Most Chinese telecom providers will update existing PON with XG-PON and XGS-PON, a plan that could impact the pricing of NG-PON2 worldwide.
"We expect that China Telecom will continue to evaluate the use of 10 Gbit/s EPON, XG- and XGS-PON going forward, while China Mobile will focus on XG- and XGS-PON," said Alam Tamboli, senior analyst at the Dell'Oro Group, who recently spent time in China, visiting service providers and vendors.
Without widespread adoption by Chinese vendors of NG-PON2, it will be more challenging for other nations' service providers to realize anticipating volume savings of this technology, he said. The sheer size of the Chinese market can create -- or not create -- enough volume to generate volume savings, Tamboli noted.
"If the models that others have put out for NG-PON2 for price erosion are based around China adopting NG-PON2 then those price models have an inherent error in them," he said. "You won't have those volumes in NG-PON2 anytime soon. If volumes don't come up enough, pricing won't come down."
At 75% saturation of households, China still has room to grow (the United States, for example, has 80% saturation), said Tamboli. Chinese providers have reached most metropolitan areas and now must expand into rural and more challenging parts of the country, he said.
There are about 450 million households in China; the top three Chinese operators -- China Mobile (with more than 35 million new subscribers in 2017); China Unicom (with 1.3 million net adds last year), and China Telecom (which added 10.4 million new customers in 2017) -- represented about 339 million in the fourth quarter of 2017, according to Dell'Oro.
The Chinese government advocates the use of fiber -- in part because of the critical role fiber plays in 5G.
"It is clear that demand in China will not be the driver of broadband access revenue growth that it has been the past half dozen years. China subscriber numbers are coming closer and closer to market saturation every quarter," Tamboli said. China Mobile, which has seen the largest subscriber growth numbers anywhere... is expecting 2018 to be a much slower year with 'only' 21 million net additions for fixed broadband subscribers in the year."
To further cement his view, Tamboli pointed to Huawei's position that its carrier segment -- which includes multiple technologies such as PON, routers and mobile RAN -- will see only moderate growth in 2018.
— Alison Diana, Editor, Broadband World News. Follow us on Twitter or @alisoncdiana.