CITIC SEC: The Ministry of Industry and Information Technology issued a notice to carry out a pilot project for a 10-gigabit optical network, which is expected to accelerate the start of a new round of access network construction cycle.

CITIC SEC released a research report stating that the Office of the Ministry of Industry and Information Technology issued a notice on conducting pilot projects for 10 Gigabit Optical Networks, requiring the deployment of 50G-PON, FTTH/FTTR, and 7th generation wireless LAN technologies in cities and regions with conditions and foundations by the end of 2025 to carry out the pilot project of 10 Gigabit Optical Networks. Currently, core technologies such as 50G PON and FTTR for 10 Gigabit networks are already mature, and the release of the notice is expected to accelerate the start of a new cycle of 10 Gigabit access network construction, benefiting related access network equipment, components, and fiber optic cable manufacturers. Key points as follows: On January 7, 2025, the Office of the Ministry of Industry and Information Technology issued the notice on conducting pilot projects for 10 Gigabit Optical Networks, with the work goal of achieving pilot projects for 10 Gigabit Optical Networks by the end of 2025 in cities and regions with conditions and foundations, focusing on key scenarios such as communities, factories, and industrial parks. The deployment and application of technologies such as 50G-PON (passive optical network) ultra-wide optical access, FTTH/FTTR, and the 7th generation wireless LAN in coordination, high-speed high-capacity optical transmission, and the integration of optical networks with artificial intelligence. The main pilot project contents include "10 Gigabit Community", "10 Gigabit Factory" and "10 Gigabit Industrial Park". CITIC SEC's main views are as follows: 50G PON is the core technology for the 10 Gigabit broadband cycle, and China's operators are leading in layout and already have preliminary commercial capabilities. The three major domestic operators are leading in the progress of new technologies and fields such as 50G PON: China Mobile Limited completed the world's first third-generation full-rate convergence 50G PON 10 Gigabit access technology verification in April 2024, achieving the coexistence of three generations and five different ONU formats on the same port, compatibility of 50G PON with full-rate uplink and 10 Gigabit network basic capabilities, laying the core technical foundation for the industrialization of 50G PON. Additionally, China Telecom Corporation and its partners successfully developed a three-mode OLT optical module in September 2024, completing systematic verification and third-party testing. This solution addresses the issue of mismatch between 50G PON and existing GPON/XG(S)-PON dual-mode systems, meeting the demand for smooth evolution and upgrade from GPON in existing operator areas to 50G PON, effectively simplifying deployment. As the core solution for opening the 10 Gigabit broadband cycle, China's operators already have preliminary commercial capabilities. The pilot project contents outlined in the notice include: 1) In the 10 Gigabit community scenario: requirements for 50G-PON access ports with the ability to coexist with three generations of multimode covering residential communities, compatibility and smooth upgrades with various existing access technologies, and coordinated deployment with FTTH/FTTR and the 7th generation wireless LAN to achieve true ultra-gigabit capabilities reaching user terminals; 2) In the 10 Gigabit factory scenario: requirements for 50G-PON access ports covering factory buildings and workshops. 3) In the 10 Gigabit industrial park scenario, targeting various provincial-level and above parks, 50G-PON covers production areas, offices, dormitories, etc. in the park. Also, verifying FTTH/FTTR application solutions for 10 Gigabit access, pilot applications in office, management, production, and other scenarios. The notice requires active promotion of 50G-PON, FTTR, and other new technology scenarios, expected to promote the upgrade of telecommunications access networks to 10 Gigabit networks. Under the promotion of the notice, technologies such as 50G PON and FTTR are expected to accelerate promotion and commercial maturity, thereby driving a new wave of construction of 10 Gigabit networks in China. Equipment and components needs such as 50G PON optical modules and non-uniform PLCs in the 50G-PON and FTTR solutions are expected to see significant growth. In this trend, domestic access network equipment and component manufacturers are expected to benefit fully, achieving demand volume and product upgrades. Investment strategy: China's next-generation 10 Gigabit broadband technologies such as 50G PON and FTTR have preliminary commercial conditions, and the issuance of the notice is expected to further accelerate the implementation of a new cycle of 10 Gigabit access network construction, with related access network equipment and component manufacturers expected to benefit deeply. It is recommended to pay attention to domestic OTN/FTTR equipment manufacturers, domestic optical module manufacturers for access networks, and core optical chip and device manufacturers. In addition, with the increase in access network traffic, there may also be a demand for backbone/citywide long-distance communication capacity expansion. Risk factors: Unexpected policy advances; commercial maturity of new technologies falls short of expectations; operator capital expenditures fall short of expectations; industry market competition exceeds expectations.