pricing is far under the market price for other brands of equipment, and it makes me wonder if this is not going to put downward price pressure on the rest of the industry.

There are two primary sets of electronics in a PON network – the OLT and ONTs. The OLT (Optical Line Terminal) is a centrally located piece of equipment that originates the laser signal headed towards customers. The OLT is basically a big bay of lasers that talk to customers. The ONT (Optical Network Terminal) is the device that sits at a customer location that has the matching laser that talks back to the OLT.

ZTE’s pricing is industry shaking. They have priced OLTs at almost a third of the price of their competition. They have been able to do this partially by improving the OLT cards that hold the lasers and each of their cards can connect to twice as many customers as other OLTs. This makes the OLT smaller and more energy efficient. But that alone cannot account for the discount and their pricing is obviously aimed at gaining a foothold in the US market.

The ONT pricing is even more striking. They offer a gigabit Ethernet-only indoor ONT for $45. That price is so low that it almost turns the ONT into a throw away item. This is a very plain ONT. It has one Ethernet port and does not have any way to connect to existing inside wiring for telephone or cable TV. It’s clearly meant to work with WiFi at the customer end to deliver all services. Their pricing is made even more affordable by the fact that they offer lower-than-normal industry prices for the software needed to activate and maintain in future years.

This pricing is going to lead companies to reexamine their planned network design. A lot of service providers still use traditional ONTs that contain multiple Ethernet ports and that also have ports for connection to both telephone copper and cable company coaxial wiring. But those ONTs are still relatively expensive and the most recent quotes I’ve seen put these between $200 and $220.

Using an Ethernet-only ONT means dumping the bandwidth into a WiFi router and using that for all services. That means having to use voice adapters to provide telephone service, similar to what’s been used by VoIP providers for years. But these days I have clients that are launching fiber networks without a voice product, and even if they want to support VoIP the adapters are relatively inexpensive. This network design also means delivering only IPTV if there is a cable product and this ONT could not be used with older analog-based cable headends.

ZTE is an interesting company. They are huge in China and are a $17 Billion company. They make a lot of cellphones, which is their primary product line. But they also make a lot of different kinds of telecom gear like this PON equipment. They claim they FTTP equipment is widely used in China and that they have more FTTP customers connected than most US-based vendors.

This blog is not a blanket endorsement of the company. They have a questionable past. They have been accused of bribery in making sales in Norway and the Philippines. They also were fined by the US Commerce Department for selling technology to North Korea and Iran, both under sanctions. And to the best of my knowledge they are just now trying to crack into the US market, which always is something to consider.

But this kind of drop in FTTP pricing has been needed. It is surprising that OLTs and ONTs from other manufacturers still basically cost the same as they did years ago. We generally expect that as electronics are mass produced that the prices will drop, but we have never seen this in a PON network. One can hope that this kind of pricing will shake up other manufacturers to sharpen their pencils. Larger fiber ISPs already get pricing cheaper than what I mentioned above on today’s equipment. But most of my clients are relatively small and they have little negotiating power with equipment vendors. I hope this shakes the industry a bit – something that’s needed if we want to deploy fiber everywhere.