After extensive comparison of candidate technologies, the Full Service Access Network (FSAN) Group in early 2012 made the decision to define Time/Wavelength Division Multiplexing (TWDM) as the primary solution for the next-generation passive optical network (NG-PON2). A minimum of four wavelengths are foreseen as providing a total capacity per feeder line of 40 Gbit/s downstream and 10 Gbit/s or more upstream. Conventional wavelength division multiplexing (WDM) lasers from core or metro networks are too expensive for fiber to the home (FTTH) systems, because every optical network unit (ONU) will need a tunable laser for upstream transmission. In this paper we will compare different technical solutions and present wavelength-set division multiplexing (WSDM), a scheme developed by Bell Labs as the preferred solution for cost reasons. WSDM uses a laser that can be tuned by an on-chip heater stripe. To exploit this partial wavelength tunability, we do not use contiguous wavelength bands, but wavelength-sets consisting of cyclic interleaved wavelength slots on a fine grid. This wavelength plan can be implemented, e.g., by a cyclic arrayed waveguide grating (AWG) with a small free spectral range. We will describe the concept in detail and report on its experimental validation. © 2013 Alcatel-Lucent.