TXP, a vendor of optical network terminals (ONTs) -- the customer premises equipment in fiber-to-the-premises (FTTP) networks -- is merging with Cambridge Industry Group (CIG), an ONT vendor based in China.

In a press release today, TXP said the merger would allow the companies to “enter a new phase of cost leadership” in the ONT space, notorious for its thin margins.

“The volume that the GPON market was running at wasn’t at the right level to sustain the kind of prices the market was expecting,” said Paul Forzisi, TXP’s vice president of marketing. “With this combination, we get there.”

By combining, each company will double its scale and broaden its geographic reach. TXP reported $11 million in revenue last year, while CIG reported $10 million. And TXP employs about 85 people, while CIG employs about 90. In addition, as perhaps the only pure-play ONT vendor in North America, TXP gives CIG a foothold in this market, while CIG adds its overseas base.

Actual sales of ONTs represents the smallest part of TXP’s business today. In the second quarter, only 8% of TXP’s revenue came from ONT sales. The vast majority was split evenly between supply chain management services and prototyping and assembly services. Sales of retrofitting kits contributed another 10%.

TXP’s biggest customer is Tellabs, which contributed 28% of its $5.8 million in total revenue for the first half of this year. Its second-biggest customer, Avanex, contributed 18%.