level to built photodiodes directly into a silica substrate [27], industrial processes still require hybrid integration also for these elements. This means that the chip is no longer built only from a bare wafer using planar processes, but requires the integration of other chips [28-30]. This process increases the bill of material (BOM) weight on the cost of the component, while the BOM is inessential in the case of microelectronic chips. The New Access Network Systems and Enabling Technologies 11.5.1.2 GPON Interfaces Draft Cost Model Even if the cost model of hybrid integrated GPON interfaces is not the same as microelectronics, nevertheless their cost decreases with volume, faster than the cost of micro-optics components. In order to clarify this point in the case of GPON interfaces, let us use the same rough cost model we used for DWDM PICs in Chapter 10. In this case, we will consider four terms in the cost of the component: Monolithic chip: This cost term decreases almost linearly with volume due to its depen- dence on the factory depreciation. Bill of material: This term (i.e., the sum of all the parts that are acquired by external sup- pliers) decreases with a slower trend with respect to the chip cost; a reasonable approxi- mation is to set it proportional to 1/vx, where V is the volume and x<1 is a parameter that is characteristic of the business area under analysis. The value of X is related to the adva- natge the supplier has to have volume orders even if at lower prices. Just as an example, if we refer to the supply of a field programmable gate array (FPGA), here the production cost goes down rapidly with volume and the suppliers will push as much as possible to have volume orders. In this condition, it is clear that the price will decrease rapidly with vol- ume and x will be near to one (something like 0.75, for example, the exact value depends on the particular case). If a custom micromechanical part needs to be bought, and if it is something that is manufactured only for this application, and if t