Smart grids based on passive optical networking (PON) technologies are set to provide a $1.5-2bn opportunity for fibre and FTTx component and infrastructure vendors targeting China, according to statistics released Wednesday.

Forecasts from industry researcher Ovum suggest that a large opportunity exists in China, where the deployment of a PON-based smart grid would benefit OLT (optical line termination) equipment vendors such as Huawei, ZTE, Alcatel-Lucent, and FiberHome, along with the ONT (optical network terminal) box manufacturers and component vendors supplying fibre splitters, transceivers, BOSAs, PON MAC chips, and optical interface chips as well as cabling manufacturers, such as Yangtze Optical Fibre and Cable (YOFC), Corning, and Prysmian.

A major driver is expected to be the State Grid Corporation of China (SGCC) which is pursuing a smart grid project that could also be part of a plan to become a communications service provider.

Julie Kunstler, Principal Analyst of Components at Ovum, believes that the ultimate goal of a fibre-based smart grid is to support advanced communications services. “Building a fibre-based smart grid communications network creates a very large market opportunity for PON vendors.

“This potential market is important, as Ovum forecasts declining PON OLT port shipments beginning in 2013, following major FTTx network buildouts in China,” said Kunstler. And while it is still early to predict the likelihood of the SGCC opportunity, several PON communications equipment vendors have developed products that meet smart grid requirements along with triple-play communications services.

Consequently, Kunstler’s recommendation to equipment vendors is to stay close to SGCC to understand its smart grid plans in China. “The cost pressures are likely to be brutal and vendors should continue to look for ways to reduce BOM (bill of material).”