Market shares of broadband access products by revenues in Q3 2020
Switch off today's
5G networks and most of us would barely notice. Despite telco enthusiasm, and
some government panic about letting Chinese vendors anywhere near such a
critically important technology, 5G remains a pointlessly fast luxury for the
cashed-up. In a pandemic that has confined millions to their homes, it is even
less useful – telecom's equivalent of a supercar in a gridlocked neighborhood.
Turning off the broadband connections
into people's homes would be another matter entirely. Without that
connectivity, entire populations would not be able to work, educate their
children, see family and friends, watch the latest movies – even shop for
household goods. It is no exaggeration to describe broadband as the
life-support system for a chronically ill society.
And yet fixed broadband often seems an
afterthought. While governments promise connectivity for citizens in remote and
rural areas, conscripting operators into their fiber-for-all campaigns, the
supply side has received none of the attention that has gone toward 5G.
Authorities either have not realized or do not care that today's broadband
technology market is just as lopsided as the 5G one. Three big companies hoover
up three quarters of all the money that operators spend on broadband access
products. And two of them are Chinese.
Research carried out by Omdia, a sister
company to Light Reading, shows that Huawei, Nokia and ZTE controlled 75% of
the worldwide market for broadband access products in the third quarter of
2020, the most recent for which data is available. The next biggest player,
with a 5% share, was Fiberhome, another Chinese vendor, and the rest of the
market was split between even smaller firms. Restrictions on Chinese vendors in
5G have triggered alarm about overreliance on Ericsson and Nokia, the only big
alternatives. But the same restrictions in broadband would leave operators with
no sizeable option bar Nokia.
UK opens Pandora's box
Having imposed tough limits on Chinese
vendors, the UK government is one of the only ones to have publicly voiced
concern about broadband access. Starting in 2023, Chinese vendors will be
restricted to 35% of any full-fiber network, the same cap that applies in the
5G radio access network. But while operators will have to rid their 5G networks
of any Chinese products by 2028, the government is in a quandary about fixed.
In a blog he wrote last July, Ian Levy,
the technical director of the UK's National Cyber Security Council, summed up
the risks of excluding Huawei from broadband. Promising a government
consultation with operators, Levy observed that "there is only one other
scale vendor in this sector" – a clear reference to Nokia. "As we've
said before, overreliance on any vendor is bad from a security and resiliency
point of view."
BT-owned Openreach, which operates the
UK's only nationwide wholesale network, has relied heavily on Huawei as a
broadband vendor. Concerned that new rules would leave it at the mercy of
Nokia, its second supplier, Openreach brought in Adtran as a third vendor last
year. With just 3% of the international market, according to Omdia's data, the
US company is dwarfed by broadband's big three. But it already runs an
impressively large business in Germany, where it claims to supply the
technology for about 35% of all Internet connections. A convincing performance
by Adtran in the UK might persuade authorities to move decisively against
Yet BT evidently hopes to avoid any
further disruption to its network plans. Quizzed by the parliamentary Science
and Technology Committee last month, Howard Watson, BT's chief technology
officer, downplayed security concerns about retaining Huawei. "We do
believe that fixed, whether full fiber or fiber-to-the-cabinet, has a lower
risk profile than mobile and please remember that it is only in the access part
of the network," he said. "In the core of the fixed network, we have
no presence from high-risk vendors."
That very same argument was made about
mobile, however, and it did not stop the ban on Huawei in the 5G radio access
network. And just as that decision seemed to embolden some other European
regulators, a UK clampdown on Huawei in fixed could prompt scrutiny of Chinese
involvement in Europe's broadband infrastructure.
Together, Huawei and ZTE collected 52%
of the broadband access revenues generated internationally in the third quarter
of 2020, according to Omdia. And Huawei looks even more powerful in this market
than it does in mobile, with a 40% share of business. In the last decade, it
has signed deals with some of Europe's biggest players, including Telecom
Italia and Spain's Telefónica. France's Orange counts Huawei and Nokia as its
main broadband access vendors.
As the operators of fiber networks start
to invest in next-generation PON (passive optical network) technology,
geopolitics could represent a growth opportunity for smaller vendors such as
Adtran and Calix, another US firm. Slovenia's Iskratel might also benefit in
parts of Europe, says Julie Kunstler, a senior principal analyst for Omdia.
"Part of it is because of the PON market doing very well and part of it is
because of the operators that have said going forward we are not going to use
Huawei, or not use it as much," she tells Light Reading.
Jeff Heynen, vice president at the
Dell'Oro market-research group, broadly agrees. "I think you will continue
to see more countries and operators in Europe begin to reduce their reliance on
Huawei for fixed broadband infrastructure, though unlike with 5G and mobile
core it will more likely come via a gradual replacement," he says.
Right now, neither of those experts
anticipates any of the uproar that has happened in 5G. Heynen thinks operators
in several big countries, including Greece, Italy, Spain and Turkey, will
continue to buy equipment from Huawei and ZTE. But if the UK does introduce
more stringent curbs, and others do likewise, it would heighten the risk of
industry fragmentation. "If Huawei doesn't see any advantage in
participating in certain standards groups, it is strong enough to do its own
standard," says Kunstler. "Ultimately, that could cause problems for
the operator and the consumer."
Battle of the PONs
There are already signs of this
bifurcation over future broadband standards. Nokia has thrown its weight behind
a technology called 25G PON, while Huawei wants to skip this and proceed
directly to what is known as 50G PON. The disagreement came to a head at a
meeting of the International Telecommunications Union last year, when Huawei
and Chinese service providers essentially blocked 25G PON's standardization.
As a consequence, Nokia has taken 25G
PON outside the normal standardization process, conscious that operators
including Japan's Rakuten Mobile and New Zealand's Chorus have an appetite for
the technology. Besides sponsoring a multi-supplier agreement, signed by
service providers as well as other vendors, Nokia is working on its own chip
technology, under its Quillion brand, so it is not beholden to the development
schedules of firms like Broadcom, a US components maker.
The move is perhaps not as brazen as it
might sound. Similar high-capacity technologies have already been used in data
centers, for one thing. With sufficient demand from major service providers,
there could be widespread adoption of 25G PON systems regardless of what
standards bodies do. And while it normally comes first, standardization might
eventually succeed deployment if a big part of the industry embraces the
Not everyone outside China is convinced
that will happen. Ronan Kelly, Adtran's chief technology officer for the EMEA
and APAC regions, reckons a mixture of today's GPON technologies and XGS-PON, a
10G system, will "comfortably" meet telco needs over the next decade.
"Ten years is a long time to be able to drive cost out of the next PON
technology," he says. "If the market that consumes the bulk of the PON
transceivers has already decided it's doing 50G PON, I expect by the time it is
needed it will prove to be the most cost-effective option."
Adtran's long-term focus is on 50G PON,
says Kelly. "Either way, for Adtran, thanks to our architecture, if the
world does decide it wants 25G PON, and the ITU revisits its decision and
chooses to standardize it, we can implement it with ease."
Nevertheless, the entire saga increases
the possibility "that the world will split into two purchasing groups:
Chinese and Western," according to 650 Group, a market-research company,
which described last year's developments in an October blog. "What's happening now
is not uncharted waters, but it is rare for the telecommunications industry to
splinter into multiple buying groups – usually standards are developed and
followed for the benefit of the industry," it says.
An industry split asunder
US sanctions introduced by former US
President Donald Trump are also wrenching apart the supply chains that have
underpinned global telecom standards. But as they look for alternatives to US
mobile technologies, both Huawei and ZTE already design their own PON chips,
meaning they are not reliant on US semiconductor firms like Broadcom and Intel
for componentry. As of last year, most PON components could be sourced outside
of the US, according to a reliable source who requested anonymity.
Bifurcation would force authorities and
operators in Western economies to look even more seriously at the non-Chinese
alternatives to Nokia. In some respects, there is less to worry about here than
in the mobile market, where the interconnectedness of 4G and 5G has forced some
operators to replace Huawei in both. Similarly, the momentum behind open RAN is
fuelled by some frustration that all parts of a traditional radio access
network must come from the same vendor's system to avoid a collision between
By contrast, interoperability in
broadband, allowing central office equipment from one vendor to speak with
customer premises equipment from another, is quite far advanced, thanks largely
to the efforts of the Broadband Forum, an industry association, according to
That does not mean operators have no
worries about broadband geopolitics. While less money is spent on fiber
products than radio access networks, removing the Chinese would be disruptive.
Excluding Huawei and ZTE in the future would leave Western economies with a
Finnish giant and an assortment of smaller vendors whose lack of scale clearly
unnerves the UK government.
"I think scale and experience are
two reasons why some operators are not turning their backs on Huawei and
ZTE," says Kunstler. For many of those operators, keeping shtum about
their reliance on Chinese vendors may seem like the best policy.
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